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. On November 27, 2013, the Company was notified that Sileas Corp. and the Longview Fund, LP entered into an amendment to the Secured Promissory Note that extended the maturity date for an additional two year period ending on February 20, 2016. In exchange for the extension, Sileas Corp. agreed to pay the Longview Fund an extension fee equal to 2% of the principal amount of this Secured Note. As a result of the amendment, the principal amount of the Note was increased by $275 thousand to $14.1 million as of November 27, 2013, 2013.   The note balance as of September 28, 2014 was $17.5 million inclusive of accrued and unpaid interest of $3.4 million.

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)

In April 2012, the Company amended its revolving credit facility with Avidbank. The renewable revolving maturity date was July 15, 2014. On May 22, 2014, the Company amended its revolving credit facility with Avidbank. The new renewable revolving maturity date is May 21, 2016. The facility provides up to $1 million in financing against eligible receivables and subject to meeting certain covenants including an asset coverage ratio test for up to two years. The material terms of the amended revolving credit facility are as follows:

As of September 28, 2014, the outstanding balance on the line of credit was $0.  For the years ended September 28, 2014 and September 29, 2013, the total interest expense against the outstanding line of credit balance was $21 thousand and $42 thousand, respectively. During the twelve months ended September 28, 2014, Optex Systems Holdings separately recognized $13 thousand in interest income related to financing fees on a foreign sale. There was zero in interest income for the twelve months ended September 29, 2013.