Item
1.01. Entry into a Material Definitive Agreement.
Credit
Agreement
On November 7, 2022, Alto
Ingredients, Inc. (the “Company”) entered into a Credit Agreement, dated November 7, 2022 (the “Credit Agreement”),
by and among the Company, the Subsidiary Guarantors (as defined in the Credit Agreement) from time to time party thereto, certain funds
managed by Orion Infrastructure Capital (collectively, the “Lenders”), and OIC Investment Agent, LLC, as administrative agent
and collateral agent (“OIC”), under which the Lenders agreed to extend a senior secured credit facility in an amount of up
to $125,000,000 in accordance with the terms of the Credit Agreement (the “Credit Facility”). The Credit Facility is secured
by the grant to OIC, for the benefit of the Lenders and OIC, of a first priority lien on certain assets of the Company and its subsidiaries
and a second priority lien on certain assets of Kinergy Marketing LLC, a wholly-owned subsidiary of the Company (“Kinergy”),
and Alto Nutrients, LLC, an indirect wholly-owned subsidiary of the Company (“Alto Nutrients”).
On the Initial Funding Date
(as defined in the Credit Agreement), the Lenders agreed to advance to the Company an aggregate amount not to exceed $100,000,000, with
up to an additional $25,000,000 from time to time upon the satisfaction of certain conditions as set forth in the Credit Agreement. The
Company also agreed to issue to the Lenders an aggregate of 1,282,051 shares of its common stock, par value $0.001 per share (“Common
Stock”), and up to an additional 320,513 shares of Common Stock upon the funding or fundings of any Specified CapEx Loans (as defined
in the Credit Agreement) (collectively, the “Participation Shares”).
Interest accrues on the unpaid
principal amount of the loans under the Credit Facility at a fixed rate of 10% per annum and the loans mature on the earliest to occur
of (i) November 7, 2028, or (ii) the date upon which the entire outstanding principal amount of the loans, together with all unpaid interest,
fees, charges and costs, are accelerated pursuant to the terms of the Credit Agreement.
The Company is required to
make mandatory prepayments of amounts outstanding under the Credit Agreement (without payment of a premium or penalty) on a semi-annual
basis beginning with the six-month period ending December 31, 2023 in an amount equal to percentage of Excess Cash Flow (as defined in
the Credit Agreement) based on the Company’s Leverage Ratio (as defined in the Credit Agreement) in accordance with the following
terms: (i) if the Leverage Ratio is greater than or equal to 3.0x, then the prepayment amount will equal 100% of Excess Cash Flow, (ii)
if the Leverage Ratio is less than 3.0x and greater than or equal to 1.5x, then the prepayment amount will equal 50% of Excess Cash Flow
and (iii) if the Leverage Ratio is less than 1.5x, then the prepayment amount will equal 25% of Excess Cash Flow.
The Credit Agreement also
contains customary affirmative covenants for a transaction of this nature, including, among other things, covenants relating to (i) preservation
of existence of the Company and its subsidiaries and foreign qualification, (ii) conduct of business, (iii) compliance with laws and obligations,
(iv) maintenance of title, (v) maintenance of insurance, (vi) maintenance of adequate financial and accounting books and records, (vii)
access to records, (viii) payment of taxes, (ix) delivery of financial statements and other information, and (x) use of proceeds.
The Credit Agreement also
contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to (i) formation
of subsidiaries and capital stock issuances, (ii) indebtedness, (iii) liens, (iv) investments, advances and loans, (v) principal place
of business and business activities, (vi) restrictions on certain payments, (vii) use of proceeds, (viii) restrictions on fundamental
changes, (ix) dispositions, (x) accounting changes, (xi) amendment or termination of material contracts, (xii) transactions with affiliates,
(xiii) hazardous materials, (xiv) restrictions on speculative transactions, (xv) change of auditors, (xvi) capital expenditures, (xvii)
the Employee Retirement Income Security Act (“ERISA”), (xviii) amendments to organizational documents, and (xix) restrictions
on bank accounts.
The Credit Agreement also
contains various events of default (subject to certain grace periods, to the extent applicable), including events of default for (i) the
nonpayment of principal, interest or fees, (ii) the inaccuracy of the representations or warranties in any material respect, (iii) the
failure to observe or perform certain covenants or agreements, (iv) bankruptcy, (v) certain unsatisfied judgments, (vi) the termination,
invalidity or unenforceability of the Credit Agreement and the agreements contemplated thereby, (vii) certain ERISA violations, (viii)
change of control, (ix) certain uninsured losses or condemnations, (x) certain abandonments, or (xi) certain defaults under indebtedness.
If an event of default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement.
The Credit Agreement also
contains customary representations and warranties and other customary terms and conditions.
The description of the Credit
Agreement does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, which is filed as Exhibit
10.1 to this Current Report on Form 8-K and is incorporated herein by this reference.
Amendment No. 6 to Second Amended and
Restated Credit Agreement
On November 7, 2022, Kinergy
and Alto Nutrients entered into an Amendment No. 6 to Second Amended and Restated Credit Agreement, dated November 7, 2022 (“Amendment
No. 6”), by and among Wells Fargo Bank, National Association (“Wells Fargo”), Kinergy and Alto Nutrients further amending
that certain Second Amended and Restated Credit Agreement dated August 2, 2017 by and among Wells Fargo, the financial institutions from
time to time party thereto as lenders, Kinergy and Alto Nutrients (as amended, the “Second Amended and Restated Credit Agreement”).
Under Amendment No. 6, the parties agreed, among other things, to extend
the maturity date of the loans under the Second Amended and Restated Credit Agreement from 2023 to 2027. The parties also agreed to amend
the fixed charge coverage ratio from not less than 2.00 to 1.00 to not less than 1.10 to 1.00 and amended the amount of cash distributions
that Kinergy or Alto Nutrients could make to the Company from up to 50% of excess cash flow to up to 75% of excess cash flow. Under Amendment
No. 6, the Company and certain of its subsidiaries also agreed to (i) guarantee the obligations of Kinergy and Alto Nutrients arising
under or in connection with the Second Amended and Restated Credit Agreement, and (ii) grant second priority liens on certain of their
assets to secure such obligations.
The description of Amendment
No. 6 does not purport to be complete and is qualified in its entirety by reference to Amendment No. 6, which is filed as Exhibit 10.2
to this Current Report on Form 8-K and is incorporated herein by this reference.
Registration Rights Agreement
On November 7, 2022, the Company
entered into a registration rights agreement, dated November 7, 2022 (the “Registration Rights Agreement”), by and among the
Company and the Lenders pursuant to which, among other things, the Company will prepare and file with the Securities and Exchange Commission
a registration statement or registration statements to register for resale the Participation Shares issued to the Lenders under the Credit
Agreement.
At the time of issuance of
any of the Participation Shares pursuant to the terms of the Credit Agreement, such Participation Shares will not be registered under
the Securities Act of 1933, as amended (the “Securities Act”), and until so registered, the Participation Shares may not be
reoffered or resold absent registration or availability of an applicable exemption from registration.
The description of the Registration
Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, which
is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by this reference.