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Entry into a Material Definitive Agreement
On
September 15, 2017, Collectors Universe, Inc. (the ”Company”) obtained a five-year, $3.5 million unsecured term loan (the “Term Loan”) from ZB, N.A., dba California Bank &Trust (“CB&T” or the “Bank”), on the terms and subject to the conditions set forth in a Business Loan Agreement dated September 15, 2017, as modified by an Addendum to Business Loan Agreement (as so modified, the “Loan Agreement”), a copy of which is attached as Exhibit 10.98 to this Current Report on Form 8-K. During its first year (the "Draw-Down Period"), the Loan will take the form of a non-revolving credit line during which period the Company is entitled to draw down borrowings under the Term Loan at such times and in such amounts as it may request, provided that the maximum aggregate principal amount of the borrowings that may be outstanding may not exceed $3.5 million. During the Draw-Down Period the Company is required to make monthly payments of accrued but unpaid interest, only, at whichever of the following two interest rates as the Company may select: (i) LIBOR plus 2.25% per annum (the "LIBOR Rate"), or (ii) the highest prime lending rate published from time to time by the Wall Street Journal less 0.25% per annum (the "Prime Rate"), in either case subject to an interest rate floor of 2.250% per annum.
At the end of the one-year Draw
-Down Period, the Loan will automatically convert into a four-year term loan in the principal amount then outstanding. During that four year period, the Company will be required to repay the Term Loan in 48 equal monthly principal payments, together with interest at whichever of the following three rates as is selected by the Company: (i) the LIBOR Rate, (ii) the Prime Rate, or (iii) a fixed rate of __% per annum (the Fixed Rate"), in any case subject to an interest rate floor of 2.250% per annum.
If the Company chooses the Fixed Rate of interest, then it will be required to pay the Bank a prepayment penalty if the Company chooses to prepay more than 20% of the principal amount of the Term Loan after the end of the one year Draw-Down Period and
prior to the last year of the Term Loan. If the Company selects the LIBOR Rate or the Prime Rate, it will not be required to pay any penalty or premium upon the prepayment of the Term Loan.
Borrowing under the
Term Loan will be evidenced by a Promissory Note, as modified by an Addendum to Promissory Note (as so modified, the “Promissory Note”) entered into by the Company in favor of the Bank. A copy of the Promissory Note is attached as Exhibit 10.99 to this Current Report on Form 8-K.
The Company plans to use borrowings under the Term Loan
to fund the Company’s share of the construction and related facility costs for its new corporate headquarters and for other general corporate purposes.
The
Loan Agreement contains two financial covenants, which require the Company to maintain (a) a funded debt coverage ratio and (b) a debt service coverage ratio, respectively. The Loan Agreement also contains certain other covenants typical for this type of credit line, including a covenant which provides that, without the Bank’s consent, the Company may not incur additional indebtedness for borrowed money, except for (i) borrowings under a three year $10 million revolving credit line obtained from the Bank in January 2017, (ii) purchase money indebtedness and (iii) capitalized lease obligations. If the Company were to default in the payment of interest or principal, when due, or in its compliance with any of the financial or other covenants under the Loan Agreement, and fails to cure any such default within the applicable cure period, as set forth in the Loan Agreement, the Bank may accelerate the maturity date of the Term Loan, in which event the Company would then have to pay all of the outstanding principal and any unpaid interest in single lump sum payment and the Term Loan would be terminated.
The foregoing summaries of the Loan Agreement and Promissory Note are not intended to be complete and are qualified
in their entirety by reference to the Loan Agreement and Promissory Note, copies of which are attached as Exhibits 10.98 and 10.99, respectively, to this Current Report.