UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
OR
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the act:
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(NASDAQ Capital Market) |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
ORION ENERGY SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
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Page(s) |
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ITEM 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2022 and March 31, 2022 |
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4 |
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5 |
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6 |
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7 |
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ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3. |
31 |
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ITEM 4. |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 5. |
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ITEM 6. |
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34 |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
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September 30, 2022 |
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March 31, 2022 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Revenue earned but not billed |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Other intangible assets, net |
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Deferred tax assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other |
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Deferred revenue, current |
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Current maturities of long-term debt |
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Total current liabilities |
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Revolving credit facility |
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Long-term debt, less current maturities |
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Deferred revenue, long-term |
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Other long-term liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Preferred stock, $ |
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Common stock, |
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Additional paid-in capital |
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Treasury stock, common shares: |
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( |
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Retained deficit |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Statements.
3
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
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Three Months Ended September 30, |
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Six Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Product revenue |
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$ |
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$ |
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$ |
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$ |
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Service revenue |
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Total revenue |
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Cost of product revenue |
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Cost of service revenue |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Acquisition costs |
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Sales and marketing |
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Research and development |
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Total operating expenses |
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(Loss) income from operations |
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Other income (expense): |
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Other income |
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— |
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Interest expense |
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Amortization of debt issue costs |
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Total other expense |
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( |
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( |
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( |
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(Loss) income before income tax |
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( |
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( |
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Income tax (benefit) expense |
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( |
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( |
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Net (loss) income |
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$ |
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$ |
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$ |
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$ |
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Basic net (loss) income per share attributable to |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding |
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Diluted net (loss) income per share |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares and share |
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The accompanying notes are an integral part of these Condensed Consolidated Statements.
4
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except share amounts)
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Shareholders’ Equity |
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Common Stock |
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Shares |
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Additional |
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Treasury |
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Retained |
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Total |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options for cash |
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— |
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— |
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Shares issued under Employee Stock Purchase |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Employee tax withholdings on stock-based |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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Balance, June 30, 2022 |
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$ |
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$ |
( |
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$ |
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$ |
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Shares issued under Employee Stock Purchase |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance, September 30, 2022 |
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$ |
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$ |
( |
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$ |
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$ |
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Shareholders’ Equity |
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Common Stock |
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Shares |
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Additional |
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Treasury |
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Retained |
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Total |
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Balance, March 31, 2021 |
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$ |
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$ |
( |
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$ |
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$ |
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Exercise of stock options for cash |
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— |
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— |
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Shares issued under Employee Stock Purchase |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Employee tax withholdings on stock-based |
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( |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance, June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options for cash |
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— |
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— |
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Shares issued under Employee Stock Purchase |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Employee tax withholdings on stock-based |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance, September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Statements.
5
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Six Months Ended September 30, |
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2022 |
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2021 |
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Operating activities |
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Net (loss) income |
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$ |
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$ |
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Adjustments to reconcile net (loss) income to net cash used in |
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Depreciation |
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Amortization of intangible assets |
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Stock-based compensation |
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Amortization of debt issue costs |
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Deferred income tax |
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Gain (loss) on sale of property and equipment |
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Provision for inventory reserves |
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Provision for bad debts |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Revenue earned but not billed |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable |
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( |
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( |
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Accrued expenses and other |
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( |
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Deferred revenue, current and long-term |
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( |
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Net cash used in operating activities |
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Investing activities |
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Cash to fund acquisition |
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Cash paid for investment |
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Purchases of property and equipment |
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Additions to patents and licenses |
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Proceeds from sale of property, plant and equipment |
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Net cash used in investing activities |
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Financing activities |
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Payment of long-term debt |
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Proceeds from revolving credit facility |
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Payments of revolving credit facility |
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Payments to settle employee tax withholdings on stock-based compensation |
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( |
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Deferred financing costs |
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Net proceeds from employee equity exercises |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Statements.
6
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion is a provider of energy-efficient LED lighting and controls, maintenance services and electrical vehicle (EV) charging station solutions, to commercial and industrial businesses, and federal and local governments, predominantly in North America.
NOTE 2 — IMPACT OF COVID-19
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the U.S. and globally. Orion’s business was adversely impacted by measures taken by customers, suppliers, government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of Orion’s 2020 fiscal year, and continuing most significantly into the second quarter of fiscal 2021. During the third quarter of fiscal 2021, Orion experienced a rebound in business as project installations resumed for its largest customer. However, potential future risks remain due to the COVID-19 pandemic. It is not possible to predict the overall impact, including the economic and regulatory impact, the COVID-19 pandemic will have on Orion’s business, liquidity, capital resources or financial results. If the COVID-19 pandemic becomes more pronounced in Orion’s markets or experiences a resurgence in markets recovering from the spread of COVID-19, Orion’s results of operation would likely be materially adversely affected.
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Orion and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Orion have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2023 or other interim periods.
The Condensed Consolidated Balance Sheet as of March 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.
The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in Orion’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC on June 10, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of significant management estimates include revenue recognition, inventory obsolescence, allowance for doubtful accounts, accruals for warranty and loss contingencies, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.
7
Concentration of Credit Risk and Other Risks and Uncertainties
Orion's cash is primarily deposited with
Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For the three and six months ended September 30, 2022,
For the three and six months ended September 30, 2022,
As of September 30, 2022,
Recent Accounting Pronouncements
Issued: Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. The provisions of ASU 2016-13 and the related amendments are effective for Orion for fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Orion is currently evaluating the impact of adoption of this standard on its consolidated statements of operations, cash flows and the related footnote disclosures.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an entity to use the guidance in ASC 606, Revenue from Contracts with Customers, rather than using fair value, when recognizing and measuring contract assets and contract liabilities related to customer contracts assumed in a business combination. The provisions of ASU 2021-08 are effective for Orion for fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Orion is currently evaluating the impact of adoption of this standard on its consolidated balance sheet.
NOTE 4 — REVENUE
Orion generates revenue primarily by selling manufactured or sourced commercial lighting fixtures and components, installing these fixtures in customer’s facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components. Orion recognizes revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration Orion expects to receive in exchange for those goods or services.
During the fourth quarter of fiscal 2022, Orion acquired Stay-Lite Lighting, which provides lighting and electrical services. The results of Stay-Lite Lighting are included in the Orion Services Group segment and accelerate the growth of Orion’s maintenance services customer offering. The disaggregated revenue table provides total revenue from the maintenance services offering.
8
Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of Operations.
The following tables provide detail of Orion’s total revenue for the three and six months ended September 30, 2022 and September 30, 2021 (dollars in thousands):
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Three Months Ended September 30, 2022 |
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Six Months Ended September 30, 2022 |
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Product |
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Services |
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Total |
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Product |
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Services |
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Total |
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Revenue from contracts with customers: |
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Lighting product and installation |
|
$ |
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$ |
|
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$ |
|
|
$ |
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$ |
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$ |
|
||||||
Maintenance services |
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Solar energy related revenues |
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Total revenues from contracts with customers |
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Revenue accounted for under other guidance |
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Total revenue |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended September 30, 2021 |
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Six Months Ended September 30, 2021 |
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Product |
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Services |
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Total |
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Product |
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Services |
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Total |
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||||||
Revenue from contracts with customers: |
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Lighting product and installation |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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||||||
Maintenance services |
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Solar energy related revenues |
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Total revenues from contracts with customers |
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Revenue accounted for under other guidance |
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Total revenue |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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||||||
From time to time, Orion sells the receivables from one customer to a financing institution. The was
The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of September 30, 2022 and March 31, 2022 (dollars in thousands):
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September 30, |
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March 31, |
|
||
Accounts receivable, net |
|
$ |
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$ |
|
||
Contract assets |
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$ |
|
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$ |
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||
Contract liabilities |
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$ |
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$ |
|
||
There were
9
NOTE 5 — ACCOUNTS RECEIVABLE, NET
As of September 30, 2022 and March 31, 2022, Orion's accounts receivable and allowance for doubtful accounts balances were as follows (dollars in thousands):
|
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September 30, |
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March 31, |
|
||
Accounts receivable, gross |
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$ |
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$ |
|
||
Allowance for doubtful accounts |
|
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( |
) |
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( |
) |
Accounts receivable, net |
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$ |
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$ |
|
||
NOTE 6 — INVENTORIES, NET
As of September 30, 2022 and March 31, 2022, Orion's inventory balances were as follows (dollars in thousands):
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Cost |
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Excess and |
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Net |
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|||
As of September 30, 2022 |
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Raw materials and components |
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$ |
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$ |
( |
) |
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$ |
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||
Work in process |
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( |
) |
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Finished goods |
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( |
) |
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Total |
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$ |
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$ |
( |
) |
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$ |
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||
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As of March 31, 2022 |
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Raw materials and components |
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$ |
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$ |
( |
) |
|
$ |
|
||
Work in process |
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( |
) |
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||
Finished goods |
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( |
) |
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Total |
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$ |
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$ |
( |
) |
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$ |
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||
NOTE 7 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of September 30, 2022 and March 31, 2022, prepaid expenses and other current assets include the following (dollars in thousands):
|
|
September 30, |
|
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March 31, |
|
||
Payroll tax credit |
|
$ |
|
|
$ |
|
||
Other prepaid expenses |
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Total |
|
$ |
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$ |
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||
10
NOTE 8 — PROPERTY AND EQUIPMENT, NET
As of September 30, 2022 and March 31, 2022, property and equipment, net, included the following (dollars in thousands):
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|
September 30, |
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March 31, |
|
||
Land and land improvements |
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$ |
|
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$ |
|
||
Buildings and building improvements |
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Furniture, fixtures and office equipment |
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Leasehold improvements |
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Equipment leased to customers |
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Plant equipment |
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Vehicles |
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Construction in Progress |
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Gross property and equipment |
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||
Less: accumulated depreciation |
|
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( |
) |
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|
( |
) |
Total property and equipment, net |
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$ |
|
|
$ |
|
||
NOTE 9 — LEASES
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties.
