Item 1.01 Entry into a Material Definitive Agreement.
On January 24, 2017, Katy Industries, Inc. (the “Company”), Continental Commercial Products, LLC (“CCP”), 2155735 Ontario Inc. (“Ontario Inc”), CCP Canada Inc. (“CCP Canada”), FTW Holdings, Inc. (“FTW”) and Fort Wayne Plastics, Inc. (“FWP” and, together with the Company, CCP, Ontario Inc, CCP Canada, FTW and FWP, the “Borrowers,” and each a “Borrower”) entered into Amendment No. 1 (the “1
st
Amendment”) to the Credit and Security Agreement, dated as of November 16, 2016, among the Borrowers, Encina Business Credit SPV, LLC, as agent and swing line lender, and the lenders party thereto (the “Encina Credit Agreement”).
The 1st Amendment provides for an incremental increase in availability under the “Borrowing Base” provided in (and as defined in) the Encina Credit Agreement of up to $1.975 million consisting of (1) a Tranche 1 component of up to $725,000 in incremental availability to finance sourced product of any Borrower that is ordered from a vendor to a Borrower and tied to a firm customer order of a Borrower and (2) a Tranche 2 component of up to $1.25 million in incremental availability for general working capital purposes (collectively, the “Incremental Availability Loans”). Borrowings of Incremental Availability Loans bear interest at a rate equal to 14.5% per annum plus the greater of the LIBOR (One Month) Rate and 0.5%. Availability of the Tranche 1 Incremental Availability Loans terminates on May 24, 2017. Availability of the Tranche 2 Incremental Availability Loans is reduced by (a) $138,888.89 on each Monday following May 24, 2017 and (b) 70% of net cash proceeds received by Borrowers from the sale of certain real estate owned by an affiliate of Borrowers, in each case, until such availability amount has been permanently reduced to $0.
All new extensions of credit consisting of Incremental Availability Loans will continue to be governed by the Encina Credit Agreement (as amended by the 1st Amendment) and will continue to be collateralized by a first priority security interest in and lien upon substantially all present and future assets and properties of the Borrowers.
The foregoing description of the 1st Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the 1st Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.