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EX-2.1 - IEC ELECTRONICS CORP | v206050_ex2-1.htm |
EX-10.1 - IEC ELECTRONICS CORP | v206050_ex10-1.htm |
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) – December 17, 2010
IEC
ELECTRONICS CORP.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
(State or
Other Jurisdiction of Incorporation)
0-6508
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13-3458955
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(Commission
File Number)
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(IRS
Employer Identification No.)
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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:
|
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
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o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR
240.14d-2(b))
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o
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive
Agreement
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Southern California Braiding
Co., Inc. Purchase Agreement
On
December 17, 2010, CSCB, Inc. (“Buyer”), a newly formed, wholly owned subsidiary
of IEC Electronics Corp. (the “Company”), entered into an Asset Purchase
Agreement (the “Purchase Agreement”) made among the Buyer, Southern California
Braiding Co., Inc. (“Seller”), Leo P. McIntyre, Trustee of the Exemption Trust
Created Under The McIntyre Family Trust Dated October 4, 1993 As Amended and
Restated In Its Entirety Dated July 12, 2005 (“Exemption Trust”), Leo P.
McIntyre, Trustee Of The McIntyre Survivor’s Trust, Restatement Dated June 13,
2006, Created Under The McIntyre Family Trust Dated October 4, 1993 (“Survivor’s
Trust”), Leo P. McIntyre (“McIntyre”) and Craig Pfefferman (“Pfefferman,”
collectively with the Seller, Exemption Trust, Survivor’s Trust, and McIntyre,
the “Selling Parties”). Pursuant to the Purchase Agreement, the Buyer
acquired substantially all of the assets of the Seller (the
“Transaction”). The Company guaranteed performance of the Buyer’s
obligations under the Purchase Agreement.
The
Transaction purchase price was $25,000,000, which included $24,391,000 in cash,
100,000 shares of restricted Company stock valued at $609,000, and assumption of
certain operating liabilities of Seller. The purchase price was
subject to adjustment based upon closing working capital of the
Seller. An estimated adjustment at closing resulted in an additional
payment of $1,639,458 to Seller at closing. The final working capital
adjustment will be determined subsequent to the closing date, and may result in
a cash payment to the Buyer or Seller, as the case may be. The cash
portion of the purchase price was financed with loans from Manufacturers and
Trader’s Trust Company (“Bank”) in transactions discussed below.
Of the
purchase price, $2,500,000 was deposited in escrow to cover (i) certain
indemnification obligations, (ii) a portion of any shortfall in 2011 gross sales
below $20,000,000 and 2011 backlog below $10,000,000, (iii) adjustments in
working capital, subject to replenishment of the escrow by the Seller, and (iv)
accounts receivable not fully reserved in the working capital adjustment that
are not collected within 180 days, subject to replenishment of the escrow by the
Seller. Any portion of the escrow not used to cover claims will be
released to the Seller on March 31, 2012. In addition, a supplemental
escrow of $623,162 was established and will be released upon Buyer’s receipt of
certain customer consents to assumption of contracts by the Buyer.
The
Selling Parties entered into a five-year agreement not to compete with the
purchased business. Pfefferman will be employed by the Buyer
post-closing.
The
foregoing description of the Purchase Agreement does not purport to be complete
and is qualified in its entirety by reference to the full text of the Purchase
Agreement, which is filed as Exhibit 2.1 to this Report. The
Agreement has been included to provide investors and security holders with
information regarding its terms. It is not intended to provide any
other factual information about the Company or the other parties
thereto. The Purchase Agreement contains representations and
warranties the parties thereto made to, and solely for the benefit of, the other
parties thereto. Certain representations and warranties were made as
of a specific date, may be subject to a contractual standard of materiality
different from those generally applicable to shareholders and investors, or may
have been used for purposes of allocating risk between the respective parties
rather than establishing matters as facts. Accordingly, investors
should not rely on the representations and warranties as characterizations of
the actual state of facts at the time they were made or otherwise, and investors
should not rely on the representations and warranties for any other
purpose. In addition, the Purchase Agreement is modified by the
underlying disclosure schedules. Information concerning the subject
matter of the representations and warranties may change after the date of the
Purchase Agreements, and such change may or may not be fully reflected in the
Company’s public disclosures.