Orion accounts for leases in accordance with ASC 842. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
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Balance sheet classification |
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September 30, 2022 |
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March 31, 2022 |
|
||
Assets |
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Other long-term assets |
|
$ |
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$ |
|
|||
Liabilities |
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||
Current liabilities |
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||
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Accrued expenses and other |
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$ |
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|
$ |
|
|||
Non-current liabilities |
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||
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Other long-term liabilities |
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|||
Total lease liabilities |
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$ |
|
|
$ |
|
||
Orion had operating lease costs of $
The estimated maturity of lease liabilities for each of the next five years is shown below (dollars in thousands):
Maturity of Lease Liabilities |
|
Operating Leases |
|
|
Fiscal 2023 |
|
$ |
|
|
Fiscal 2024 |
|
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Fiscal 2025 |
|
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Fiscal 2026 |
|
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Fiscal 2027 |
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Total lease payments |
|
$ |
|
|
Less: Interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
11
Assets Orion Leases to Other Parties
One of Orion’s frequent customers purchases products and installation services under agreements that provide for monthly payments, at a fixed monthly amount, of the contract price, plus interest, typically over a five-year period. While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. The portions of the transaction associated with the sale of the light fixtures is accounted for as a sales-type lease under ASC 842. The total transaction price in these contracts is allocated between the lease and non-lease components in the same manner as the total transaction price of other turnkey projects containing lighting fixtures and installation services.
Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the Condensed Consolidated Statement of Operations.
The following chart shows the amount of revenue and cost of sales arising from sales-type leases during the three and six months ended September 30, 2022 and September 30, 2021 (dollars in thousands):
|
|
Three Months Ended September 30, |
|
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Six Months Ended September 30, |
|
||||||||||
|
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2022 |
|
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2021 |
|
|
2022 |
|
|
2021 |
|
||||
Product revenue |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Cost of product revenue |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
NOTE 10 — GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Orion has $
As of September 30, 2022 and March 31, 2022, the components of, and changes in, the carrying amount of other intangible assets, net, were as follows (dollars in thousands):
|
|
September 30, 2022 |
|
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March 31, 2022 |
|
||||||||||||||||||
|
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Gross Carrying |
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Accumulated |
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Net |
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Gross Carrying |
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Accumulated |
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Net |
|
||||||
Amortized Intangible Assets |
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||||||
Patents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Licenses |
|
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|
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( |
) |
|
|
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|
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( |
) |
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|
||||
Trade name and trademarks |
|
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( |
) |
|
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|
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|
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( |
) |
|
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|
||||
Customer relationships |
|
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|
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( |
) |
|
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|
|
|
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( |
) |
|
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|
||||
Developed technology |
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|
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( |
) |
|
|
|
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|
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|
|
( |
) |
|
|
|
||||
Total Amortized Intangible Assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
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Indefinite-lived Intangible Assets |
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||||||
Trade name and trademarks |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Total Amortized Intangible Assets |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Amortization expense on intangible assets was $
Amortization expense on intangible assets was $
As of September 30, 2022, the weighted average remaining useful life of intangible assets was
12
The estimated amortization expense for the remainder of fiscal 2023, the next five fiscal years and beyond is shown below (dollars in thousands):
Fiscal 2023 (period remaining) |
|
$ |
|
|
Fiscal 2024 |
|
|
|
|
Fiscal 2025 |
|
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|
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Fiscal 2026 |
|
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|
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Fiscal 2027 |
|
|
|
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Fiscal 2028 |
|
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|
|
Thereafter |
|
|
|
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Total |
|
$ |
|
NOTE 11 — ACCRUED EXPENSES AND OTHER
As of September 30, 2022 and March 31, 2022, accrued expenses and other included the following (dollars in thousands):
|
|
September 30, |
|
|
March 31, |
|
||
Other accruals |
|
$ |
|
|
$ |
|
||
Compensation and benefits |
|
|
|
|
|
|
||
Accrued project costs |
|
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|
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|
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Credits due to customers |
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|
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Warranty |
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|
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Legal and professional fees |
|
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|
||
Sales tax |
|
|
|
|
|
|
||
Sales returns reserve |
|
|
|
|
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|
||
Total |
|
$ |
|
|
$ |
|
||
Orion generally offers a limited warranty of to
Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
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2022 |
|
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2021 |
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|
2022 |
|
|
2021 |
|
||||
Beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accruals |
|
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|
|
|
|
|
|
|
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|
||||
Warranty claims (net of vendor reimbursements) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
End of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
NOTE 12 — NET (LOSS) INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.
Diluted net income per common share reflects the dilution that would occur if stock options were exercised and restricted shares vested. In the computation of diluted net income per common share, Orion uses the treasury stock method for outstanding options and restricted shares. For the six months ended September 30, 2022, Orion was in a net loss position; therefore, the Basic and Diluted weighted-average shares outstanding are equal because any increase to the basic shares would be anti-dilutive.
|
|
For the Three Months Ended |
|
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For the Six Months Ended |
|
||||||||||
|
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2022 |
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2021 |
|
|
2022 |
|
|
2021 |
|
||||
Numerator: |
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|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income (in thousands) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Denominator: |
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|
||||
Weighted-average common shares outstanding |
|
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|
||||
Weighted-average common shares and common share |
|
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|
||||
Net (loss) income per common share: |
|
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|
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|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net income per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Common stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restricted shares |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
NOTE 13 — LONG-TERM DEBT
Long-term debt consisted of the following (dollars in thousands):
|
|
September 30, |
|
|
March 31, |
|
||
Revolving credit facility |
|
$ |
|
|
$ |
— |
|
|
Equipment debt obligations |
|
|
|
|
|
|
||
Total long-term debt |
|
|
|
|
|
|
||
Less current maturities |
|
|
( |
) |
|
|
( |
) |
Long-term debt, less current maturities |
|
$ |
|
|
$ |
|
||
Revolving Credit Agreement
On December 29, 2020, Orion entered into a new $
The replacement of the Prior Credit Agreement with the Credit Agreement provides Orion with increased financing capacity and liquidity to fund its operations and implement its strategic plans.
14
The Credit Agreement provides for a
As of September 30, 2022, Orion was in compliance with all debt covenants.
Equipment Debt Obligations
NOTE 14 — INCOME TAXES
Orion’s income tax provision was determined by applying an estimated annual effective tax rate, based upon the facts and circumstances known, to book income (loss) before income tax, adjusting for discrete items. Orion’s actual effective tax rate is adjusted each interim period, as appropriate, for changes in facts and circumstances. For the three months ended September 30, 2022 and 2021, Orion recorded income tax (benefit)/expense of $(
As of September 30, 2022 and March 31, 2022, Orion has a recorded valuation allowance of $
Uncertain Tax Positions
As of September 30, 2022, Orion’s balance of gross unrecognized tax benefits was approximately $
Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as Other long-term liabilities to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax (benefit) expense. Penalties and interest are included in the unrecognized tax benefits.
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Litigation
Orion is subject to various claims and legal proceedings arising in the ordinary course of business. Orion does not believe the final resolution of any of such claims or legal proceedings will have a material adverse effect on Orion’s future results of operations or financial condition.
State Tax Assessment
During fiscal year 2018, Orion was notified of a pending sales and use tax audit by the Wisconsin Department of Revenue for the period covering April 1, 2013 through March 31, 2017. This sales and use tax audit was settled during the quarter ended June 30, 2022 with no tax adjustment.
15
Employee Stock Purchase Plan
In August 2010, Orion’s Board of Directors approved a non-compensatory employee stock purchase plan, or “ESPP”. In the three months ended September 30, 2022,
|
|
Shares Issued |
|
|
Closing Market |
|
Quarter Ended June 30, 2022 |
|
|
|
|
||
Quarter Ended September 30, 2022 |
|
|
|
|
||
Total issued in fiscal 2022 |
|
|
|
|
$ |
|
Sale of shares
In March 2020, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to publicly offer and sell from time to time up to $
In March 2021, Orion entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which Orion may offer and sell shares of common stock from time to time, having an aggregate offering price of up to $
NOTE 17 — STOCK OPTIONS AND RESTRICTED SHARES
At Orion’s 2019 annual meeting of shareholders held on August 7, 2019, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). The Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from
The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.
