Annual report pursuant to section 13 and 15(d)

Debt Financing

v2.4.0.8
Debt Financing
 12 Months Ended
Sep. 29, 2013
Debt Disclosure [Abstract]  
Debt Financing

Note 8 - Debt Financing

 

Related Parties

 

Acquisition by Sileas Corporation on February 20, 2009

 

On February 20, 2009, Sileas purchased 100% of the equity and debt interest held by Longview, representing 90% of Optex Systems, Inc. (Delaware).  Currently, Sileas is the majority owner of Optex Systems Holdings.

 

Secured Promissory Note Due February 20, 2014/Longview Fund, LP

 

As a result of the transaction described above between Sileas and Longview Fund, LP on February 20, 2009, Sileas, currently majority owner of Optex Systems Holdings, executed and delivered to Longview, a Secured Promissory Note, originally due February 20, 2012 in the principal amount of $13.5 million. The note was extended on November 22, 2011 until February 20, 2014 in exchange for and extension fee of $270 thousand. The note balance as of September 29, 2013 was $13.8 million. See also, Note 14 – Subsequent events.

 

The Note bears simple interest at the rate of 4% per annum, and the interest rate upon an event of default increases to 10% per annum. The obligations of Sileas under the note are secured by a security interest in Optex Systems Holdings’ common and preferred stock owned by Sileas. Optex Systems Holdings has not guaranteed the note and Longview is not entitled to pursue Optex Systems Holdings in the event of a default by Sileas. Therefore, there are no actual or potential cash flow commitments from Optex Systems Holdings. In the event of default by Sileas on its obligations under the note, Longview would only be entitled to receive the Optex Systems Holdings common and preferred stock held by Sileas.

 

Credit Facility – Avidbank (formerly known as Peninsula Bank Business Funding)

 

On March 22, 2011, Optex Systems Holdings, Inc. amended its revolving credit facility with Avidbank, which provided up to $1 million in financing against eligible receivables. The line expired on March 15, 2012. Subsequently, in April 2012, the Company amended its revolving credit facility with Avidbank. The new renewable revolving maturity date is July 15, 2014. The facility provides up to $1 million in financing against eligible receivables for up to two years. The material terms of the amended revolving credit facility are as follows:

  

• The interest rate for all advances shall be the greater of 7.0% and the then in effect prime rate plus 3.5% (3.25% at September 29, 2013). The additional minimum interest payment requirement has been eliminated.

 

• Interest shall be paid monthly in arrears.

 

• The loan period is from July 15th through July 14th of the following year, beginning with the period of July 15, 2012 through July 14, 2013 and a revolving loan maturity date of July 14, 2014, at which time any outstanding advances, and accrued and unpaid interest thereon, will be due and payable.

 

• A renewal fee of $10,000 is due on the 15th day of April each year beginning with April 15, 2012.

 

• The obligations of Optex Systems, Inc. to Avidbank are secured by a first lien on all of its assets (including intellectual property assets should it have any in the future) in favor of Avidbank.

 

• The facility contains customary events of default. Upon the occurrence of an event of default that remains uncured after any applicable cure period, Avidbank’s commitment to make further advances may terminate, and Avidbank would also be entitled to pursue other remedies against Optex Systems, Inc. and the pledged collateral.

 

• Pursuant to a guaranty executed by Optex Systems Holdings in favor of Avidbank, Optex Systems Holdings has guaranteed all obligations of Optex Systems, Inc. to Avidbank.

 

• The facility contains a requirement for the Company to maintain a zero balance on the revolving line for a period of at least 30 consecutive days during each loan period.

 

As of September 29, 2013, the outstanding balance on the line of credit was $858 thousand.  For the years ended September 29, 2013 and September 30, 2012, the total interest expense against the outstanding line of credit balance was $42 thousand and $19 thousand, respectively.