2
Third Amended and Restated
Credit Facility Agreement
On
December 17, 2010, the Company entered into a Third Amended and Restated Credit
Agreement (“Third Amended Credit Agreement”) with Manufacturers and Traders
Trust Company (“Lender”), a New York banking corporation, pursuant to which the
Lender has agreed to provide the Company with $51,544,493 in aggregate of senior
secured credit facilities. These facilities modify and replace the
existing Revolving Credit Commitment, extend the existing Equipment Line through
December 17, 2013 continuing the term debt outstanding thereunder, provide for a
new SCB Term Loan in the principal amount of $20,000,000, and include the
existing Energy Loan (original amount $203,000, of which $94,506 was outstanding
as of December 17, 2010), the existing 2008 Term Loan (original amount
$1,700,000, of which $349,980 was outstanding as of December 17, 2010), the
existing M&T Sale-Leaseback (“Lease/Term Loan Facility”), the existing GTC
Term Loan (original amount of $5,000,000, of which $4,000,004 was outstanding on
December 17, 2010), the existing Mortgage Secured Term Loan (original amount of
$4,000,000, of which $3,733,336 was outstanding on December 17, 2010), and
the existing Celmet Term Loan (original amount of $2,000,000, of which
$1,866,667 was outstanding on December 17, 2010), as outlined in the Second
Amended and Restated Credit Facility Agreement dated July 30, 2010, as amended
September 13, 2010, between the Company and the Lender (“Prior Agreement”) which
was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
August 5, 2010. The Third Amended Credit Agreement amends and
restates in its entirety the Prior Agreement.
The
following is a summary of the new senior secured facilities:
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·
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A
$20,000,000 Revolving Credit Commitment ("Revolving Credit Loans").
Borrowings under this facility cannot exceed the lesser of the Borrowing
Base and $20,000,000. The Borrowing Base is the sum of 85% of
eligible receivables plus 35% of eligible inventories up to $3,750,000, or
in the case of overline advances, 70% of eligible inventories up to
$4,750,000. The revolving credit facility terminates on
December 17, 2013 at which time all Revolving Credit Loans will be repaid
in full. The Company may elect an overline advance under the
Revolving Credit Facility if no overline advance has been outstanding in
the prior 30 days, and upon such request the interest rate on the
Revolving Credit Loans is increased 0.5 percentage
points. Overline advances must be repaid within 60 days and
amounts outstanding in excess of the Borrowing Base must be repaid
immediately. The Company will incur quarterly commitment fees
based on the unused amount of the Revolving Credit
Facility.
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3
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·
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A
$20,000,000 Term Loan (the "SCB Term Loan"). The SCB Term Loan
will be paid in sixty equally monthly payments of $333,333.33 each on the
first day of each month, and matures on December 17,
2015.
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The rates
of interest applicable to the Energy Loan and existing loans with fixed rates
under the Equipment Line remain unchanged. Revolving Credit Loans,
floating rate and new loans under the Equipment Line, the 2008 Term Loan, the
GTC Term Loan, the Mortgage Secured Term Loan, the Celmet Term Loan, and the SCB
Term Loan now bear interest at LIBOR plus the Applicable Margin. The
Applicable Margin is based on the Company's Total Debt/EBITDARS, and ranges from
3.75 percentage points for Total Debt/EBITDARS equal to or greater than
3.25:1.00, to 2.25 percentage points for Total Debt/EBITDARS less than
1.75:1.00. On the date of closing, the Applicable Margin was
3.25%. Interest on all facilities is payable monthly.
The Third
Amended Credit Agreement requires the Company to apply all net cash proceeds
from the sales of assets out of the ordinary course of business if the proceeds
exceed $100,000 in the aggregate and all net cash proceeds from property
casualty insurance not applied to purchase replacement property to the
prepayment of loans under the Third Amended Credit Agreement. In
addition, there is a mandatory prepayment equal to 50% of Excess Cash Flow (as
defined in the Third Amended Credit Agreement) for the fiscal year last ended to
be applied first to the SCB Term Loan, then to the Celmet Term Loan, then to the
GTC Term Loan, then to the Mortgage Secured Term Loan and then to the 2008 Term
Loan.
Of the
amounts disbursed under the Third Amended Credit Agreement, approximately
$26,030,000 was paid to the Selling Parties and into escrow as cash
consideration under the Purchase Agreement described above and below under Item
2.01, and the balance of $155,000 was applied to certain transaction
expenses.
The loans
under the Third Amended Credit Agreement are subject to acceleration upon the
occurrence of any of the following events of default: failure to make payments
under the Third Amended Credit Agreement within ten days of the due date;
failure to perform any other obligation to Lender under the Third Amended Credit
Agreement subject, in the case of certain covenants, to an opportunity to cure
within 30 days after notice; failure to perform any obligation to Lender other
than under the Third Amended 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 Third
Amended 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 Third Amended Credit Agreement);
unenforceability of any security document entered into in connection with the
Third Amended 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.
4
The Third
Amended Credit Agreement contains various covenants that, among other
restrictions, limit the Company’s ability and the ability of its subsidiaries
to:
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·
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incur
debts or grant liens;
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·
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make
certain investments;
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·
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engage
in mergers and acquisitions or sell, transfer, assign or convey
assets;
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·
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amend
the Company’s certificate of incorporation or
bylaws;
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·
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pay
dividends or distributions on or repurchase the Company’s capital
stock;
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·
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change
the nature of its business;
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·
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form
subsidiaries; and
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·
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engage
in transactions with affiliates.
