|
Note 8 —
Debt Financing
Credit Facility
— Avidbank
The Company amended
its revolving credit facility with Avidbank pursuant to a Seventh Amendment to Amended and Restated Loan Agreement, dated as of
April 5, 2018. The new renewable revolving maturity date is April 21, 2020. The facility provides up to $2.2 million in financing
against eligible receivables and is subject to meeting certain covenants including an asset coverage ratio test for up to twenty
months. The material terms of the amended revolving credit facility are as follows:
| |
● |
The interest rate for all advances shall be the then in effect prime rate plus 2.5% and is subject to a minimum interest payment requirement per six month period of $10,000. |
| |
● |
Interest shall be paid monthly in arrears. |
| |
● |
The loan period is from April 5, 2018 through April 21, 2020 at which time any outstanding advances, and accrued and unpaid interest thereon, will be due and payable. |
| |
● |
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. |
| |
● |
On April 21, 2018 and each anniversary thereof for so long as the Revolving Facility is in effect, the Company shall pay a facility fee equal to one half of one percent (0.5%) of the Revolving Line. |
| |
● |
The Company can maintain accounts at third party banks so long as the total in those other bank accounts does not exceed 20% of the total on deposit at Avidbank, and it shall remit to Avidbank monthly statements for all of those accounts within 30 days of the end of each month. |
In order to meet the
security requirement under the lease, we entered into a letter of credit with Avidbank on October 17, 2016 in the amount of $250,000,
which expires on October 17, 2019 and is renewable by us for successive one year periods unless the bank notifies us no later than
60 days prior to the end of the initial or any extended term that it shall not renew the letter of credit. Effective as of October
31, 2019 the letter of credit was reduced to $125,000 pursuant to the lease terms.
As of September 29,
2019 and September 30, 2018, the outstanding principal balance on the line of credit was $250 thousand and $300 thousand, respectively.
For the years ended September 29, 2019 and September 30, 2018, the total interest expense against the outstanding line of credit
balance was $23 thousand and $20 thousand.
|