Quarterly report pursuant to Section 13 or 15(d)

Subsequent Event (Notes)

v3.5.0.2
Subsequent Event (Notes)
9 Months Ended
Sep. 30, 2016
Subsequent Event [Abstract]  
Subsequent Events
Subsequent Event
As disclosed on the Company's Current Report on Form 8-K dated October 21, 2016, the Company entered into a term loan credit agreement (the “Credit Agreement”), under which it borrowed $8 million as a term loan on October 21, 2016. The term loan is scheduled to mature on October 21, 2019 and requires payment of interest monthly at the prime rate plus 6%. The Company may prepay the term loan at any time with the payment of the applicable pre-payment fee, or may be obligated to prepay the term loan, with the payment of the applicable pre-payment fee, with the net proceeds from certain dispositions (other than the Company’s interest in BriefCam, Ltd.), issuances of equity or debt securities, extraordinary transactions and upon a change of control.
The Company is subject to certain affirmative and negative covenants under the Credit Agreement, including various financial covenants relating to a maximum cumulative net cash operating amount, minimum eligible accounts receivable and cash, minimum cash, minimum core bookings, maximum deferred revenue non-current, minimum subscription, maintenance and support revenue, and renewal rates.
In connection with the Credit Agreement, the Company granted a first priority security interest in substantially all of its properties, rights and assets and Qumu, Inc. provided a guaranty of the Company’s obligations under the Credit Agreement pursuant to a Guaranty and Collateral Agreement dated October 21, 2016 in favor of the administrative agent.
In connection with the Credit Agreement, on October 21, 2016, the Company issued a warrant to purchase 314,286 shares of the Company’s common stock. The warrant has an exercise price of $2.80 per share and an expiration date of October 21, 2026, and is transferrable. Upon the occurrence of certain defined events, the warrant holder has the right thereafter to receive, upon exercise of the warrant, an amount of securities, cash or property as if the warrant holder had been a holder of the shares issuable upon exercise of the warrant, or the warrant holder may require the Company to purchase the warrant from the holder for a cash amount equal to the greater of the original issuance value of $915,390 and the Black-Scholes value of the remaining unexercised portion of the warrant.
The terms of the warrant require liability classification upon issuance on October 21, 2016. This liability will be remeasured to its fair value on a recurring basis at each reporting date. The change in fair value of the warrant liability during each reporting period will be recorded on our consolidated statements of operations as a component of other income (expense), net, at each reporting date. Management's judgment is used to estimate the fair value of the warrant, which is classified as a Level 3 liability under the fair value hierarchy. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would have a directionally similar impact to the fair value measurement.