Prior to the 2016 Omnibus Incentive Plan, Orion maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “2004 Plan”). No new awards are being granted under the 2004 Plan; however, all awards granted under the 2004 Plan that are outstanding will continue to be governed by the 2004 Plan. Forfeited awards originally issued under the 2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Plan. The Amended 2016 Plan and the 2004 Plan also permit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.
Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program.
16
The following amounts of stock-based compensation were recorded (dollars in thousands):
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of product revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the first three months of fiscal 2022, Orion had the following activity related to its stock-based compensation:
|
|
Restricted Shares |
|
|
Stock Options |
|
||
Awards outstanding at March 31, 2022 |
|
|
|
|
|
|
||
Awards granted |
|
|
|
|
|
|
||
Awards vested or exercised |
|
|
( |
) |
|
|
( |
) |
Awards forfeited |
|
|
( |
) |
|
|
( |
) |
Awards outstanding at September 30, 2022 |
|
|
|
|
|
|
||
Per share weighted average price on grant date |
|
$ |
|
|
|
|
||
As of September 30, 2022, the amount of deferred stock-based compensation expense to be recognized, over a remaining period of
NOTE 18 — SEGMENTS
Orion has the following business segments: Orion Services Group Division ("OSG"), Orion Distribution Services Division ("ODS"), and Orion U.S. Markets Division ("USM"). The accounting policies are the same for each business segment as they are on a consolidated basis.
Orion Services Group Division
The OSG segment develops and sells lighting products and provides construction, engineering along with installation and maintenance services for Orion's commercial lighting and energy management systems. OSG provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.
Orion Distribution Services Division
The ODS segment sells lighting products through manufacturer representative agencies and a network of North American broadline electrical distributors and contractors.
Orion U.S. Markets Division
The USM segment sells commercial lighting systems and energy management systems to contractors and energy service companies ("ESCOs").
17
Corporate and Other
Corporate and Other is comprised of operating expenses not directly allocated to Orion’s segments and adjustments to reconcile to consolidated results (dollars in thousands).
|
|
Revenues |
|
|
Operating Income (Loss) |
|
||||||||||
|
|
For the Three Months Ended |
|
|
For the Three Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Orion Services Group |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Orion Distribution Services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Orion U.S. Markets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Other |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
Revenues |
|
|
Operating Income (Loss) |
|
||||||||||
|
|
For the Six Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Orion Services Group |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Orion Distribution Services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Orion U.S. Markets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Other |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
18
NOTE 19 — ACQUISITION
Effective on January 1, 2022, Orion acquired all of the issued and outstanding capital stock of Stay-Lite Lighting, Inc. (“Stay-Lite Lighting”), a nationwide lighting and electrical maintenance service provider, for $
Orion has accounted for this transaction as a business combination. Orion has preliminarily allocated the purchase price of approximately $
The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of January 1, 2022, is as follows (dollars in thousands):
Cash |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Revenue earned but not billed |
|
|
|
|
Inventory |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property and equipment |
|
|
|
|
Goodwill |
|
|
|
|
Other intangible assets |
|
|
|
|
Other long-term assets |
|
|
|
|
Accounts payable |
|
|
( |
) |
Accrued expenses and other |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
Net purchase consideration |
|
|
|
Goodwill recorded from the acquisition of Stay-Lite Lighting is attributable to the expected synergies from the business combination. The goodwill resulting from the acquisition is deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name and customer relationships. The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach.
The following table presents the details of the intangible assets acquired at the date of acquisition (dollars in thousands):
|
|
Estimated |
|
Estimated Useful Life (Years) |
|
||
Tradename |
|
$ |
|
|
|
||
Customer relationships |
|
|
|
|
|
||
Stay-Lite Lighting’s post-acquisition results of operations since January 1, 2022 are included in Orion’s Consolidated Statements of Operations. The operating results of Stay-Lite Lighting are included in the Orion Services Group segment.
Transaction costs related to the acquisition of Stay-Lite Lighting and Voltrek LLC (see Note 20 - Subsequent Events) are recorded in acquisition costs in the consolidated statements of operations. Transaction costs totaled $
19
NOTE 20 — SUBSEQUENT EVENTS
Acquisition of Voltrek
Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek LLC (“Voltrek”), an electric vehicle charging station solutions provider, for a purchase price of $
No amounts relating to Voltrek or the Voltrek Acquisition, other than acquisition costs, are recognized in the accompanying financial statements because the acquisition date occurred subsequent to September 30, 2022. The accounting for the acquisition and the purchase price allocation is not determinable at this time, as Orion is still in the process of determining acquisition date fair values of certain working capital amounts and estimating the fair value of identifiable intangible assets associated with this acquisition.
Amendment to Loan Security Agreement
Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, executed Amendment No. 1 to its Loan Security Agreement (“LSA”) dated December 29, 2020. The primary purpose of the amendment is to include the assets of the acquired subsidiaries, Stay-Lite Lighting, Inc. and Voltrek LLC, as security interests of the LSA. Accordingly, eligible assets of Stay-Lite and Voltrek will be included in the borrowing base calculation for the purpose of establishing the monthly borrowing availability under the LSA. The amendment also clarifies that the earnout liabilities associated with the Stay-Lite and Voltrek transaction are permitted under the LSA and that the expenses recognized in connection with those earnouts should be added back in the computation of EBITDA, as defined.
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and related notes included in this Form 10-Q, as well as our audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
Cautionary Note Regarding Forward-Looking Statements
Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to several risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.
Overview
We provide energy-efficient LED lighting and controls, maintenance services and electrical vehicle (EV) charging station solutions. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We research, design, develop, manufacture, market, sell, install, and implement energy management systems consisting primarily of high-performance, energy-efficient commercial and industrial interior and exterior LED lighting systems and related services. Our products are targeted for applications in three primary market segments: commercial office and retail, area lighting, and industrial applications, although we do sell and install products into other markets. Our services consist of turnkey installation and system maintenance. Virtually all our sales occur within North America.
Our lighting products consist primarily of LED lighting fixtures, many of which include IoT enabled control systems. Our principal customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies ("ESCOs"). Currently, most of our products are manufactured at our leased production facility located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties in order to provide versatility in our product development.
We differentiate ourselves from our competitors through offering comprehensive project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration. In addition, we began to offer lighting and electrical maintenance services in fiscal 2021 which enables us to support a lifetime business relationship with our customer. We completed the acquisition of Stay-Lite Lighting on January 1, 2022, which is intended to further expand our maintenance services capabilities.
We believe the market for LED lighting products and related controls continues to grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other lighting technologies. Our LED lighting technologies have become the primary component of our revenue as we continue to strive to be a leader in the LED market.
21
In fiscal 2022, we continued to successfully capitalize on our capability of being a full service, turn-key provider of LED lighting and controls systems with design, build, installation and project management services, as we continued a very large project for a major national account which was substantially complete by the end of the fiscal year. As a result of this success, we have begun to evolve our business strategy to focus on further expanding the nature and scope of our products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including providing lighting and electrical maintenance services and utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We also plan to pursue the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to our customers. We currently plan on investing significant time, resources and capital into expanding our offerings in these areas with no expectation that they will result in us realizing material revenue in the near term and without any assurance they will succeed or be profitable. In fact, it is likely that these efforts will reduce our profitability, at least in the near term as we invest resources and incur expenses to develop these offerings. While we intend to pursue these expansion strategies organically, we also are actively exploring potential business acquisitions, like our acquisition of Stay-Lite Lighting and Voltrek, which would more quickly add these types of expanded and different capabilities to our product and services offerings. It is possible that the acquisitions of Stay-Lite Lighting and Voltrek, or other potential acquisitions, if successfully completed, could significantly change, and potentially transform, the nature and extent of our business.
We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. However, some of our maintenance services contracts consist of multi-year arrangements. We typically generate substantially all our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements we are required to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if the agreements or a substantial volume of purchase orders under the agreements are delayed or terminated. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.
We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a "retrofit". We frequently engage our customer’s existing electrical contractor to provide installation and project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors and ESCOs to sell to their own customer bases.
The gross margins of our products can vary significantly depending upon the types of products we sell, with margins typically ranging from 10% to 50%. As a result, a change in the total mix of our sales among higher or lower margin products can cause our profitability to fluctuate from period to period.
Our fiscal year ends on March 31. Our current fiscal year ends on March 31, 2023 and is referred to as “fiscal 2023”. We refer to our just completed fiscal year, which ended on March 31, 2022, as "fiscal 2022", and our prior fiscal year which ended on March 31, 2021 as "fiscal 2021". Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31 and our fiscal fourth quarter ends on March 31.
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. Orion has three reportable segments: Orion Services Group Division ("OSG"), and Orion Distribution Services Division ("ODS"), and Orion U.S. Markets Division (“USM”).
22
Impact of COVID-19
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the U.S. and globally. Our business was adversely impacted by measures taken by customers, suppliers, government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of our 2020 fiscal year, and continuing most significantly into the second quarter of fiscal 2021. During the third quarter of fiscal 2021, we experienced a rebound in business as project installations resumed for our largest customer. However, potential future risks remain due to the COVID-19 pandemic. It is not possible to predict the overall impact, including the economic and regulatory impact, the COVID-19 pandemic will have on put business, liquidity, capital resources or financial results. If the COVID-19 pandemic becomes more pronounced in our markets or experiences a resurgence in markets recovering from the spread of COVID-19, our results of operation would likely be materially adversely affected.
