(11) Subsequent Events

Cerberus Credit Facility

November Cerberus Amendment

On September 8, 2017, the Company obtained a forbearance from Cerberus regarding the Company’s failure to meet certain financial covenants set forth in the Cerberus Credit Facility as of July 29, 2017, the end of the second quarter of Fiscal 2018, namely the required leverage ratio (as defined and calculated in the Cerberus Credit Facility) of 10.50 to 1.00 and the required fixed charge ratio (as defined and calculated in the Cerberus Credit Facility) of 0.35 to 1.00. Pursuant to the forbearance, Cerberus agreed that it would not exercise its rights or remedies under the Cerberus Credit Facility solely with respect to these events of default through September 15, 2017, which was subsequently extended on multiple occasions through November 10, 2017.

On November 10, 2017, the Company entered into the November Cerberus Amendment, which includes a waiver of all events of default under the Cerberus Credit Facility relating to the second quarter of Fiscal 2018 as described above and amends certain terms thereof, including, along with certain other administrative amendments, the following:

Amounts owed under the Cerberus Credit Facility, bear interest at a rate per annum equal to either the rate of interest publicly announced from time to time by JPMorgan in New York, New York as its reference rate, base rate or prime rate or LIBOR plus, in each case, the amended applicable margin and subject to the applicable rate floor (each as defined and calculated in the Cerberus Credit Facility), which applicable margin has been amended to Pricing Level 1 as set forth in the table below until the Company’s delivery of the required financial statements and certificates to Cerberus in respect of its fiscal quarter ending April 30, 2018, and will be subject to adjustment thereafter to different Pricing Levels depending on the Company’s leverage ratio (as defined and calculated in the Cerberus Credit Facility) at the end of each of its subsequent fiscal quarters as shown in the table below;

Pricing Level	Leverage Ratio	Reference Rate Loans		LIBOR Rate Loans
1	≥ 5.00:1.00	7.00	%	9.50	%
2	< 5.00:1.00 ≥ 3.00:1.00	6.50	%	9.00	%
3	< 3.00:1.00	6.00	%	8.50	%

The required consolidated EBITDA (as defined and calculated in the Cerberus Credit Facility) has been amended to $(800) to $800 for the Company’s fiscal quarter ending April 30, 2018, $1,000 to $3,400 for the Company’s two fiscal quarters ending July 31, 2018, and $4,700 to $8,100 for the Company’s three fiscal quarters ending October 31, 2018;

The required leverage ratio (as defined and calculated in the Cerberus Credit Facility) has been amended to 4.75 to 1.00 for the Company’s four consecutive fiscal quarters ending on or about January 31, 2019, 4.65 to 1.00 for the Company’s four consecutive fiscal quarters ending on or about April 30, 2019, and decreasing ratios for each period of four consecutive fiscal quarters ending thereafter as set forth therein;

The required fixed charge coverage ratio (as defined and calculated in the Cerberus Credit Facility) has been amended to 1.20 to 1.00 for any period of four consecutive fiscal quarters ending on or about January 31, 2019 and thereafter;

The liquidity covenant has been amended to (i) require that the Company maintain an amount of unrestricted cash on-hand, together with the availability under the revolving credit facility under the Cerberus Credit Facility, of no less than $2,000 at all times, and (ii) eliminate the previous requirement that, if the liquidity covenant was not satisfied and under certain other circumstances, the Company exercise its rights to effect the Committed Financings (see Notes 7 and 8); and

The Company has agreed to a new covenant to utilize extraordinary receipts of funds to reduce the principal due under the Cerberus Credit Facility, subject to certain thresholds and limitations.

The November Cerberus Amendment also required, as a condition to its effectiveness, that third parties purchase participation interests from the exiting lenders under the Cerberus Credit Facility of no less than $11,500 on or before December 8, 2017. As described below, on December 7, 2017, Cerberus and certain third parties entered into an agreement to effect such participation interest purchases, which, upon completion on December 7, 2017, fully satisfied this condition to effectiveness.

Junior Participation Interests in Cerberus Credit Facility, Related Warrant Issuance

On December 7, 2017, each of the investors named below entered into a junior participation letter agreement with Cerberus, pursuant to which such investors agreed to purchase from the existing lenders under the Cerberus Credit Facility an aggregate of $11,500 in junior and subordinate participation interests in the term loan facility under the Cerberus Credit Facility. Such participation interest purchases closed on December 7, 2017, which fully satisfied the condition to effectiveness of the November Cerberus Amendment, as described above, and caused the November Cerberus Amendment to become effective as of such date.

As an inducement to the investors’ agreement to purchase participation interests in the Cerberus Credit Facility, on December 7, 2017, the Company issued to such investors warrants to purchase up to an aggregate of 511,111 shares of the Company’s common stock at an initial exercise price of $2.25 per share. Each such warrant is exercisable at any time from the applicable investor’s payment of the purchase price for its participation interest in the Cerberus Credit Facility until the seven-year anniversary of the warrant’s original issuance date, may be exercised in cash or on a “cashless” basis, and is subject to customary adjustments in the event of stock dividends or other distributions, stock splits, or mergers, reclassifications or similar transactions.

The following table shows each investor, its relationship with the Company, the amount of such investor’s participation interest purchased in the Cerberus Credit Facility, and the number of shares subject to the warrants issued to such investor:


Name of Investor, Relationship with the Company	Amount of Participation Interest Under Cerberus Credit Facility			No. of Shares Subject to Warrant
Cove Street Capital, LLC or its affiliates, Significant Stockholder	$	7,000			311,111
Jess Ravich, Director	$	4,400	(1)		195,556
Henry Stupp, Chief Executive Officer, Director	$	100			4,444

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(1)The Company repaid all amounts owed by the Company under the Ravich Loan, totaling $1,500, by application of a portion of the proceeds from Mr. Ravich’s purchase of participation interests in the Cerberus Credit Facility. As a result, the amount of Mr. Ravich’s participation interest in the Cerberus Credit Facility was paid for with (i) $2,900 in cash, and (ii) $1,500 through the cancellation of indebtedness under the Ravich Loan.

Ravich Loan

Pursuant to the terms of the November Cerberus Amendment, the Company was permitted to repay the amounts owed under the Ravich Loan by application of proceeds received from Mr. Ravich’s purchase of participation interests under the Cerberus Credit Facility in an amount equal to the outstanding borrowings under the Ravich Loan. As described above, the Company repaid all principal amounts owed under the Ravich Loan, totaling $1.5 million, by application of a portion of the proceeds from Mr. Ravich’s purchase of such participation interests. Upon such repayment and a cash payment of all interest owed, totaling 1.5 million , the Ravich Loan was repaid in full and cancelled as of December 7, 2017.