On August 3, 2018, the Company replaced its Cerberus Credit Facility with a combination of a new senior secured credit facility, which provided a $40.0 term loan (the “Term Loan”), and $13.5 million of subordinated promissory notes (the “Junior Notes”). The Term Loan matures in August 2021 and requires quarterly principal payments and monthly interest payments based on LIBOR plus a margin. The Term Loan is secured by substantially all the assets of the Company and is guaranteed by the Company’s subsidiaries. The Junior Notes mature in November 2021, and they are secured by a second priority lien on substantially all of the assets of Company and guaranteed by the Company’s subsidiaries. Interest is payable monthly on the Junior Notes, but no periodic amortization payments are required. The Junior Notes are subordinated in rights of payment and priority to the Term Loan but otherwise have economic terms substantially similar to the Term Loan. The weighted-average interest rate on both the Term Loan and Junior Notes at November 3, 2018 was 11.1%.

The Term Loan is subject to a borrowing base and includes financial covenants and obligations regarding the operation of the Company’s business that are customary in facilities of this type, including limitations on the payment of dividends. Financial covenants include the requirement to maintain specified levels of EBITDA, as defined in the agreement, and maintain a specified level of cash on hand. The Company is required to maintain a borrowing base comprising the value of the Company’s trademarks that exceeds the outstanding balance of the Term Loan. If the borrowing base is less than the outstanding Term Loan at any measurement period, then the Company would be required to repay a portion of the Term Loan to eliminate such shortfall. The Company is also required to raise $2.0 million of additional capital before May 4, 2019; however, this will not be required if the Company’s average working capital exceeds an agreed upon level at the close of the Company’s fiscal year ending February 2, 2019. Events of default include, among other things, the occurrence of a change of control of the Company, and a default under the Term Loan agreement would also trigger a default under the Junior Notes agreements.

The former credit facility included $11.5 million of junior participation interests that were held by a large stockholder, one of the board members and major stockholder, and the chief executive officer who is also one of the board members. These junior participation interests, along with $2.0 million of cash from a major stockholder, were exchanged into $13.5 million of the new Junior Notes referred to above.

In connection with the refinancing on August 3, 2018, the Company issued warrants to purchase 1,192,997 shares of the Company’s common stock to its Term Loan lenders at an exercise price of $0.45 per share and issued warrants to purchase 1,600,000 shares of the Company’s common stock to certain of its Junior Notes lenders at an exercise price of $0.50 per share. Each warrant is exercisable on issuance and has a seven-year life. The fair value of the warrants was $0.8 million on their grant date as determined using a Black Scholes option pricing model and was included as a component of debt issuance costs with an offset to equity. The following table shows the lenders, their relationship to the Company, the loan amounts provided, and the stock warrants issued to such investors, if any:

	Term Loan and
	Junior Note		Stock Warrant
(Dollars in thousands)	Amounts		Shares
Term Loan lenders, unrelated parties	$	40,000	$	1,192,997
Cove Street Capital, LLC, large stockholder		9,000		1,245,000
Jess Ravich, board member and large stockholder		4,400		355,000
Henry Stupp, Chief Executive Officer and board member		100		—
	$	53,500	$	2,792,997

Outstanding borrowings under the Term Loan were $39.9 million at November 3, 2018 with associated unamortized debt issuance costs of $2.8 million. Outstanding Junior Notes were $13.5 million at November 3, 2018 with associated unamortized debt issuance costs of $0.6 million. Outstanding borrowing under the Company’s previous Cerberus Credit Facility were $49.5 million at February 3, 2018 with related unamortized debt issuance costs of $3.4 million. The remaining unamortized debt issuance costs of $3.2 million related to the Cerberus Credit Facility were charged to other expense when the debt was retired on August 3, 2018.