Acquisitions
Acquisition of Stay-Lite Lighting
Effective on January 1, 2022, we acquired all of the issued and outstanding capital stock of Stay-Lite Lighting, a nationwide lighting and electrical maintenance service provider, for a cash purchase price of $4.0 million. In addition, depending upon the performance during the current and following calendar years, Orion could pay up to an additional $0.7 million in earn out related purchase price. The acquisition was funded from existing cash resources. Stay-Lite Lighting will operate as Stay-Lite, an Orion Energy Systems business. The acquisition accelerates the growth of our maintenance services offerings through our Orion Services Group, which provides lighting and electrical services to customers.
Acquisition of Voltrek
Effective on October 5, 2022, we acquired all the membership interests of Voltrek LLC, an electric vehicle charging station solutions provider, for a purchase price of $5.0 million in cash and $1.0 million of shares of common stock of Orion, subject to normal and customary closing adjustments. In addition, depending upon the relative EBITDA growth of Voltrek’s business in fiscal 2023, 2024 and 2025, we could pay up to an additional $3.0 million, $3.5 million and $7.15 million, respectively, in earnout payments. Those compensatory payments do not fall within the scope of ASC 805, Business Combinations, and will be expensed over the course of the earnout periods to the extent they are earned. The acquisition was funded from existing cash resources and our common stock. Voltrek will operate as Voltrek, an Orion Energy Systems business. The acquisition leverages our project management and maintenance expertise into a rapidly growing sector.
Recent Developments
During the fourth quarter of fiscal 2022, we substantially completed a significant project rollout for our large national retail customer and future sales to this customer are expected to be at substantially lower amounts. During fiscal 2023, we continue to support this customer, but at lower revenue levels than in the comparative prior year. Despite the reduction experienced from the large national retail customer and a global online retailer, revenue for the balance of our business grew in the three and six months ended September 30, 2022.
23
Results of Operations - Three Months Ended September 30, 2022 versus Three Months Ended September 30, 2021
The following table sets forth the line items of our Condensed Consolidated Statements of Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):
|
|
Three Months Ended September 30, |
|
|||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
|
|
|
2022 |
|
|
2021 |
|
|||||
|
|
Amount |
|
|
Amount |
|
|
% |
|
|
% of |
|
|
% of |
|
|||||
Product revenue |
|
$ |
12,833 |
|
|
$ |
27,811 |
|
|
|
(53.9 |
)% |
|
|
73.1 |
% |
|
|
76.2 |
% |
Service revenue |
|
|
4,727 |
|
|
|
8,699 |
|
|
|
(45.7 |
)% |
|
|
26.9 |
% |
|
|
23.8 |
% |
Total revenue |
|
|
17,560 |
|
|
|
36,510 |
|
|
|
(51.9 |
)% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of product revenue |
|
|
9,287 |
|
|
|
18,864 |
|
|
|
(50.8 |
)% |
|
|
52.9 |
% |
|
|
51.7 |
% |
Cost of service revenue |
|
|
3,838 |
|
|
|
6,858 |
|
|
|
(44.0 |
)% |
|
|
21.9 |
% |
|
|
18.8 |
% |
Total cost of revenue |
|
|
13,125 |
|
|
|
25,722 |
|
|
|
(49.0 |
)% |
|
|
74.7 |
% |
|
|
70.5 |
% |
Gross profit |
|
|
4,435 |
|
|
|
10,788 |
|
|
|
(58.9 |
)% |
|
|
25.3 |
% |
|
|
29.5 |
% |
General and administrative expenses |
|
|
3,945 |
|
|
|
2,753 |
|
|
|
43.3 |
% |
|
|
22.5 |
% |
|
|
7.5 |
% |
Acquisition costs |
|
|
333 |
|
|
|
— |
|
|
NM |
|
|
|
1.9 |
% |
|
|
— |
|
|
Sales and marketing expenses |
|
|
2,649 |
|
|
|
2,687 |
|
|
|
(1.4 |
)% |
|
|
15.1 |
% |
|
|
7.4 |
% |
Research and development expenses |
|
|
451 |
|
|
|
317 |
|
|
|
42.3 |
% |
|
|
2.6 |
% |
|
|
0.9 |
% |
(Loss) income from operations |
|
|
(2,943 |
) |
|
|
5,031 |
|
|
|
(158.5 |
)% |
|
|
(16.8 |
)% |
|
|
13.8 |
% |
Other income |
|
|
1 |
|
|
|
— |
|
|
NM |
|
|
|
0.0 |
% |
|
|
— |
|
|
Interest expense |
|
|
(16 |
) |
|
|
(14 |
) |
|
|
14.3 |
% |
|
|
(0.1 |
)% |
|
|
(0.0 |
)% |
Amortization of debt issue costs |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
6.7 |
% |
|
|
(0.1 |
)% |
|
|
(0.0 |
)% |
(Loss) income before income tax |
|
|
(2,974 |
) |
|
|
5,002 |
|
|
NM |
|
|
|
(16.9 |
)% |
|
|
13.7 |
% |
|
Income tax (benefit) expense |
|
|
(643 |
) |
|
|
1,343 |
|
|
NM |
|
|
|
(3.7 |
)% |
|
|
3.7 |
% |
|
Net (loss) income |
|
$ |
(2,331 |
) |
|
$ |
3,659 |
|
|
NM |
|
|
|
(13.3 |
)% |
|
|
10.0 |
% |
|
* NM - Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased 53.9%, or $15.0 million, for the second quarter of fiscal 2023 versus the second quarter of fiscal 2022. Service revenue decreased 45.7%, or $4.0 million, for the second quarter of fiscal 2023 versus the second quarter of fiscal 2022. The decrease in product and service revenue was due to significantly lower revenues from our largest customer and comparatively lower project volume from other customers, primarily caused by the response of customers to supply chain disruptions and other delays. The installations from our existing large national retail customer represented 16.0% of total revenue in the second quarter of fiscal 2023 compared to 58.9% in the second quarter of fiscal 2022. This decrease in revenue is partially offset by revenues due to the acquisition of Stay-Lite Lighting. Cost of product revenue decreased by 50.8%, or $9.6 million, in the second quarter of fiscal 2023 versus the comparable period in fiscal 2022. Cost of service revenue decreased by 44.0%, or $3.0 million, in the second quarter of fiscal 2023 versus the comparable period in fiscal 2022. The decrease in product and service costs was primarily due to the decrease in revenue. Gross margin decreased from 29.5% of revenue in the second quarter of fiscal 2022 to 25.3% in the second quarter of fiscal 2023, due primarily to reduced sales decreasing the absorption of fixed costs.
Operating Expenses
General and Administrative. General and administrative expenses increased 43.3%, or $1.2 million, in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. This comparative increase was primarily due to the acquisition of Stay-Lite Lighting and an acceleration of stock-based compensation expense due to retirement modifications of existing restricted stock awards.
Sales and Marketing. Sales and marketing expenses were relatively flat, in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022, reflecting a reduction in commission expense on lower sales, partially offset by higher employment costs.
24
Research and Development. Research and development expenses increased 42.3%, or $0.1 million, in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022, as a result of higher employment costs.
Orion Services Group Division
Our OSG segment develops and sells lighting products and provides construction, engineering along with installation and maintenance services for our commercial lighting and energy management systems. OSG provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.
The following table summarizes our OSG segment operating results (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
9,747 |
|
|
$ |
26,952 |
|
|
|
(63.8 |
)% |
Operating (loss) income |
|
$ |
(1,543 |
) |
|
$ |
4,281 |
|
|
NM |
|
|
Operating margin |
|
|
(15.8 |
)% |
|
|
15.9 |
% |
|
|
|
|
* NM - Not Meaningful
OSG segment revenue in the second quarter of fiscal 2023 decreased by 63.8%, or $17.2 million compared to the second quarter of fiscal 2022. The decrease in OSG segment revenue was due to a significant reduction of project volume from our largest customer and comparatively lower project volume from other customers, primarily caused by the response of customers to supply chain disruptions and other delays. This revenue decrease was partially offset by the added revenue from Stay-Lite Lighting. This decrease led to a corresponding operating loss in this segment, as a result of decreased absorption of fixed costs.
Orion Distribution Services Division
Our ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of North American broadline and electrical distributors and contractors.
The following table summarizes our ODS segment operating results (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
4,309 |
|
|
$ |
4,036 |
|
|
|
6.8 |
% |
Operating income |
|
$ |
134 |
|
|
$ |
560 |
|
|
|
(76.1 |
)% |
Operating margin |
|
|
3.1 |
% |
|
|
13.9 |
% |
|
|
|
|
ODS segment revenue in the second quarter of fiscal 2023 increased by 6.8%, or $0.3 million, compared to the second quarter of fiscal 2022. Operating income in this segment decreased as a result of increased allocation of corporate costs.
Orion U.S. Markets Division
Our USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and contractors.
