Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported) - May 30, 2008
IEC
ELECTRONICS CORP.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
(State
or
Other Jurisdiction of Incorporation)
| |
|
|
0-6508
|
13-3458955
|
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
105
Norton Street, Newark, New York 14513
(Address
of principal executive offices)(Zipcode)
(315)
331-7742
(Registrant’s
Telephone Number, Including Area Code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
□
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
□
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
□
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
□
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry
Into Material Definitive Agreement
On
May
30, 2008, IEC Electronics Corp. (the “Company”) entered into a Credit Facility
Agreement (the “Credit Agreement”) with Manufacturers Traders and Trust Company,
a New York banking corporation (together with its affiliates, the “Lender”),
pursuant to which the Lender (i) agreed to make revolving credit loans to the
Company from time to time until May 30, 2013 (the “Termination Date”) in an
aggregate principal amount outstanding at any time not to exceed the lesser
of
$9,000,000 or the borrowing base (the “Revolving Credit Loans”); (ii) made a
term loan in the aggregate principal amount of $1,700,000 (the “Term Loan”); and
(iii) established an equipment line facility to make, in the discretion of
the
Lender, loans to the Company from time to time until the Termination Date in
an
aggregate principal amount of $1,500,000 (the “Equipment Line Loans”). Also on
May 30, 2008, the Company entered into a sale and leaseback arrangement with
Lender pursuant to which the Company sold equipment to the Lender for $2,000,000
and leased that equipment back from the Lender on the terms and subject to
the
conditions of that Master Equipment Lease dated as of May 30, 2008 by and
between the Company and the Lender. The amount financed under the sale and
leaseback arrangement will be repaid in 60 equal monthly installments of
approximately $32,753 and a final payment of $400,000 on May 30, 2013.
The
Credit Agreement provides that the proceeds of the Revolving Credit Loans and
the Term Loan will be used first for repayment in full of the Company’s
obligations to Keltic Financial Partners LP (“Keltic Financial”) under the Loan
Agreement dated as of January 14, 2003 (as amended, the “Keltic Loan Agreement”)
between the Company and Keltic Financial and thereafter will be available for
the Company’s general corporate purposes, including the financing of the
Company’s acquisition of its wholly-owned subsidiary, Val-U-Tech Corp., a New
York corporation (“Val-U-Tech”), as described below under Item 2.01. The
proceeds of any Equipment Line Loans shall be used for the purchase of capital
equipment. At the closing under the Credit Agreement, approximately
$5,385,577 was
disbursed under the Revolving Credit Facility and $1,700,000 was disbursed
under
the Term Loan. Of the amounts disbursed under the Credit Agreement and paid
to
the Company under the sale and lease back arrangement, approximately $4,538,937
was paid to Keltic Financial in repayment in full of the Company’s obligations
under the Keltic Loan Agreement, $5,500,000 was paid to the shareholders of
Val-U-Tech in payment of the cash portion of the consideration under the merger
agreement described below under Item 2.01 and the balance was applied to
transaction expenses.
Interest
on the Term Loan accrues at the rate of 6.7% per annum and is due and payable
on
the first day of each month. Interest on Revolving Credit Loans accrues at
the
Company’s option at (i) the higher of the Lender’s prime rate or the federal
funds rate plus 0.00% to 0.50% or (ii) LIBOR plus 1.50% to 2.75% and is payable,
in the case of LIBOR loans, on the last day of the applicable interest period
but no less often than every three months and, in the case of base rate loans,
on the first day of each month. Interest on Equipment Line Loans accrues at
the
Company’s option at (i) the higher of the Lender’s prime rate or the federal
funds rate plus 0.00% to 0.75%; (ii) LIBOR plus 1.75% to 3.00%; or (iii) the
applicable LIBOR margin plus the Lender’s cost of funds for the term. The
applicable margin varies based on the Company’s consolidated leverage
ratio. The Company will incur quarterly commitment fees based on the
unused amount of the revolving credit facility.
The
outstanding principal amount of the Revolving Credit Loans shall be due and
payable on May 30, 2013 (the “Maturity Date”). Overline advances made under the
revolving credit facility are due and payable within 60 days. The principal
amount of the Term Loan shall be paid in equal monthly installments of $28,334
on the first day of each month. The principal amount of any Equipment Line
Loans
shall be repaid in consecutive monthly installments on the first day of each
month, each equal to one-sixtieth of the original principal amount of the
particular Equipment Line Loan. Any amount outstanding under the Credit
Agreement on the Maturity Date shall become immediately due and
payable.
