Item
1.01 Entry into a Material Definitive Agreement.
Loan
and Security Agreement
On October 21, 2022 (the
“Closing Date”), PARTS iD, Inc., a Delaware corporation (the “Company”) and its subsidiary, PARTS iD, LLC, a
Delaware limited liability company (together with the Company, the “Borrower’), entered into a Loan and Security Agreement
(the “Loan Agreement”) with JGB Collateral, LLC, a Delaware limited liability company, in its capacity as collateral agent
and the several financial institutions or entities that from time to time become parties to the Loan Agreement as lenders (collectively,
the “Lender”).
The
Loan Agreement provides for term loans in an aggregate principal amount of up to $11.0 million under two tranches. The tranches consist
of (i) a first tranche consisting of term loans in the aggregate principal amount of $5.5 million, of which the entire amount was funded
to the Company on the Closing Date (the “Initial Term Loan Advance”); and (ii) a second tranche consisting of term loans
in the aggregate principal amount of an additional $5.5 million, which may funded to the Company by the Lender in its sole and absolute
discretion (subject to the terms and conditions of the Loan Agreement) until the date that is six months after the Closing Date (the
“Second Term Loan Advance” and together with the Initial Term Loan Advance, the “Term Loan Advances”). Each of
the Term Loan Advances will be issued with an original issue discount of $500,000.
The
outstanding principal balance of the Term Loan Advances bear interest at a rate of 8.0% per annum. Accrued interest is payable monthly
following the funding of each Term Loan Advance. The Company is required to repay the aggregate principal balance of the Term Loan Advances
in monthly installments of $183,000, together with the monthly interest payment, commencing on April 30, 2023, and continuing on the
last Business Day (as defined in the Loan Agreement) of each month thereafter, through October 31, 2025 (the “Maturity Date”);
provided, however, if the Second Term Loan Advance is advanced by the Lender to the Company, the amount of the monthly installment payments
shall automatically be increased to $366,000. On the Maturity Date, the entire principal balance of the Term Loan Advances, plus any
accrued but unpaid interest thereon, will be due and payable.
The
Company may, at its option prepay the Term Loan Advances in full or in part with each prepayment subject to an aggregate minimum amount
of $1.0 million and integral multiples of $100,000 in excess thereof (or, if less, the aggregate principal amount of the Term Loan Advances
outstanding).
The
Loan Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness,
liens, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, and distributions. In addition,
the Loan Agreement contains financial covenants, including but not limited to, maintaining a certain quarterly EBITDA (as defined in
the Loan Agreement) and a unrestricted cash minimum requirement of $2.0 million (for the Initial Term Loan Advance) and $4.0 million
(for the Second Term Loan Advance), subject to certain adjustments as set forth in the Loan Agreement.
The
Loan Agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches
or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on the Company.
As
collateral for the obligations, the Company has granted to the Lender a senior security interest in all of Company’s right, title,
and interest in, to and under all of Company’s property (inclusive of intellectual property), except for the Excluded Collateral
(as defined in the Loan Agreement).
The
foregoing description of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Loan Agreement, a copy of which is filed herewith as Exhibit 10.1, and is incorporated herein by reference.
Warrant
In
connection with the entry into the Loan Agreement, with respect to the Initial Term Loan Advance, the Company issued to the Lender a
warrant (the “Warrant”) to purchase 1,000,000 shares (the “Warrant Shares”) of the Company’s Class A
common stock, par value $0.0001 per share (the “Common Stock”). The Warrant will be exercisable for a period of five
years from the date of issuance at a per-share exercise price equal to $2.00, which was the higher of $2.00 and 130% of the closing
price of the Company’s Common Stock on the trading day preceding the Closing Date, subject to certain adjustments as specified
in the Warrant. If the Company seeks and obtains the Second Loan Term Advance in accordance with the terms of the Loan Agreement,
the Company will issue another Warrant to the Lender to purchase 1,000,000 shares of the Company’s Common Stock on the same
terms and conditions as the Warrant issued with respect to the Initial Term Loan Advance. The Warrant also provides for customary shelf and piggyback registration rights with respect to the Warrant Shares.
The
issuance of the Warrant by the Company to the Lender was made in reliance on the exemption from registration contained in Section 4(a)(2)
of the Securities Act of 1933, as amended.
The
foregoing description of the Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of
the Warrant, a copy of which is filed herewith as Exhibit 10.2, and is incorporated herein by reference.