The following table summarizes our USM segment operating results (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
3,504 |
|
|
$ |
5,522 |
|
|
|
(36.5 |
)% |
Operating income |
|
$ |
310 |
|
|
$ |
1,297 |
|
|
|
(76.1 |
)% |
Operating margin |
|
|
8.8 |
% |
|
|
23.5 |
% |
|
|
|
|
25
USM segment revenue in the second quarter of fiscal 2023 decreased by 36.5%, or $2.0 million, compared to the second quarter of fiscal 2022, primarily due to a less diversified customer base. Operating income in this segment decreased as a result of lower revenue and increased allocation of corporate costs.
Results of Operations - Six Months Ended September 30, 2022 versus Six Months Ended September 30, 2021
The following table sets forth the line items of our Condensed Consolidated Statements of Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):
|
|
Six Months Ended September 30, |
|
|||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
|
|
|
2022 |
|
|
2021 |
|
|||||
|
|
Amount |
|
|
Amount |
|
|
% |
|
|
% of |
|
|
% of |
|
|||||
Product revenue |
|
$ |
26,316 |
|
|
$ |
56,057 |
|
|
|
(53.1 |
)% |
|
|
74.2 |
% |
|
|
78.3 |
% |
Service revenue |
|
|
9,150 |
|
|
|
15,554 |
|
|
|
(41.2 |
)% |
|
|
25.8 |
% |
|
|
21.7 |
% |
Total revenue |
|
|
35,466 |
|
|
|
71,611 |
|
|
|
(50.5 |
)% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of product revenue |
|
|
19,672 |
|
|
|
38,297 |
|
|
|
(48.6 |
)% |
|
|
55.5 |
% |
|
|
53.5 |
% |
Cost of service revenue |
|
|
7,805 |
|
|
|
12,296 |
|
|
|
(36.5 |
)% |
|
|
22.0 |
% |
|
|
17.2 |
% |
Total cost of revenue |
|
|
27,477 |
|
|
|
50,593 |
|
|
|
(45.7 |
)% |
|
|
77.5 |
% |
|
|
70.6 |
% |
Gross profit |
|
|
7,989 |
|
|
|
21,018 |
|
|
|
(62.0 |
)% |
|
|
22.5 |
% |
|
|
29.4 |
% |
General and administrative expenses |
|
|
7,699 |
|
|
|
5,864 |
|
|
|
31.3 |
% |
|
|
21.7 |
% |
|
|
8.2 |
% |
Acquisition costs |
|
|
347 |
|
|
|
— |
|
|
NM |
|
|
|
1.0 |
% |
|
|
— |
|
|
Sales and marketing expenses |
|
|
5,538 |
|
|
|
5,932 |
|
|
|
(6.6 |
)% |
|
|
15.6 |
% |
|
|
8.3 |
% |
Research and development expenses |
|
|
965 |
|
|
|
773 |
|
|
|
24.8 |
% |
|
|
2.7 |
% |
|
|
1.1 |
% |
(Loss) income from operations |
|
|
(6,560 |
) |
|
|
8,449 |
|
|
|
(177.6 |
)% |
|
|
(18.5 |
)% |
|
|
11.8 |
% |
Other income |
|
|
— |
|
|
|
1 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
0.0 |
% |
Interest expense |
|
|
(33 |
) |
|
|
(33 |
) |
|
|
— |
|
|
|
(0.1 |
)% |
|
|
(0.0 |
)% |
Amortization of debt issue costs |
|
|
(31 |
) |
|
|
(31 |
) |
|
|
— |
|
|
|
(0.1 |
)% |
|
|
(0.0 |
)% |
(Loss) income before income tax |
|
|
(6,624 |
) |
|
|
8,386 |
|
|
NM |
|
|
|
(18.7 |
)% |
|
|
11.7 |
% |
|
Income tax (benefit) expense |
|
|
(1,458 |
) |
|
|
2,217 |
|
|
NM |
|
|
|
(4.1 |
)% |
|
|
3.1 |
% |
|
Net (loss) income |
|
$ |
(5,166 |
) |
|
$ |
6,169 |
|
|
NM |
|
|
|
(14.6 |
)% |
|
|
8.6 |
% |
|
* NM - Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased 53.1%, or $29.7 million, for the first six months of fiscal 2023 versus the first six months of fiscal 2022. Service revenue decreased 41.2%, or $6.4 million, for the first six months of fiscal 2023 versus the first six months of fiscal 2022. The decrease in product and service revenue was due to significantly lower project revenues from our largest customer and comparatively lower project volume from other customers, primarily caused by the response of customers to supply chain disruptions and other delays. The installations from our existing large national retail customer represented 14.9% of total revenue in the first six months of fiscal 2023 compared to 55.0% in the first six months of fiscal 2022. This decrease in revenue was partially offset by revenues due to the acquisition of Stay-Lite Lighting. Cost of product revenue decreased by 48.6%, or $18.6 million, in the first six months of fiscal 2023 versus the comparable period in fiscal 2022. Cost of service revenue decreased by 36.5%, or $4.5 million, in the first six months of fiscal 2023 versus the comparable period in fiscal 2022. The decrease in product and service costs was primarily due to the decrease in revenue. Gross margin decreased from 29.4% in the first six months of fiscal 2022 to 22.5% in the first six months of fiscal 2023, due primarily to reduced sales decreasing the absorption of fixed costs.
Operating Expenses
General and Administrative. General and administrative expenses increased 31.3%, or $1.8 million, in the first six months of fiscal 2023 compared to the first six months of fiscal 2022. This comparative increase was primarily due to the acquisition of Stay-Lite Lighting and an acceleration of stock-based compensation expense due to retirement modifications of existing restricted stock awards.
26
Sales and Marketing. Sales and marketing expenses decreased 6.6%, or $0.4 million, in the first six months of fiscal 2023 compared to the first six months of fiscal 2022, reflecting a reduction in commission expense on lower sales, partially offset by increased employment costs.
Research and Development. Research and development expenses increased 24.8%, or $0.2 million, in the first six months of fiscal 2023 compared to the first six months of fiscal 2022, as a result of increased employment costs and testing.
Orion Services Group Division
Our OSG segment develops and sells lighting products and provides construction, engineering along with installation and maintenance services for our commercial lighting and energy management systems. OSG provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.
The following table summarizes our OSG segment operating results (dollars in thousands):
|
|
Six Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
18,782 |
|
|
$ |
48,940 |
|
|
|
(61.6 |
)% |
Operating (loss) income |
|
$ |
(3,772 |
) |
|
$ |
6,145 |
|
|
NM |
|
|
Operating margin |
|
|
(20.1 |
)% |
|
|
12.6 |
% |
|
|
|
|
* NM - Not Meaningful
OSG segment revenue in the first six months of fiscal 2023 decreased by 61.6%, or $30.2 million, compared to the first six months of fiscal 2022. The decrease in revenue was due to a significant reduction of project volume from our largest customer and comparatively lower project volume from other customers, primarily caused by the response of customers to supply chain disruptions and other delays. This revenue decrease is partially offset by the added revenue from Stay-Lite Lighting. This decrease led to a corresponding operating loss in this segment, as a result of revenue decreased absorption of fixed costs.
Orion Distribution Services Division
Our ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of North American broadline and electrical distributors and contractors.
The following table summarizes our ODS segment operating results (dollars in thousands):
|
|
Six Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
9,135 |
|
|
$ |
13,322 |
|
|
|
(31.4 |
)% |
Operating income |
|
|
83 |
|
|
|
2,682 |
|
|
|
(96.9 |
)% |
Operating margin |
|
|
0.9 |
% |
|
|
20.1 |
% |
|
|
|
|
ODS segment revenue in the first six months of fiscal 2023 decreased by 31.4%, or $4.2 million, compared to the first six months of fiscal 2022, primarily due to a decrease in sales to one customer. The decrease in sales resulted in a corresponding operating loss in this segment based on operating leverage.
Orion U.S. Markets Division
Our USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and contractors.
27
The following table summarizes our USM segment operating results (dollars in thousands):
|
|
Six Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% |
|
|||
Revenues |
|
$ |
7,549 |
|
|
$ |
9,349 |
|
|
|
(19.3 |
)% |
Operating income |
|
$ |
496 |
|
|
$ |
1,948 |
|
|
|
(74.5 |
)% |
Operating margin |
|
|
6.6 |
% |
|
|
20.8 |
% |
|
|
|
|
USM segment revenue in the first six months of fiscal 2023 decreased by 19.3%, or $1.8 million, compared to the first six months of fiscal 2022, primarily due to a less diversified customer base. Operating income in this segment decreased as a result of increased allocation of corporate costs.
Liquidity and Capital Resources
Overview
We believe our existing cash and operating cash flow provide us with the financial flexibility needed to meet our capital requirements, including to fund targeted capital expenditures, acquisitions and working capital for one year from the date of this report, as well as our longer-term capital requirements for periods beyond at least one year from the date of this report.
We had approximately $12.5 million in cash and cash equivalents as of September 30, 2022, compared to $14.5 million at March 31, 2022. Our cash position decreased as a result of an EBITDA loss and an overall use of working capital during the first six months of fiscal 2023.
