Item 1.01
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Entry into a Material Definitive Agreement.
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On July 21, 2017, Skyline Corporation
(Skyline or the Company) and its wholly-owned subsidiaries Homette Corporation (Homette), Layton Homes Corp. (Layton), and Skyline Homes, Inc. (Homes, and together with Skyline, Homette,
and Layton, the Loan Parties, and Skyline and Homes, the Borrowers and each a Borrower) entered into a Credit Agreement (the Agreement) with JPMorgan Chase Bank, N.A. (Chase) and other
ancillary agreements and documents, including a Security Agreement and Patent and Trademark Security Agreement (collectively referred to along with the Agreement as the Loan Documents). Under the Agreement, Chase will provide a
three-year revolving credit facility with loan advances to the Borrowers of up to a maximum of $10,000,000, subject to a borrowing base set forth in the Agreement (the New Facility). Loan advances bear interest at either 50 basis points
above Chases floating prime rate (CBFR) or 150 basis points in excess of the LIBOR rate for the applicable period (the Adjusted LIBO Rate). Loans are secured by the Loan Parties assets, now owned or hereafter
acquired, except for real property and any life insurance policies owned by any Borrower on the effective date of the Agreement. Interest is payable in arrears on a monthly basis in the case of the CBFR or at the end of the applicable interest rate
in the case of the Adjusted LIBO Rate, and all principal and accrued but unpaid interest is due and payable at the maturity of the New Facility. Borrowers may at any time prepay in whole or in part any loan amounts, subject to minimum amounts and
breakage costs.
Also under the Agreement, Chase agreed to issue letters of credit for the account of the Borrowers not to exceed $500,000. No advances
have yet been made in connection with such letters of credit.
As part of the closing of the financing, the Company paid Chase a closing fee of $25,000
plus legal and due diligence costs. The Loan Parties also agreed to pay the following fees to Chase during the term of the New Facility: (i) a commitment fee payable in arrears at a rate of .25% per annum on the average daily amount of the
available revolving commitment under the New Facility during the prior calendar month; and (ii) monthly letter of credit fees payable in arrears at the applicable Adjusted LIBO Rate on the outstanding amount of letters of credit issued and
outstanding during the prior month.
The Loan Documents contain covenants that limit the ability of the Loan Parties to, among other things:
(i) incur other indebtedness; (ii) create or incur liens on their assets; (iii) consummate asset sales, acquisitions, or mergers; (iv) pay dividends; (v) make certain investments; (vi) enter into certain transactions
with affiliates; and (vii) amend a Loan Partys articles of incorporation or bylaws.
The Agreement also requires compliance with a financial
covenant involving a fixed charge coverage ratio as set forth in the Agreement.
If the Borrowers default in their obligations under the Agreement, then
the unpaid balances will bear interest at 2.0% per annum in excess of the rate that would apply in the absence of a default. Other remedies available to Chase upon an event of default include the right to accelerate the maturity of all
obligations, the right to foreclose on and otherwise repossess the collateral securing the obligations, and all other rights set forth in the Loan Documents.
The events of default under the Agreement include, but are not limited to, the following: (i) certain events
of bankruptcy and insolvency; (ii) failure to make required payments; (iii) misrepresentations to Chase; (iv) failure to comply with certain covenants and agreements; (v) changes in control; and (vi) a material adverse
change occurs.
The foregoing description of the Loan Documents is a summary, does not purport to be complete, and is qualified in its entirety by
reference to the full text of the Loan Documents, copies of which are attached as exhibits to this Current Report on Form 8-K and incorporated by reference herein.
The Loan Documents have been included to provide investors with information regarding their terms. Except for their status as contractual documents that
establish and govern the legal relations among the parties thereto with respect to the transactions described therein, the Loan Documents are not intended to provide any other factual, business, or operations information about the Company. The Loan
Documents contain representations and warranties of the Loan Parties that were made solely for the benefit of the parties specified therein. Accordingly, investors should not rely on such representations and warranties as characterizations of the
actual state of facts or circumstances of the Company, since they were only made as of the date of the Loan Documents. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Loan
Documents.
Forward-Looking Statements
This document
contains certain forward-looking information about Skyline that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements generally can be identified by use of statements that include, but are not limited to, phrases such as believe, expect, future, anticipate, intend, plan,
foresee, may, should, will, estimates, potential, continue, or other similar words or phrases. Similarly, statements that describe the Companys objectives,
plans, or goals also are forward-looking statements. Such forward-looking statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of Skyline. Skyline cautions readers that a
number of important factors could cause actual results to differ materially from those expressed in, implied, or projected by such forward-looking statements. Risks and uncertainties include, but are not limited to: consumer confidence and economic
uncertainty; availability of wholesale and retail financing; the health of the U.S. housing market as a whole; federal, state, and local regulations pertaining to the manufactured housing industry; the cyclical nature of the manufactured housing,
modular housing and park model industries; general or seasonal weather conditions affecting sales; potential impact of natural disasters on sales and raw material costs; potential periodic inventory adjustments by independent retailers; interest
rate levels; the impact of inflation; the impact of high or rising fuel costs; the cost of labor and raw materials; competitive pressures on pricing and promotional costs; catastrophic events impacting insurance costs; the availability of insurance
coverage for various risks to the Company; market demographics; and managements ability to attract and retain executive officers and key personnel.
If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking
statements proves to be incorrect, the developments and future events concerning Skyline set forth in this document may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue
reliance on these statements, which speak only as of the date of this document. Skyline assumes no obligation to update such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence
of unanticipated events, unless obligated to do so under the federal securities laws.