Quantum Corporation (NYSE:QTM) Files An 8-K Entry into a Material Definitive Agreement

Amendment to Term Loan Credit and Security Agreement

On June 16, 2020 (the “Closing Date”), Quantum Corporation (the “Company”) entered into an amendment to the Term Loan Credit and Security Agreement, dated as of December 27, 2018 (as the same may be amended, modified, supplemented, renewed, restated or replaced from time to time, the “Term Loan Credit Agreement”), among the Company, Quantum LTO Holdings, LLC (“Quantum LTO”), the lenders from time to time party thereto, and U.S. Bank National Association, as disbursing and collateral agent for such lenders.

The amendment provides for an additional senior secured term loan of $20 million (the “2020 Term Loan”), borrowed in full on the Closing Date. The terms of the 2020 Term Loan are substantially similar to the terms of the existing term loans under the Term Loan Credit Agreement, as amended by the amendment, including in relation to maturity, security and pricing. The amendment also, without limitation, (a) waives the excess cash flow mandatory prepayment for the fiscal year ended March 31, 2020, (b) defers payment of the scheduled amortization payments due on June 30, 2020, September 30, 2020, and December 31, 2020 until the maturity date, (c) amends the definition of “EBITDA” to, among other things, add an add-back for certain costs, expenses and fees incurred in connection with the transactions contemplated by the amendment, (d) waives compliance with the total net leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants for the four fiscal quarter periods ending on each of June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021, (e) waives compliance with the minimum liquidity financial covenant for the fiscal quarters ending on each of June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021, (f) adds a financial covenant that requires a minimum monthly average undrawn availability under the Revolving Credit Agreement during the period from June 30, 2020 through and including May 31, 2021, and (g) amends the covenant levels for the total net leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants, commencing with the fiscal quarter ending June 30, 2021.

The foregoing description of the material terms and conditions of the amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the amendment, a copy of which is filed as Exhibit 10.1 on Form 8-K and is incorporated herein by reference.

Amendment to Amended and Restated Revolving Credit Agreement

On the Closing Date, the Company entered into an amendment to the Amended and Restated Revolving Credit and Security Agreement, dated as of December 27, 2018 (as the same may be amended, modified, supplemented, renewed, restated or replaced from time to time, the “Revolving Credit Agreement”), among the Company, Quantum LTO, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent for such lenders (the “Revolving Agent”).

The amendment, without limitation, (a) amends the definition of “EBITDA” to, among other things, add an add-back for certain costs, expenses and fees incurred in connection with the transactions contemplated by the amendment, (b) waives compliance with the total net leverage ratio, total leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants for the four fiscal quarter periods ending on each of June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021, (c) waives compliance with the average liquidity financial covenant for the fiscal quarters ending on each of June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021, (d) adds a financial covenant that requires a minimum monthly average undrawn availability level for the period from June 30, 2020 through and including May 31, 2021, (e) adds a financial covenant that requires a minimum liquidity level on the last day of each fiscal quarter, beginning with the fiscal quarter ending June 30, 2021, and (f) amends the covenant levels for the total net leverage ratio, total leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants, commencing with the fiscal quarter ending June 30, 2021.

The amendment also adjusts the applicable margin for advances under the Revolving Credit Agreement, such that (i) advances under the Revolving Credit Agreement designated as “Domestic Rate Loans” and “Swing Loans” will have an applicable margin of (A) 4.50% for the period from the Closing Date until the date quarterly financial statements are delivered to the Revolving Agent for the fiscal quarter ending June 30, 2021 and (B) thereafter, ranging from 3.50% to 4.50% based on the Company’s applicable total leverage ratio and (ii) advances under the Revolving Credit Agreement designated as “LIBOR Rate Loans” will have an applicable margin of (A) 5.50% for the period from the Closing Date until the date quarterly financial statements are delivered to the Revolving Agent for the fiscal quarter

ending June 30, 2021 and (B) thereafter, ranging from 4.50% to 5.50% based on the Company’s applicable total leverage ratio.

The foregoing description of the material terms and conditions of the amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the amendment, a copy of which is filed as Exhibit 10.2 on Form 8-K and is incorporated herein by reference.

Warrants to Purchase Stock

In connection with the amendment to the Term Loan Credit Agreement, on June 16, 2020, the Company issued to the lenders of the 2020 Term Loan under the Term Loan Credit Agreement (or affiliates thereof) warrants (the “2020 Term Loan Warrants”) to purchase an aggregate of 3,400,000 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at an exercise price of $3.00 per share. The exercise price and the number of shares underlying the 2020 Term Loan Warrants are subject to adjustment in the event of specified events, including dilutive issuances at a price lower than the exercise price of the 2020 Term Loan Warrants, a subdivision or combination of the Company’s Common Stock, a reclassification of the Company’s Common Stock or specified dividend payments. The 2020 Term Loan Warrants are exercisable until June 16, 2030. Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s Common Stock at the time of exercise.