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management, capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements during the next 12 months based on our current cash flow forecast, there can be no assurance to that effect. If we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.
Cash Flows
The following table summarizes our cash flows for the six months ended September 30, 2022 and 2021 (in thousands):
|
|
Six Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Operating activities |
|
$ |
(6,595 |
) |
|
$ |
(3,956 |
) |
Investing activities |
|
|
(397 |
) |
|
|
(802 |
) |
Financing activities |
|
|
5,046 |
|
|
|
105 |
|
Decrease in cash and cash equivalents |
|
$ |
(1,946 |
) |
|
$ |
(4,653 |
) |
Cash Flows Related to Operating Activities. Cash used in operating activities primarily consists of net loss adjusted for certain non-cash items, including depreciation, amortization of intangible assets, stock-based compensation, amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.
Cash used in operating activities for the first six months of fiscal 2023 was $6.6 million and consisted of our net loss of $5.2 million adjusted for non-cash expense items and net cash used in changes in working capital of $1.3 million, the largest of which was a $4.0 million decrease in accounts payable.
Cash used in operating activities for the first six months of fiscal 2022 was $4.0 million and consisted of our net income of $6.2 million adjusted for non-cash expense items of $3.5 million offset by working capital uses of $13.7 million, the largest of which was a $10.0 million increase in accounts receivable.
28
Cash Flows Related to Investing Activities. Cash used in investing activities of $0.4 million in the first six months of fiscal 2022 consisted primarily of purchases of property and equipment.
Cash used in investing activities of $0.8 million in the first six months of fiscal 2022 consisted primarily of cash paid for a non-controlling equity stake in ndustrial, Inc. of $0.5 million and purchases of property and equipment.
Cash Flows Related to Financing Activities. Cash provided by financing activities of $5.0 million in the first six months of fiscal 2023 consisted primarily of proceeds from our revolving credit facility, which was drawn down to subsequently pay the cash purchase price to acquire Voltrek.
Cash provided by financing activities of $0.1 million in the first six months of fiscal 2022 consisted primarily of proceeds from employee equity exercises.
Working Capital
Our net working capital as of September 30, 2022 was $32.5 million, consisting of $44.8 million in current assets and $12.3 million in current liabilities. Our net working capital as of March 31, 2022 was $32.9 million, consisting of $51.2 million in current assets and $18.4 million in current liabilities.
We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions. Because of recent supply chain challenges, we have been making additional incremental inventory purchases. Our accounts receivables, inventory and payables may increase to the extent our revenue and order levels increase.
Indebtedness
Revolving Credit Agreement
On December 29, 2020, we entered into a new $25 million Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”). The Credit Agreement replaced our prior $20.15 million secured revolving credit and security agreement (the “Prior Credit Agreement”).
The replacement of the Prior Credit Agreement with the Credit Agreement provides us with increased financing capacity and liquidity to fund our operations and implement our strategic plans.
The Credit Agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of September 30, 2022, the borrowing base supports $16.2 million availability of the Credit Facility. As of September 30, 2022, $5.0 million was borrowed under the Credit Facility.
The Credit Agreement is secured by a first lien security interest in substantially all of our assets.
Effective November 4, 2022, we, along with Bank of America, N.A. as lender, executed Amendment No. 1 to the Loan Security Agreement (“LSA”) dated December 29, 2020. The primary purpose of the amendment is to include the assets of the acquired subsidiaries, Stay-Lite Lighting, Inc. and Voltrek LLC, as security interests of the LSA. Accordingly, eligible assets of Stay-Lite and Voltrek will be included in the borrowing base calculation for the purpose of establishing the monthly borrowing availability under the LSA. The amendment also clarifies that the earnout liabilities associated with the Stay-Lite and Voltrek transaction are permitted under the LSA and that the expenses recognized in connection with those earnouts should be added back in the computation of EBITDA, as defined.
29
Backlog
Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed purchase orders. Backlog totaled $11.2 million and $10.1 million as of September 30, 2022 and March 31, 2022, respectively. We generally expect our backlog to be recognized as revenue within one year, although the COVID-19 pandemic may extend this time period.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Inflation
We have experienced increases in various input costs including labor, components and transportation in the past year. In response, we have implemented multiple price increases, and we have substantially mitigated the inflationary pressures, such that our results from operations have not been materially affected by inflation. We are monitoring input costs and cannot currently predict the future impact to our operations by inflation.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, collectability of receivables, stock-based compensation, warranty reserves and income taxes. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, 2022. For the six months ended September 30, 2022, there were no material changes in our accounting policies.
Recent Accounting Pronouncements
For a complete discussion of recent accounting pronouncements, refer to Note 3 in the Condensed Consolidated Financial Statements included elsewhere in this report.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10-K for the year ended March 31, 2022. There have been no material changes to such exposures since March 31, 2022.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of September 30, 2022, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of September 30, 2022.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date of this report, we do not believe that the final resolution of any of such claims or legal proceedings will have a material adverse effect on our future results of operations.
See Note 15 – Commitments and Contingencies, to the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I - Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, which we filed with the SEC on June 10, 2022 and in Part 1 - Item 2 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 5. OTHER INFORMATION
Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, entered into Amendment No. 1 to Loan and Security Agreement (the “Amendment”) to the Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”), which provides for a five-year $25.0 million revolving credit facility that matures on December 29, 2025. The Amendment amended the Credit Agreement to, among other things: (i) add Stay-Lite Lighting and Voltrek as additional borrowers under the Amended Credit Agreement; (ii) clarify that the obligations related to the earn out payments associated with the acquisitions of Stay-Lite Lighting and Voltrek are permitted under the Amended Credit Agreement; and (iii) add expenses recognized in connection with the potential earnouts payable in the Stay-Lite Lighting and Voltrek acquisitions to the computation of EBITDA as defined under the Amended Credit Agreement.
Pursuant to the terms and conditions of the Amended Credit Agreement, future borrowing base calculations will incorporate the applicable assets of Stay-Lite Lighting and Voltrek.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Credit Agreement, a copy of which is filed as Exhibit 10.4 to this Quarterly Report.
32
ITEM 6. EXHIBITS
10.1 |
|
|
|
10.2 |
|
|
|
10.3 |
|
|
|
10.4 |
|
|
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1 |
|
|
|
32.2 |
|
|
|
101.INS |
Inline XBRL Instance Document+ |
|
|
101.SCH |
Inline XBRL Taxonomy extension schema document+ |
|
|
101.CAL |
Inline XBRL Taxonomy extension calculation linkbase document+ |
|
|
101.DEF |
Inline XBRL Taxonomy extension definition linkbase document+ |
|
|
101.LAB |
Inline XBRL Taxonomy extension label linkbase document+ |
|
|
101.PRE |
Inline XBRL Taxonomy extension presentation linkbase document+ |
|
|
104 |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, has been formatted in Inline XBRL. |
+ Filed herewith
* Management contract or compensatory plan or arrangement
^ The schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request; provided, however, that the Registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, as amended, for any schedule so furnished.
33
SIGNATURE
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, thereunto duly authorized, on November 8, 2022.
ORION ENERGY SYSTEMS, INC. |
||
|
|
|
By |
|
/s/ J. Per Brodin |
|
|
J. Per Brodin |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer and Authorized Signatory) |
34
Exhibit 10.4
EXECUTION VERSION
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this
“Amendment”) is dated effective as of November 4, 2022 and entered into by and among, ORION ENERGY SYSTEMS, INC., a Wisconsin corporation (“Company”), GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited liability company (“Great Lakes”), CLEAN ENERGY SOLUTIONS, LLC, a Wisconsin limited liability company (“Clean Energy”), ORION ASSET MANAGEMENT, LLC, a Wisconsin limited liability company (“Asset Management”), ORION TECHNOLOGY VENTURES, LLC, a Wisconsin limited liability company (“Orion Technology”) and together with the Company, Great Lakes, Clean Energy and Asset Management, collectively, “Existing Borrowers), STAY-LITE LIGHTING, INC., a Wisconsin corporation ("Stay-Lite") and VOLTREK, LLC, a Massachusetts limited liability company ("Voltrek" and together with Stay- Light, the "Additional Borrowers"), and BANK OF AMERICA, N.A., a national banking association, as Lender (“Lender”). Capitalized terms used herein but not otherwise defined shall have their respective meanings as defined in the Loan Agreement (defined below).
RECITALS
WHEREAS, the Existing Borrowers, the Guarantors and the Lender have entered into that certain Loan and Security Agreement dated as of December 29, 2020 (as amended, restated, extended, supplemented or otherwise modified, the “Loan Agreement”).
WHEREAS, the Obligors have requested that (i) the Additional Borrowers be joined to the Loan Agreement as "Borrowers" thereunder (the "Joinder") and (ii) the Lender agree to certain amendments to the Loan Agreement as set forth herein.
