Item 8.01. Other Events.



Loan Agreement

As previously disclosed in our Current Report on Form 8-K, dated May 16, 2022, concurrently with the execution of the Business Combination Agreement, dated May 15, 2022, and as amended by the Amendment to the Business Combination Agreement, dated July 12, 2022 (as so amended, the "Business Combination Agreement"), by and among Chardan NexTech Acquisition 2 Corp., which will change its name to Dragonfly Energy Holdings Corp. upon closing ("Chardan" or "Holdings"), Bronco Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Chardan ("Merger Sub"), and Dragonfly Energy Corp., a Nevada corporation ("Borrower" or the "Company"), Chardan and Borrower entered into a commitment letter (the "Debt Commitment Letter") with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets ("CCM 5", and in connection with the Term Loan, the "Chardan Lender"), and EICF Agent LLC ("EIP" and, collectively with the Chardan Lender, the "Initial Term Loan Lenders"), pursuant to which the Initial Term Loan Lenders committed to provide Borrower with a senior secured term loan facility in an aggregate principal amount of $75 million (the "Term Loan") concurrently with the closing under the Business Combination Agreement (the "Closing Date"). The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the "Backstop Commitment Letter"), with a certain third-party financing source (the "Backstop Lender"), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the "Backstopped Loans") immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto. The proceeds of the Term Loan will be used (i) to refinance on the Closing Date, prior indebtedness, (ii) to support the combination under the Business Combination Agreement, (iii) for working capital purposes and other corporate purposes, and (iv) to pay any fees associated with transactions contemplated under the definitive agreement for the Term Loan and the other loan documents entered into in connection therewith, including the transactions described in the foregoing clauses (i) and (ii) and fees and expenses related to the business combination.

In connection with the Debt Commitment Letter, Holdings and Borrower have negotiated the terms of a Term Loan, Guarantee and Security Agreement (the "Term Loan Agreement") setting forth the terms of the Term Loan. Pursuant to the terms of the Term Loan Agreement, the Term Loan will be advanced in one tranche on the Closing Date. The Term Loan will amortize in the amount of 5% per annum beginning 24 months after closing and mature on the fourth anniversary of the Closing Date ("Maturity Date"). The Term Loan will accrue interest (i) until April 1, 2023 at a per annum rate equal to adjusted Secured Overnight Financing Rate ("SOFR") plus a margin equal to 13.5%, of which 7% will be payable in cash and 6.5% will be paid in-kind, (ii) thereafter until October 1, 2024, at a per annum rate equal to adjusted SOFR plus 7% payable in cash plus an amount ranging from 4.5% to 6.5%, depending on the senior leverage ratio of the consolidated company, which will be paid-in-kind and (iii) at all times thereafter, at a per annum rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5% payable in cash, depending on the senior leverage ratio of the consolidated company. In each of the foregoing cases, adjusted SOFR will be no less than 1%.

The Company may elect to prepay all or any portion of the amounts owed prior to the Maturity Date, provided that the Company provides notice to the Administrative Agent and the amount is accompanied by the applicable prepayment premium, if any. Prepayments of the Term Loan will be required to be accompanied by a premium of 5% of the principal amount so prepaid if made prior to the 1st anniversary of the Closing Date, 3% if made on and after the 1st anniversary but prior to the 2nd anniversary of the Closing Date, 1% if made after the 2ndanniversary of the Closing Date but prior to the 3rd anniversary of the Closing Date, and 0% if made on or after the 3rdanniversary of the Closing Date. If the Term Loan is accelerated following the occurrence of an event of default, the Borrower will be required to immediately pay to lenders the sum of all obligations for principal, accrued interest, and the applicable prepayment premium.

In addition to the foregoing, Borrower will be required to prepay the Term Loan with the net cash proceeds of certain asset sales and casualty events (subject to certain customary exceptions), with the net cash proceeds of the issuance of indebtedness that is not otherwise permitted to be incurred under the Term Loan Agreement, upon the receipt of net cash proceeds from an equity issuance in an amount equal to 25% of such net cash proceeds, and commencing with the fiscal year ending December 31, 2023, with the excess cash flow for each such fiscal year in an amount equal to either 25% or 50% of such excess cash flow, depending on the senior leverage ratio of the consolidated company, less the amount of any voluntary prepayments made during such fiscal year.





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Pursuant to the Term Loan Agreement, the obligations of Borrower will be guaranteed by Holdings and Borrower's subsidiaries that are party thereto from time to time as guarantors. Pursuant to the Term Loan Agreement, each of Holdings, Borrower and its subsidiaries party thereto from time to time will grant Alter Domus (US) LLC, as administrative agent for the lenders (the "Administrative Agent"), a security interest in substantially all of its personal property, rights and assets to secure the payment of all amounts owed to lenders under the Term Loan Agreement. In addition, Holdings will be required to enter into a Pledge Agreement (the "Pledge Agreement") pursuant to which Holdings would pledge to the Administrative Agent its equity interests in the Borrower as further collateral security for the obligations under the Term Loan Agreement.