On June 16, 2020, to an engagement letter, dated as of June 16, 2020 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the “Letter Agreement”), between the Company and Armory Securities, LLC (“Armory”), the Company issued to Armory warrants (the “Armory Warrants”) to purchase 50,000 shares of the Company’s Common Stock at an exercise price of $3.00 per share. The exercise price and the number of shares underlying the Armory Warrants are subject to adjustment in the event of specified events, including certain merger events, certain sales or other transfers of assets or voting capital stock of the Company, a combination, reclassification, exchange or subdivision of the Company’s Common Stock, or specified dividend payments. The Armory Warrants are exercisable until June 16, 2030. Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s Common Stock at the time of exercise.

The issuance of the 2020 Term Loan Warrants, the Armory Warrants, and any shares of Common Stock issuable thereunder, are exempt from registration to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D under the Securities Act. The 2020 Term Loan Warrants, the Armory Warrants, and any shares of Common Stock issuable thereunder, were not registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from the registration requirements.

The foregoing description of the 2020 Term Loan Warrants and the Armory Warrants does not purport to be complete and is qualified in its entirety by reference to the full text of the 2020 Term Loan Warrants and the Armory Warrants, which are filed as Exhibits 4.1, 4.2, 4.3 and 4.4 hereto, respectively.

Registration Rights Agreement

In connection with the amendment to the Term Loan Credit Agreement, on June 16, 2020, the Company entered into an amended and restated registration rights agreement with the holders of the 2020 Term Loan Warrants (the “Registration Rights Agreement”) and the holders of the warrants previously issued to certain lenders under the Term Loan Credit Agreement on December 27, 2018 (the “2018 Term Loan Warrants” and, together with the 2020 Term Loan Warrants, the “Term Loan Warrants”). The Registration Rights Agreement amends and restates the registration rights agreement, dated as of December 27, 2018, by and among the Company and the holders of the 2018 Term Loan Warrants, and grants the holders of the Term Loan Warrants certain registration rights for the shares of Common Stock issuable upon the exercise of the applicable Term Loan Warrants, including (i) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40% of the registrable securities held by such holder as of the issuance date of the applicable Term Loan Warrants on or after June 16, 2020, (ii) the ability of a holder to request that the Company file a Form S-3 registration statement with respect to outstanding registrable securities if at any time the Company is eligible to use a Form S-3 registration statement, and (iii) customary piggyback registration rights, subject to certain customary limitations.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is filed as Exhibit 4.5.

Forward Looking Statements

This Current Report on Form 8-K contains “forward-looking” statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company advises caution in reliance on forward-looking statements. Forward-looking statements include, without limitation, the Company’s future obligations and covenants. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by the forward-looking statement, including the Company’s ability to comply with the covenants and future obligations described herein and other risks. More detailed information about additional risk factors, are set forth in the Company’s periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors,” in the Company’s Quarterly Report on Form 10-K filed with the Securities and Exchange Commission on August 6, 2019. All forward-looking statements in this Current Report on Form 8-K are based on information available to the Company as of the date of this filing. The Company expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure set forth in Item 1.01 above is hereby incorporated by reference to this Item 2.03.

Item 3.02. >Unregistered Sales of Equity Securities.

The disclosure set forth in Item 1.01 under the subheading “Warrants to Purchase Stock” is hereby incorporated by reference to this Item 3.02.

Item 9.01. Financial Statements and Exhibits.

QUANTUM CORP /DE/ Exhibit
EX-4.1 2 ex1.htm EXHIBIT 4.1 Exhibit Exhibit 4.1EXECUTION VERSIONTHIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,…
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About Quantum Corporation (NYSE:QTM)

Quantum Corporation focuses on scale-out storage, archive and data protection, providing solutions for capturing, sharing, managing and preserving digital assets over the entire data lifecycle. The Company’s end-to-end tiered storage solutions enable users to maximize the value of their data by making it accessible whenever and wherever needed, retaining it indefinitely and reducing total cost and complexity. It works with a network of distributors, value-added resellers (VARs), direct marketing resellers (DMRs), original equipment manufacturers (OEMs) and other suppliers to meet customers’ evolving needs. Its scale-out storage portfolio includes StorNext software, appliances and full systems called StorNext Pro Solutions, as well as Xcellis workflow storage, QXS disk storage, Lattus extended online storage and Q-Cloud Archive and Vault services. Its StorNext offerings enable customers to manage large unstructured data sets in an information workflow.