WHEREAS, as of the Amendment Effective Date (defined below), the Lender consents to the Joinder and agrees to amend the Loan Agreement, all on the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Existing Borrowers, the Additional Borrowers and the Lenders agree as follows:
The signature pages to the Loan Agreement may be omitted or modified, however to reflect the parties to the Amended Loan Agreement, and the execution and delivery of this Amendment shall be deemed to be an execution and delivery of the Amended Loan Agreement
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induce the Lender to enter into this Amendment, each Obligor that is party to this Amendment represents and warrants to the Lender that the following statements are true, correct and complete as of the Amendment Effective Date after giving effect to this Amendment:
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or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the Amendment Effective Date arising out of, connected with or related in any way to this Amendment, the Loan Agreement or any other Loan Document, or any act, event or transaction related or attendant thereto, or the agreements of the Lender contained therein, or the possession, use, operation or control of any of the assets of each Obligor, or the making of any Loans or other advances, or the management of such Loans or advances or the Collateral on or prior to the Amendment Effective Date. As to each and every claim released hereunder, each Obligor hereby represents that it has received the advice of legal counsel with regard to the releases contained herein.
[Signatures follow; remainder of page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.
EXISTING BORROWERS:
ORION ENERGY SYSTEMS, INC.
By: /s/ Per Brodin Name: Per Brodin
Title: Chief Financial Officer
GREAT LAKES ENERGY TECHNOLOGIES, LLC
By: /s/ Per Brodin Name: Per Brodin
Title: Chief Financial Officer
CLEAN ENERGY SOLUTIONS, LLC
By: /s/ Per Brodin Name: Per Brodin
Title: Chief Financial Officer
ORION ASSET MANAGEMENT, LLC
By: /s/ Per Brodin Name: Per Brodin
Title: Chief Financial Officer
ORION TECHNOLOGY VENTURES, LLC
By: /s/ Per Brodin Name: Per Brodin
Title: Chief Financial Officer
Signature Page to Amendment No. 1 to Loan and Security Agreement
ADDITIONAL BORROWERS:
STAY-LITE LIGHTING, INC.
By: /s/ Per Brodin Name: Per Brodin
Title: Treasurer and Secretary
VOLTREK, LLC
By: /s/ Per Brodin Name: Per Brodin
Title: Treasurer and Secretary
Signature Page to Amendment No. 1 to Loan and Security Agreement
LENDER:
BANK OF AMERICA, N.A.
By: /s/ Jonah Vogt Name: Jonah Vogt
Title:_ Vice President
Signature Page to Amendment No. 1 to Loan and Security Agreement
ANNEX I
Amended Loan Agreement
See attached
[EXECUTION VERSION]ANNEX I
to First Amendment to Loan and Security Agreement
dated November 4, 2022
LOAN AND SECURITY AGREEMENT
Dated as of December 29, 2020
ORION ENERGY SYSTEMS, INC., GREAT LAKES ENERGY TECHNOLOGIES, LLC,
CLEAN ENERGY SOLUTIONS, LLC, ORION ASSET MANAGEMENT, LLC,
and
ORION TECHNOLOGY VENTURES, LLC, STAY-LITE LIGHTING, INC.
and
VOLTREK, LLC
as Borrowers,
BANK OF AMERICA, N.A.,
as Lender
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION 1
SECTION 2. CREDIT FACILITIES 25
SECTION 3. INTEREST, FEES AND CHARGES 2627
SECTION 4. LOAN ADMINISTRATION 32
SECTION 5. PAYMENTS 3433
SECTION 6. CONDITIONS PRECEDENT 38
SECTION 7. COLLATERAL 40
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TABLE OF CONTENTS
(continued)
Page
SECTION 9. REPRESENTATIONS AND WARRANTIES 4746
SECTION 10. COVENANTS AND CONTINUING AGREEMENTS 51
SECTION 12. MISCELLANEOUS 6160
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TABLE OF CONTENTS
(continued)
Page
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TABLE OF CONTENTS
Page
LIST OF SCHEDULES
Schedule 7.8.1 Pledged Interests
Schedule 8.5 Deposit Accounts
Schedule 8.6.1 Business Locations Schedule 9.1.4 Names and Capital Structure
Schedule 9.1.5 Real Estate in Special Flood Hazard Zone Schedule 9.1.11 Patents, Trademarks, Copyrights and Licenses Schedule 9.1.14 Environmental Matters
Schedule 9.1.15 Restrictive Agreements Schedule 9.1.16 Litigation
Schedule 9.1.18 Pension Plans
Schedule 10.2.2 Existing Liens
Schedule 10.2.17 Existing Affiliate Transactions
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of December 29, 2020, among ORION ENERGY SYSTEMS, INC., a Wisconsin corporation (“Company”), GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited liability company (“Great Lakes”), CLEAN ENERGY SOLUTIONS, LLC, a Wisconsin limited liability company (“Clean Energy”) and ORION ASSET MANAGEMENT, LLC, a Wisconsin limited liability company (“Asset Management”), ORION TECHNOLOGY VENTURES, LLC, a Wisconsin limited liability company (“Orion Technology”), STAY-LITE LIGHTING, INC., a Wisconsin corporation ("Stay-Lite") and VOLTREK, LLC, a Massachusetts limited liability company ("Voltrek" and together with the Company, Great Lakes and Clean Energy, Asset Management, Orion Technology and Stay-Lite, collectively, “Borrowers”), and BANK OF AMERICA, N.A., a national banking association (including any Lending Office, “Lender”).
R E C I T A L S:
Borrowers have requested that Lender provide a credit facility to Borrowers to finance their mutual and collective business enterprise. Lender is willing to provide the credit facility on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION
. As used herein, the following terms have the meanings set forth below:
Accounts Formula Amount: 85% of the Value of Eligible Accounts; provided, however, that, notwithstanding the proviso to the definition of "Borrowing Base", until an initial field examination is conducted with respect to the Accounts owned by Stay-Lite and Voltrek (the “Initial Examination”), 80% of the Value of Eligible Accounts of Stay-Lite and Voltrek shall be included in the calculation of the Accounts Formula Amount and after the completion of the Initial Examination, 85% of the Value of Eligible Accounts of Stay-Lite and Voltrek shall be included in the calculation of the Accounts Formula Amount; provided further, however, that if the Initial Examination is not completed prior to June 30, 2023, the Value of all Eligible Accounts of Stay-Lite and Voltrek not subject to a completed Initial Examination shall be excluded from the calculation of Accounts Formula Amount until such Initial Examination is completed.
Acquisition: a transaction or series of transactions resulting in (a) acquisition of a business, division or substantially all assets of a Person; (b) record or beneficial ownership of 50% or more of the Equity Interests of a Person; or (c) merger, consolidation or combination of a Borrower or Subsidiary with another Person.
Affiliate: with respect to a specified Person, any other Person that directly, or indirectly through intermediaries, Controls, is Controlled by or is under common Control with the specified Person.
Allocable Amount: as defined in Section 5.8.3.
Amendment Effective Date: as defined in the Amendment No. 1.
Amendment No. 1: that certain Amendment No. 1 to Loan and Security Agreement, by and among the Borrowers and the Lender.
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Anti-Corruption Law: any law relating to bribery or corruption, including the U.S. Foreign Corrupt Practices Act of 1977, UK Bribery Act 2010 and Patriot Act.
Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot
Act.
Applicable Concentration Percentage: with respect to (a) a Specified Account Debtor, 100%, (b) Tier I Account Debtors, 70%, (c) Tier II Account Debtors, 40% and (d) Tier III Account Debtors, 30%. All percentages set forth in this definition may be increased or decreased from time to time by Lender in its Permitted Discretion.
Applicable Law: all laws, rules, regulations and governmental guidelines applicable to the Person or matter in question, including statutory law, common law and equitable principles, as well as provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities.
Applicable Margin: the margin set forth below, as determined by the average daily Availability for the last Fiscal Quarter:
Level |
Average Availability |
LIBORTerm SOFR Loans |
Base Rate Loans |
I |
> 66% of the Borrowing Base |
1.50% |
0.50% |
II |
> 33% of the Borrowing Base and < 66% of the Borrowing Base |
1.75% |
0.75% |
III |
< 33% of the Borrowing Base |
2.00% |
1.00% |
Until receipt of the Borrowing Base Report for the calendar month ending March 31, 2021, margins shall be determined as if Level II were applicable. Thereafter, margins shall be subject to increase or decrease by Lender on the first day of the calendar month following each Fiscal Quarter end based upon the Average Availability for such Fiscal Quarter. If Lender is unable to calculate Average Availability for a Fiscal Quarter due to Borrowers’ failure to deliver any Borrowing Base Report as of the last day of the calendar month for the Fiscal Quarter then ending when required hereunder, then, at the option of Lender, margins shall be determined as if Level III were applicable until the first day of the calendar month following its receipt.
Asset Disposition: a sale, lease, license, consignment, transfer or other disposition of Property, including any disposition in connection with a sale-leaseback transaction, synthetic lease or statutory division of a limited liability company.
Availability: the Borrowing Base minus Revolver Usage.
Availability Reserve: the sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve; (d) liabilities secured by Liens upon Collateral that are or may be senior to Lender’s Liens (but imposition of any such reserve shall not waive an Event of Default arising therefrom); (e) the Dilution Reserve; and (f) additional reserves, in such amounts and with respect to such matters, as Lender in its Permitted Discretion may elect to impose from time to time.
