• Filing Date: 2020-06-24
  • Form Type: 10-K
  • Description: Annual report
v3.20.1
SUBSEQUENT EVENTS
12 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
Paycheck Protection Program

On April 13, 2020, Quantum Corporation (the “Company”) entered into a Payment Protection Term Note (the “Note”) effective April 11, 2020 with PNC Bank, National Association as the lender (“Lender”) in an aggregate principal amount of $10.0 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “PPP Loan”). Subject to the terms of the Note, the PPP Loan bears interest at a fixed rate of 1% per annum, with interest deferred up to a maximum of 10 months payable monthly thereafter, has an initial term of two years and is unsecured and guaranteed by the Small Business Administration. Under the terms of the PPP Note, the Company may apply for forgiveness of the amount due on the Loan. The Company intends to use the proceeds from the PPP Loan for qualifying expenses and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act. However, the Company cannot assure at this time that the PPP Loan will be forgiven partially, or in full.

In order to apply for the PPP Loan, the Company was required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support its ongoing operations. The Company made this certification in good faith after analyzing, among other things, its financial situation and access to alternative forms of capital, and believe that it satisfied all eligibility criteria for the PPP Loan, and that its receipt of the PPP Loan is consistent with the spirit and broad objectives of the PPP and of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. In addition, the SBA stated its intent to audit the PPP Loan application of any company, like the Company, that received proceeds under the PPP of more than $2 million. Additionally, on May 8, 2020, the Company was one of five publicly traded companies to receive a letter from the United States House of Representatives’ Select Subcommittee on the Coronavirus Crisis ("the Subcommittee") requesting that the Company return the PPP Loan proceeds, and if it did not return the proceeds, requiring the Company to produce to the Subcommittee specified documentation related to its PPP Loan. The Company intends to cooperate fully with the Subcommittee’s review of its PPP Loan. If the Company is later determined to have violated any of the laws or governmental regulations that apply to it in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that the Company was ineligible to receive the PPP Loan, the Company may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan in its entirety.

Long-Term Debt Amendments

Amendment to the Senior Secured Term Loan
On June 16, 2020, the Company entered into an amendment to the Senior Secured Term Loan (the "June 2020 Term Loan Amendment"). The amendment provides an additional borrowing of $20.0 million which was immediately drawn in full. The amendment also: (a) waives the ECF Payment of $5.3 million for the 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, minimum liquidity and minimum EBITDA financial covenants for the quarters ending on June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021; (e) adds a financial covenant that requires a minimum monthly average undrawn availability of $7.0 million under the Amended PNC Credit Facility during the period from June 30, 2020 through and including May 31, 2021; and (f) amends the covenant levels for the total net leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants, commencing with the quarter ending June 30, 2021. The amendment modified the Equity Clawback to allow the Company to prepay up to 50% of the aggregate principal amount of the outstanding Senior Secured Term Loan balance with cash proceeds of a public offering of the Company’s common stock at a prepayment premium of 5% of the principal amount being repaid. The amendment also added an exit fee of 2% of the aggregate principal amount repaid excluding amounts repaid that are subject to the Equity Clawback.
In connection with the June 2020 Term Loan Amendment, the Company issued to the lenders warrants (the “2020 Term Loan Warrants”) to purchase 3,400,000 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 2020 Term Loan Warrants are subject to adjustment in the event of specified events, including dilutive issuances of common stock linked equity instruments at a price lower than the exercise price of the 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.
Registration Rights Agreement
In connection with the June 2020 Term Loan Amendment, the Company entered into an amended and restated registration rights agreement (the “Amended Registration Rights Agreement”) with the holders of the 2018 Term Loan Warrants and the 2020 Term Loan Warrants (collectively, the “Term Loan Warrants”). The Amended Registration Rights Agreement 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) certain piggyback registration rights related to potential future equity offerings of the Company, subject to certain limitations.
Amendments to Amended PNC Credit Facility

On April 3, 2020, the Company entered into an amendment to the Amended PNC Credit Facility. The amendment amends certain terms, including to waive compliance with the total net leverage ratio and total leverage ratio covenants for the quarter ending March 31, 2020.

On June 16, 2020, the Company entered into an amendment to the Amended PNC Credit Facility. The amendment amends certain terms, including: (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, minimum liquidity and minimum EBITDA financial covenants for the quarters ending on June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021; (c) adds a financial covenant that requires a minimum monthly average undrawn availability level of $7.0 million for the period from June 30, 2020 through and including May 31, 2021; (d) adds a financial covenant that requires a minimum liquidity of not less than $10.0 million at the end of each quarter and a minimum average liquidity level $10.0 million for the ninety days preceding the last day of each quarter, beginning with the quarter ending June 30, 2021; (e) 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 quarter ending June 30, 2021; and (f) continues to includes a covenant that requires a minimum of $5.0 million of PNC qualified cash at all times.

The amendment also adjusts the applicable margin for advances under the Amended PNC Credit Facility such that (i) advances designated as “Domestic Rate Loans” and “Swing Loans” will have an applicable margin of (a) 4.50% for the period from the June 16, 2020 until the date quarterly financial statements are delivered to PNC 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 designated as “LIBOR Rate Loans” will have an applicable margin of (a) 5.50% for the period from June 16, 2020, until the date quarterly financial statements are delivered to PNC 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.