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The Third
Amended Credit Agreement also contains covenants requiring the Company to
maintain:
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·
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a
Debt to EBITDARS Ratio (as defined in the Third Amended Credit Agreement),
on a consolidated basis, no greater than 3.50 to 1.00 at closing and
through September 29, 2011; no greater than 3.25 to 1.00 September 30,
2011 through September 29, 2012; no greater than 3.00 to 1.00 September
30, 2012 through September 29, 2013, and no greater than 2.75 to 1.00
September 30, 2013 and thereafter. The covenant shall be
reported at the end of each fiscal quarter, and for calculation purposes
related to the business of Buyer for periods prior to that ending on
December 31, 2010, EBITDARS applicable to Buyer will be treated as
$1,592,000 per applicable fiscal quarter (the “Buyer EBITDARS
Assumption”); and
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·
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A
minimum quarterly EBITDARS (as defined in the Third Amended Credit
Agreement), on a consolidated basis, equal to or greater than $1,5000,000,
measured at the end of each fiscal;
and
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·
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At
all times a Fixed Charge Coverage Ratio (as defined in the Third Amended
Credit Agreement), on a consolidated basis, equal to or greater than 1.25
to 1.00, reported at the end of each fiscal quarter, and for calculation
purposes related to the business of Buyer for periods prior to that ending
on December 31, 2010, using the Buyer EBITDARS
Assumption.
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5
The
Company’s obligations under the Third Amended Credit Agreement are secured by,
among other things, (i) a security interest in all of the assets of the Company,
IEC Electronics Wire and Cable, Inc. ("IECW&C"), General Technology
Corporation (“GTC”) and Buyer, granted on the terms and subject to the
conditions of an Amended and Restated General Security Agreement dated as of
December 16, 2009 by the Company, IECW&C and GTC in favor of the Lender
(“Security Agreement”) and the Supplement to Security Agreement dated as of
December 17, 2010 ; (ii) a pledge of all of the Company’s equity interest in
IECW&C, GTC and Buyer on the terms and subject to the conditions of that
Amended and Restated Pledge Agreement dated as of December 17, 2010 by and
between the Company and the Lender; (iii) 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 and
(iv) a mortgage in favor of the Lender made by GTC covering GTC's interest in
property and improvements located at premises at 1450 Mission Avenue NE,
Albuquerque, New Mexico. The Company’s obligations under the Third
Amended Credit Agreement are also guaranteed by IECW&C, GTC and
Buyer.
Item
2.01
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Completion
of Acquisition of Disposition of
Assets
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On
December 17, 2010 the Buyer completed the acquisition of substantially all of
the assets of the Seller pursuant to the Purchase Agreement and on the terms
discussed in Item 1.01 above.
The
Seller, located in Bell Gardens, California, provides precision, high
reliability wire, cable and harness products to military and defense markets,
primarily military prime contractors and NASA, built to withstand the demands of
extreme environments. The Seller’s annual revenues for 2010 are
expected to be in the range of $20,000,000. Other than in connection
with the acquisition, none of the Selling Parties has had any material
relationship with the Company, the Buyer, any of their affiliates, any director
or officer of the Company or Buyer, or any associate of any such director or
officer.
On
December 17, 2010 the Company issued a press release announcing the acquisition
of the Seller which was disclosed in the Company’s Current Report on Form 8-K
filed on that date.
The
financial statements required under Item 9.01(a) to be filed in connection with
the completion of the Company’s acquisition of the Seller 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.
Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant
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On
December 17, 2010, the Company entered into the Third Amended Credit Agreement
on the terms discussed in Item 1.01 above.
6
Item
9.01
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Financial
Statements and Exhibits
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(d) Exhibits
Exhibit
2.1*
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Asset
Purchase Agreement dated December 17, 2010 by and among CSCB, Inc.,
Southern California Braiding Co., Inc., Leo P. McIntyre, Trustee of the
Exemption Trust Created Under The McIntyre Family Trust Dated October 4,
1993 As Amended and Restated In Its Entirety Dated July 12, 2005, Leo P.
McIntyre, Trustee Of The McIntyre Survivor’s Trust, Restatement Dated June
13, 2006, Created Under The McIntyre Family Trust Dated October 4, 1993,
Leo P. McIntyre and Craig Pfefferman, and executed by IEC Electronics
Corp. solely as guarantor of certain obligations thereunder
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*
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Schedules
omitted pursuant to Item 601(b)(2) of Regulation S-K. The
registrant agrees to furnish supplementally a copy of any omitted schedule
to the SEC upon request. Contents of schedules are described in
the list of schedules attached at the end of the filed
agreement.
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Exhibit
10.1
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Third
Amended and Restated Credit Agreement dated December 17, 2010 by and
between IEC Electronics Corp. and Manufacturers and Traders Trust
Company
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7
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)
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Date: December
23, 2010
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By:
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/s/ W. Barry Gilbert | |
W. Barry Gilbert | |||
Chairman,
Chief Executive Officer
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8