The Term Loan Agreement contains affirmative and restrictive covenants and representations and warranties. The Company and its subsidiaries will be bound by certain affirmative covenants setting forth actions that are required during the term of the Term Loan Agreement, including, without limitation, certain information delivery requirements, obligations to maintain certain insurance, and certain notice requirements. Additionally, Holdings, Borrower and each of its subsidiaries that are guarantors from time to time will be bound by certain restrictive covenants setting forth actions that are not permitted to be taken during the term of the Term Loan Agreement without prior written consent, including, without limitation, incurring certain additional indebtedness, consummating certain mergers, acquisitions or other business combination transactions, and incurring any non-permitted lien or other encumbrance on assets. The Term Loan Agreement will also contain other customary provisions, such as confidentiality obligations and indemnification rights for the benefit of the administrative agent and lenders. The Term Loan Agreement will contain financial covenants requiring the credit parties to (a) maintain minimum liquidity (generally, the balance of unrestricted cash and cash equivalents in the Company's account that is subject to a control agreement in favor of the Administrative Agent) of at least $10,000,000 as of the last day of each fiscal month commencing with the fiscal month ending December 31, 2022, (b) if the daily average liquidity for any fiscal quarter ending on December 31, 2022, March 31, 2023, June 30, 2023, or September 30, 2023 is less than $17,500,000 and for each fiscal quarter thereafter (commencing with the fiscal quarter ending December 31, 2023), maintain a senior leverage ratio (generally, aggregate debt divided by consolidated EBITDA) of not more than 6.75 to 1.00 for fiscal quarters ending December 31, 2022 to March 31, 2023, 6.00 to 1.00 for fiscal quarters ending June 30, 2023 to September 30, 2023, 5.00 to 1.00 for fiscal quarters ending December 1, 2023 to March 31, 2024, 4.00 to 1.00 for fiscal quarters ending June 30, 2024 to September 30, 2024, 3.25 to 1.00 for fiscal quarters ending December 31, 2024 to March 31, 2025, and 3.00 to 1.00 for fiscal quarters ending June 30, 2025 and thereafter, (c) if liquidity is less than $15,000,000 as of the last day of any fiscal quarter (commencing with the fiscal quarter ending December 31, 2022), maintain a fixed charge coverage ratio for the trailing four fiscal quarter period of no less than 1.15:1.00 as of the last day of such fiscal quarter, and (d) if consolidated EBITDA is less than $15,000,000 for any trailing twelve month period ending on the last day of the most recently completed fiscal quarter, cause capital expenditures to not exceed $500,000 for the immediately succeeding fiscal quarter (subject to certain exceptions set forth in the Term Loan Agreement).





Warrant Agreements

In connection with the entry into the Term Loan Agreement, and as a required term and condition thereof, Holdings shall enter into (i) the Penny Warrant to issue penny warrants to the Initial Term Loan Lenders under the Term Loan exercisable to purchase an aggregate number of shares equal to 5.6% of Holding's common stock on a fully diluted basis (the "Penny Warrants") and (ii) the $10 Warrant to issue warrants to the Initial Term Loan Lenders under the Term Loan exercisable to purchase 1.6 million shares of Holding's common stock at $10 per share (the "$10 Warrants" and, together with the Penny Warrants, the "Warrants"). The amount of Penny Warrants was increased from 3.6% (as previously disclosed) to 5.6% of Holding's common stock on a fully basis as of the Closing Date. The additional shares of common stock will dilute the pro forma ownership of the other Holdings stockholders proportionately.

The Penny Warrants will have an exercise period of 10 years from the date of issuance. In addition, the calculation of ownership of common stock "on a fully diluted basis" will include (i) all outstanding common stock, (ii) shares of common stock issuable upon conversion of outstanding convertible bonds, preferred stock and other securities convertible to common stock on an as-converted to common stock basis, and (iii) all shares of common stock subject to outstanding options.





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The $10 Warrants will have an exercise period of 5 years from the date of issuance and will have customary cashless exercise provisions. In addition, in the event the registration statement registering the shares of common stock related to Holdings' planned $150 million equity line of credit has not been declared effective by the Securities and Exchange Commission on or before the date that is 121 days after the issuance date, the number of shares of common stock to be issued pursuant to the $10 Warrants shall increase by an additional 200,000 shares on such date and at the beginning of each subsequent 30 day period, until such registration statement is declared effective.

The Warrants will have specified weighted average anti-dilution protection against subsequent equity sales or distributions, subject to customary exclusions including for issuances upon conversion exercise or exchange of securities outstanding as of the Closing Date, issuances pursuant to agreements in effect as of the Closing Date (provided such issuances are taken into account in the calculation of "on a fully diluted basis" as provided above), issuances pursuant to employee benefit plans and similar arrangements, issuances in joint ventures, strategic arrangements or other non-financing type transactions, issuances in debt financings as equity kickers, issuances in public offerings and similar transactions. In addition, no anti-dilution adjustment will be made with respect to issuances of Holdings common stock pursuant to Holdings' planned $150 million equity line of credit (or replacement thereof) sold at a per share price above $5.00. The shares issuable upon exercise of the Warrants shall have customary registration rights requiring Holdings to file and keep effective a resale registration statement registering the resale of the shares of common stock underlying the Warrants.

The foregoing description of the Penny Warrants and $10 Warrants, does not purport to be complete and is qualified in its entirety by reference to the full text of such Penny Warrant Agreement and $10 Warrant Agreement, which are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.





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Forward-Looking Statements

This Current Report on Form 8-K contains certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, including certain financial forecasts and projections. All statements other than statements of historical fact contained in this Current Report on Form 8-K, including statements as to the transactions contemplated by the business combination and related agreements, future results of operations and financial position, revenue and other metrics, planned products and services, business strategy and plans, objectives of management for future operations of Dragonfly, market size and growth opportunities, competitive position and technological and market trends, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including "may," "should," "expect," "intend," "will," "estimate," "anticipate," "believe," "predict," "plan," "targets," "projects," "could," "would," "continue," "forecast" or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors (some of which are beyond the control of Dragonfly or CNTQ) which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All . . .

Item 9.01 Financial Statements and Exhibits.





(d) Exhibits.



Exhibit
  No.      Description

  4.1        Form of Penny Warrants
  4.2        Form of $10 Warrants
  104      Cover Page Interactive Data File (embedded within the Inline XBRL document)




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