The
loans
under the Credit Agreement are subject to acceleration upon the occurrence
of
any of the following events of default: failure to make payments under the
Credit Facility Agreement within ten days of the due date; failure to perform
any other obligation to Lender under the Credit Agreement subject to a grace
period of ten days and an opportunity to cure within 30 days of notice in the
case of certain covenants; failure to perform any obligation to Lender other
than under the Credit Agreement after any applicable cure or grace periods;
default in the payment of other indebtedness in excess of the principal amount
of $100,000; inaccuracy of any representation and warranty in the Credit
Agreement or related documents; filing of a petition in bankruptcy not stayed,
bonded or vacated within 60 days of filing or similar events evidencing the
financial difficulties of the Company; occurrence of a Change of Control (as
defined in the Credit Agreement); unenforceability of any security document
entered into in connection with the Credit Agreement; occurrence of any event
that makes any employee benefit plan of the Company subject to termination
under
ERISA; or suspension or termination of any government contract of the Company
that would have a material adverse effect on the Company.
The
Company’s obligations under the Credit Agreement are secured by a security
interest in all of the assets of the Company and Val-U-Tech granted on the
terms
and subject to the conditions of that General Security Agreement dated as of
May
30, 2008 by the Company and Val-U-Tech in favor of the Lender; a pledge of
all
of the Company’s equity interest Val-U-Tech on
the
terms and subject to the conditions of that Pledge Agreement dated as of May
30,
2008 by and between the Company and the Lender;
and a
negative pledge on the Company’s real property on the terms and subject to the
conditions of that Negative Pledge Agreement dated as of May 30, 2008 by and
between the Company and the Lender. The Company’s obligations under the Credit
Agreement are also guaranteed by Val-U-Tech on the terms and subject to the
conditions of that Continuing Guaranty dated as of May 30, 2008 by Val-U-Tech
in
favor of the Lender.
The
Company may prepay the loans under the Credit Agreement at any time subject
to
the payment of customary breakage fees in the case of LIBOR loans and to payment
of a premium in the case of the Term Loan or any fixed rate loans. Prepayments
of base rate loans may be made without premium or penalty. Any
partial prepayments of the loans must be in a minimum amount of at least
$500,000. The Credit Agreement provides that the Company shall apply all net
cash proceeds from the sales of assets out of the ordinary course of business
in
amounts of at least $100,000 in the aggregate and all net cash proceeds from
property casualty insurance not applied to purchase replacement to the
prepayment of the loans under the Credit Agreement.
The
Credit Agreement contains various covenants that, among other restrictions,
limit the Company’s ability and the ability of its subsidiaries to:
|
|
·
|
incur
debts or grant liens;
|
|
|
·
|
make
certain investments;
|
| |
·
|
engage
in mergers and acquisitions or sell, transfer, assign or convey
assets;
|
| |
·
|
amend
the Company’s certificate of incorporation or bylaws;
|
|
|
·
|
pay
dividends or distributions on or repurchase the Company’s capital
stock;
|
| |
·
|
change
the nature of its business;
|
|
|
·
|
form
subsidiaries; and
|
|
|
·
|
engage
in transactions with affiliates.
|
The
Credit Agreement also contains covenants requiring the Company to
maintain:
|
|
·
|
a
Debt to EBITDARS Ratio (as defined in the Credit Agreement), on a
consolidated basis, no greater than 3.75 to 1.00, reported at the
end of
each fiscal quarter commencing with the fiscal quarter ending June
30,
2008;
|
|
|
·
|
A
minimum quarterly EBITDARS (as defined in the Credit Agreement),
on a
consolidated basis, equal to or greater than $350,000, measured at
the end
of each fiscal quarter commencing with the fiscal quarter ending
on June
30, 2009; and
|
| |
·
|
at
all times a Fixed Charge Coverage Ratio (as defined in the Credit
Agreement), on a consolidated basis, equal to or greater than 1.10
to
1.00, reported at the end of each fiscal quarter commencing with
the
fiscal quarter ending June 30,
2008.
|
Item
2.01 Completion
of Acquisition or Disposition of Assets.
On
May
30, 2008, the Company completed the acquisition of Val-U-Tech pursuant to the
Agreement and Plan of Merger dated as May 23, 2008 (the “Merger Agreement”) by
and among the Company, VUT Merger Corp., a New York corporation and a
wholly-owned subsidiary of the Company (the “Merger Sub”), Val-U-Tech and the
shareholders of Val-U-Tech. At the closing of the Merger Agreement, the Merger
Sub was merged with and into Val-U-Tech with Val-U-Tech as the surviving
corporation (the “Merger”). The execution of the definitive Merger Agreement was
disclosed in the Company’s Current Report on Form 8-K filed on May 30,
2008.
