Item 5. Other Information
Item 5. Other Information.
Fourth Amendment to Credit Agreement
Because we are filing this Quarterly Report on Form 10-Q within four business days after the triggering event, we are making the following disclosure under this Item 5 instead of filing a Current Report on Form 8-K under Item 1.01, Entry into a Material Definitive Agreement and Item 2.03, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant:
On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which amends the Amended and Restated Credit Agreement, dated as of April 30, 2021, as amended by the First Amendment Agreement dated as of September 8, 2021, the Second Amendment Agreement dated as of February 22, 2022 (the “Second Amendment”), and the Third Amendment Agreement dated as of June 21, 2023 (as further amended by the Fourth Amendment, the “Credit Agreement”), by and among us, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent.
The Fourth Amendment, among other things, decreases the commitment fees payable under the revolving credit facility under the Credit Agreement such that the undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.125% to 0.200%, depending on our consolidated leverage ratio. The Fourth Amendment also eliminates the language providing that the applicable margin for term Secured Overnight Financing Rate (“SOFR”) loans, subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”), was 3.50%, such that the term loan and amounts drawn under the revolving credit facility now bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) Adjusted Term SOFR for a one-month tenor plus 1% (the “Base Rate”) plus an applicable margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is 0.75% to 2.25% on loans bearing interest at the Base Rate and 1.75% to 3.25% on loans bearing interest at Adjusted Term SOFR, in each case depending on our consolidated total leverage ratio.
The Fourth Amendment eliminates the liquidity financial covenant and modifies the remaining financial covenants to reflect the termination of the temporary covenant relief period that was in place until June 30, 2023 pursuant to the Second Amendment. The Fourth Amendment requires that we not permit, as of the last day of each fiscal quarter commencing on September 30, 2023:
● our consolidated total leverage ratio to be greater than 3.00 to 1.00, in each case, for the period of four consecutive fiscal quarters ending on or immediately prior to such date (and the Fourth Amendment permits us to net cash and cash equivalents of up to $10,000,000 from consolidated total indebtedness);
● our consolidated EBITDA to be less than $20,000,000 for the period of four consecutive fiscal quarters ending on or immediately prior to such date (and the Fourth Amendment eliminates additional addbacks to consolidated EBITDA for certain litigation costs and expenses that had been permitted by the Second Amendment); and
● our consolidated fixed charge coverage ratio to be less than 1.25 to 1.00 for the period of four consecutive fiscal quarters ending on or immediately prior to such date.
The Fourth Amendment also eliminates the provision that was included in the Second Amendment that required mandatory principal prepayments of the loans under the Credit Agreement upon the collection of certain aged accounts receivable.
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The Fourth Amendment provides for an additional term loan in the amount of $8.25 million, which, on August 1, 2023, we borrowed and used to make a payment on our outstanding borrowings under the revolving credit facility. Following such payment, as of August 1, 2023, we had outstanding borrowings of $46.75 million under the Credit Agreement, comprised of $30.0 million under the term loan and $16.75 million under the revolving credit facility. In addition, the Fourth Amendment extends the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024 to August 1, 2026. The principal of the term loan is required to be repaid in quarterly installments of $750,000 through the new maturity date.
The foregoing description of the Fourth Amendment is a summary, does not purport to be complete, and is qualified in its entirety by reference to the Fourth Amendment, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 10.2 and is incorporated herein by reference.
Trading Arrangements
On May 24, 2023, Kristie Burns , our Senior VP Marketing and Clinical Affairs , adopted a pre-arranged trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. This plan provides for the sale of up to 6,233 shares of our common stock in the aggregate and terminates on the earlier of the close of market on August 23, 2024, or the date all shares are sold thereunder.
On June 13, 2023, William W. Burke , Chairman of our Board of Directors , adopted a pre-arranged trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. This plan provides for the sale of up to 2,500 shares of our common stock in the aggregate and terminates on the earlier of the close of market on December 31, 2024, or the date all shares are sold thereunder.
During the quarter ended June 30, 2023, none of our other directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
Item 6. Exhibits.
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index below.
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EXHIBIT INDEX
Incorporated by Reference
Exhibit
Exhibit
Filed
Number
Description of Exhibit
Form
Date of Filing
Number
Herewith
3.1
Amended and Restated Certificate of Incorporation, as amended through May 9, 2019
8-K
05/09/2019
3.2
3.2
Amended and Restated Bylaws, effective December 19, 2022
10-K
02/21/2023
3.2
10.1
Third Amendment Agreement, dated as of June 21, 2023, among Tactile Systems Technology, Inc., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent
X
10.2
Fourth Amendment Agreement, dated as of August 1, 2023, among Tactile Systems Technology, Inc., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent
X
10.3
Offer Letter between Sherri Ferstler and Tactile Systems Technology, Inc., dated July 18, 2023
X
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended
X
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended
X
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.1
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (iv) Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements
X
104.1
Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)
X
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Tactile Systems Technology, Inc.
Date: August 7, 2023
By:
/s/ Elaine M. Birkemeyer
Elaine M. Birkemeyer
Chief Financial Officer
(Principal financial and accounting officer)
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.