is this a life line or just more nails in the coffin
Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed, on July 2, 2023 (the “Petition Date”), Tattooed Chef, Inc. (the “Company”) and certain of its direct and indirect subsidiaries (collectively, the “Company Parties”) filed a voluntary petition (the “Chapter 11 Cases”) under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Central District of California (the “Bankruptcy Court”). The Company Parties’ Chapter 11 proceedings are jointly administered under the caption “In re: Ittella International, LLC, et al.”, Case Number 2:23-bk-14154-SK (the “Chapter 11 Cases”). The Company Parties continue to operate their business in the ordinary course and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On July 6, 2023, at a hearing before the Bankruptcy Court, the Bankruptcy Court entered an interim order (the “Interim DIP Order”) approving the DIP Facility (as defined below) on an interim basis, providing the Company Parties with additional capital to continue to operate during the pendency of the Chapter 11 Cases.
On July 11, 2023, the Company Parties and UMB entered into a Senior Secured Super-Priority Priming Debtor-In-Possession Loan and Security Agreement (the “DIP Credit Agreement”), which provides for a $6,000,000 senior secured super-priority debtor-in-possession credit facility (the “DIP Facility”) consisting of (i) new money revolving loans in an aggregate amount of up to $3,000,000, and (ii) roll-up loans (where prepetition secured obligations to UMB are converted into post-petition secured obligations under the DIP Facility) in an aggregate amount of $3,000,000 (collectively, the “DIP Loans”). UMB’s obligations to fund the DIP Loans are contingent upon the satisfaction of certain conditions set forth in the DIP Credit Agreement, including, without limitation, the entry of the Interim DIP order and final orders by the Bankruptcy Court approving the DIP Facility and its terms (the “DIP Orders”). The proceeds of all or a portion of the DIP Facility may be used by the Company Parties in accordance with the budget provided for therein, including, without limitation, to (i) pay the administrative costs of the Chapter 11 Cases and the DIP Facility and (ii) for general working capital purposes, in all cases on the terms, and subject to the conditions, set forth in the DIP Credit Agreement, the DIP Orders, and other applicable orders of the Bankruptcy Court.
Pursuant to the terms of the DIP Credit Agreement, interest will accrue on the principal balance of the DIP Loans at a rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York, adjusted daily, plus 5%, provided that in no event will the interest rate be less than 5% per annum. The Company Parties are also obligated to pay UMB a $60,000 fee in consideration of the DIP Facility, which is payable in full on the Maturity Date (as defined below). The DIP Facility includes conditions precedent, representations and warranties, affirmative and negative covenants and events of default customary for financings of this type and size. The occurrence of any event of default will cause the principal balance of the DIP Loans to accrue interest at a rate per annum equal to 2% above the non-default interest rate. Unless accelerated as a result of an event of default, all obligations under the DIP Facility shall mature and be due and payable in full on September 30, 2023 (the “Maturity Date”).
Subject to entry of the DIP Orders, the Company Parties’ obligations under the DIP Credit Agreement will be (i) secured by, among other things, (a) first priority, priming security interests in substantially all of the Company Parties’ assets, subject only to certain carve outs and permitted exceptions, as set forth in the DIP Credit Agreement and DIP Orders, and (b) a Deed of Trust Assignment of Rents and Leases, Security Agreement and Fixture Filing among UMB and certain of the Company Parties covering the Company’s New Mexico facilities, and (ii) granted super-priority administrative claim status in the Chapter 11 Cases, subject only to certain carve outs, as set forth in the DIP Credit Agreement and DIP Orders. The foregoing description of the DIP Credit Agreement and DIP Facility does not purport to be complete and is qualified in its entirety by reference to the DIP Credit Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