At
the
effective time of the Merger, the issued and outstanding capital stock of
Val-U-Tech was converted into the right to receive $10,000,000 (the “Purchase
Price”), of which $5,500,000 was paid in cash, $1,050,000 was paid in 500,000
shares of the Company’s common stock, par value $0.01 (“Common Stock”), valued
at $2.10 per share (the average closing price of the Common Stock for the five
trading days immediately preceding the date of the Merger Agreement), and the
remainder of which was paid in the form of promissory notes (“Seller Notes”) in
the aggregate principal amount of $3,450,000. The Purchase Price is subject
to
adjustment after the effective time of the Merger based upon (i) the financial
position of Val-U-Tech immediately prior to the effective time of the Merger
as
determined by an audit of Val-U-Tech’s financial statements to be performed by
the Company’s regular independent public accounting firm and (ii) Val-U-Tech’s
revenues for the years 2008 and 2009. Any adjustment to the Purchase Price
shall
be effected by adjusting the aggregate principal amount of the Seller
Notes.
The
financial statements required under Item 9.01(a) to be filed in connection
with
the completion of the Company’s acquisition of Val-U-Tech are not included in
the initial filing of this Current Report on Form 8-K and shall be filed by
amendment not later than 71 days after the date on which this Current Report
on
Form 8-K is filed.
A
copy of
the press release issued by the Company announcing the completion of the Merger
is attached hereto as Exhibit 99.1.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
The
information set forth under Item 1.01 and Item 2.01 of this Current Report
on
Form 8-K is incorporated herein by reference.
The
Seller Notes will be amortized over five years from the Closing Date. Interest
on the outstanding principal amount of the Seller Notes will accrue from the
Closing Date until payment in full at the rate of 4.0% per annum. Payments
of
principal and interest shall be made in 20 equal quarterly installments of
approximately $143,482 in the aggregate on the first day of each September,
December, March and June beginning September 1, 2008. Each Seller Note is fully
subordinated to the indebtedness of the Company under the Credit Agreement
on
the terms and subject to the conditions of that Subordination Agreement dated
as
of May 30, 2008 by and among the holder of the Seller Note, the Company and
the
Lender. The Seller Notes may be prepaid at any time and from time to time
without premium or penalty. The payment obligations of the Company under the
Seller Notes are subject to the Company’s right of offset for claims for
indemnification under the Merger Agreement.
The
holder of each Seller Note may declare the principal of, interest on and all
other amounts payable thereunder to be immediately due and payable upon any
of
the following events of default: failure of the Company to pay any installment
of principal or interest payable under the Seller Note within 30 days after
the
date due; suspension or liquidation by the Company of its usual business; filing
by or against the Company of any proceeding, suit or action for reorganization,
dissolution or liquidation or a petition under any of the provisions of the
U.S.
Bankruptcy Code not stayed, bonded or vacated within 60 days of any filing;
application for, or appointment of, a receiver of the Company or its property,
unless the same shall be dismissed within 60 days after such application or
appointment; making or sending notice of an intended bulk sale or any other
transfer of substantially all of the Company’s assets and the subsequent
consummation of any such transaction, unless the purchaser or transferee of
such
assets also assumes the Seller Note; or any judgment, attachment or execution
against the Company or its property for any amount in excess of $100,000 remains
unpaid, unstayed, or undismissed for a period of more than 30 days.
Item
3.02 Unregistered
Sales of Equity Securities
The
information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
The
issuance of the shares of Common Stock and Seller Notes pursuant to the Merger
Agreement is exempt from the registration requirements under the Securities
Act
of 1933, as amended (the “Act”), pursuant to Section 4(2) of the Act as a
transaction by an issuer not involving a public offering. Neither the Company
nor any person acting on its behalf has offered or sold the securities by any
form of general solicitation or general advertising.
Item
9.01 Financial
Statements and Exhibits
(d) Exhibits
| |
99.1
|
Press
Release issued by IEC Electronics Corp., dated June 3,
2008.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
IEC
Electronics Corp.
|
| |
(Registrant)
|
| |
|
|
|
Date:
June 5, 2008
|
By:
|
/s/
W. Barry Gilbert
|
|
|
|
W.
Barry Gilbert
|
|
|
|
Chairman,
Chief Executive Officer
|