Average Availability: for any period, the result, expressed as a percentage, of (a) the average daily Borrowing Base during such period minus the average daily Revolver Usage during such period, divided by (b) the average daily Borrowing Base during such period.
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Bank Product: any of the following products or services extended to an Obligor or Affiliate of an Obligor by Lender or any of its Affiliates: (a) Cash Management Services; (b) Swaps; (c) commercial credit card and merchant card services; and (d) supply chain finance, credit insurance, leases and other banking products or services, other than Letters of Credit.
Bank Product Debt: Debt, obligations and other liabilities of an Obligor or Affiliate of an Obligor with respect to Bank Products.
Bank Product Reserve: the aggregate amount of reserves established by Lender from time to time in its Permitted Discretion with respect to Bank Product Debt.
Bankruptcy Code: Title 11 of the United States Code.
Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day;
(b) the Federal Funds Rate for such day, plus 0.50%; or (c) LIBORTerm SOFR for a one month interest period as of such day, plus 1.0%; provided, that in no event shall the Base Rate be less than zero.
Base Rate Loan: any Loan that bears interest based on the Base Rate.
Beneficial Ownership Certification: a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation, in form and substance satisfactory to Lender.
Beneficial Ownership Regulation: 31 C.F.R. §1010.230.
Benefit Plan: any (a) employee benefit plan (as defined in ERISA) subject to Title I of ERISA,
(b) plan (as defined in and subject to Section 4975 of the Code), or (c) Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such employee benefit plan or plan.
Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money by any Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments, (iii) accrues interest or is a type upon which interest charges are customarily paid (excluding trade payables owing in the Ordinary Course of Business), or
(iv) was issued or assumed as full or partial payment for Property; (b) Finance Leases; (c) letter of credit reimbursement obligations; and (d) guaranties of any of the foregoing owing by another Person.
Borrower Agent: as defined in Section 4.3.
Borrower Materials: Borrowing Base Reports, Compliance Certificates, Notices of Borrowing, Notices of Conversion/Continuation, and other information, reports, financial statements and materials delivered by Obligors under the Loan Documents.
Borrowing: Loans made or converted together on the same day, with the same interest option and, if applicable, Interest Period.
Borrowing Base: on any date of determination, an amount equal to (a) the lesser of (i) the Commitment; or (ii) the sum of (A) the Accounts Formula Amount, plus (B) the Inventory Formula Amount, plus (cC) the Eligible Cash Amount minus (b) Availability Reserves established by the Lender from time to time; provided, however, that no Accounts or Inventory acquired in a Permitted Acquisition, other Investment or otherwise outside the ordinary course of business shall be included in the calculation of the Borrowing Base until completion of an initial field examination or appraisal with respect to such Inventory and Accounts, as applicable (which initial field examination or appraisal shall not be included in the limits on the number of examinations and appraisals provided in Section 10.1.1(b).
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Borrowing Base Report: a report of the Borrowing Base, in form and substance satisfactory to
Lender.
Business Day: any day that is not a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, North Carolina and Illinois; and if such day relates to a LIBOR Loan, is a day on which dealings in Dollar deposits are conducted in the London interbank market.
Capital Expenditures: all expenditures made by a Borrower or Subsidiary for the acquisition of fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year, but excluding expenditures (a) made in connection with the replacement, substitution or restoration of assets to the extent (i) financed from insurance proceeds or awards of compensation (or other similar recoveries) used to replace or restore an asset as set forth in Section 8.6.2, or (ii) financed with cash proceeds of Asset Dispositions of similar assets permitted under this Agreement, to the extent consummated substantially contemporaneously with receipt of such proceeds or (b) constituting the capitalization of non-cash leasehold improvements.
Cash Collateral: cash delivered to Lender to Cash Collateralize any Obligations, and all interest, dividends, earnings and other proceeds relating thereto.
Cash Collateralize: the delivery of cash to Lender, as security for the payment of Obligations, in an amount equal to (a) 105% of LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including fees, expenses, indemnification obligations and Obligations arising under Bank Products), Lender’s good faith estimate of the amount due or to become due. “Cash Collateralization” has a correlative meaning.
Cash Equivalents: (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the U.S. government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers’ acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by Lender or a commercial bank organized under the laws of the United States or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by Lender) not subject to offset rights; (c) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank described in clause (b); (d) commercial paper issued by Lender or rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody’s or S&P.
Cash Management Services: services relating to operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.
CERCLA: the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. §9601 et seq.).
Change in Law: the occurrence, after the date hereof, of (a) the adoption, taking effect or phasing in of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof; or (c) the making, issuance or application of any request, guideline, requirement or directive (whether or not having the force of law) by any
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Governmental Authority; provided, that “Change in Law” shall include, regardless of the date enacted, adopted or issued, all requests, rules, guidelines, requirements or directives (i) under or relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (ii) promulgated pursuant to Basel III by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any similar authority) or any other Governmental Authority.
Change of Control: (a) Company ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in each other Borrower; (b) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the beneficial owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) directly or indirectly of 30% or more of the Equity Interests of Company having the right to vote for the election of members of the Board of Directors of Company; (c) a majority of the members of the Board of Directors of each Borrower do not constitute Continuing Directors; or (d) the sale or transfer of all or substantially all assets of a Borrower, except to another Borrower.
Claims: all claims, liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses) at any time (including after Full Payment of the Obligations) incurred by any Indemnitee or asserted against any Indemnitee by any Obligor or other Person, in any way relating to
(a) any Loans, Letters of Credit, Loan Documents, or the use thereof or transactions relating thereto, (b) any action taken or omitted in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform or observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto.
Closing Date: as defined in Section 6.1.
CME: CME Group Benchmark Administration Limited.
Code: the Internal Revenue Code of 1986.
Collateral: all Property described in Section 7.1, all Property described in any Security Documents as security for any Obligations, and all other Property, in each case other than to the extent constituting Excluded Property, that now or hereafter secures (or is intended to secure) any Obligations.
Commitment: Lender’s obligation to make Loans and to issue Letters of Credit in an aggregate amount up to $25,000,000.
Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. §1 et seq.).
Compliance Certificate: a certificate, in form and substance satisfactory to Lender in its Permitted Discretion, by which Borrowers certify (a) compliance with Section 10.3 (or, if a Fixed Charge Trigger Period is not in effect, limited to a certified calculation of (and not compliance with) the Fixed Charge Coverage Ratio), (b) that no Default or Event of Default has occurred and (c) that no Obligor has changed its name, organizational form or jurisdiction of organization except as disclosed in writing in such certificate.
Conforming Changes: with respect to use, administration of or conventions associated with SOFR, Term SOFR or any proposed Successor Rate, as applicable, any conforming changes to the definitions of Base Rate, SOFR, Term SOFR and Interest Period, timing and frequency of determining rates and making payments of interest and other technical, administrative or operational matters
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(including, for the avoidance of doubt, the definitions of Business Day and U.S. Government Securities Business Day, timing of borrowing requests or prepayment, conversion or continuation notices, and length of lookback periods) as may be appropriate, in Lender's discretion, to reflect the adoption and implementation of such applicable rate(s) and to permit the administration thereof by Lender in a manner substantially consistent with market practice (or, if Lender determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such rate exists, in such other manner of administration as Lender determines is reasonably necessary in connection with the administration of any Loan Document).
Communication: any notice, request, election, representation, certificate, report, disclosure, authorization, or other statement or information relating hereto, including any Loan Document or Borrower Materials.
Connection Income Taxes: Other Connection Taxes that are imposed on or measured by net income (however denominated), or are franchise or branch profits Taxes.
Contingent Obligation: any obligation of a Person arising from a guaranty, indemnity or other assurance of payment or performance of any Debt, lease, dividend or other obligation (“primary obligation”) of another obligor (“primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person under any (a) guaranty, endorsement, co-making or sale with recourse of an obligation of a primary obligor; (b) obligation to make take-or-pay or similar payments regardless of nonperformance by any other party to an agreement; or (c) arrangement (i) to purchase any primary obligation or security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure working capital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase Property or services for the purpose of assuring the ability of the primary obligor to perform a primary obligation or (v) otherwise to assure or hold harmless the holder of any primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum amount for which such Person may be liable under the instrument evidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto.
Continuing Director: (a) any member of the Board of Directors who was a director (or comparable manager) of Company on the date of this Agreement and (b) any individual who becomes a member of the Board of Directors of Company after the date of this Agreement if such individual was approved, appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, excluding any such individual originally proposed for election in opposition to the Board of Directors in office on the date of this Agreement in an actual or threatened election contest relating to the election of directors (or comparable managers) of Company and whose initial assumption of office resulted from such contest or the settlement thereof.
Control: possession, directly or indirectly, of the power to direct or cause direction of a Person’s management or policies, whether through the ability to exercise voting power, by contract or otherwise.
Covered Entity: (a) a “covered entity,” as defined and interpreted in accordance with 12 C.F.R.
§252.82(b); (b) a “covered bank,” as defined in and interpreted in accordance with 12 C.F.R. §47.3(b); or
(c) a “covered FSI,” as defined in and interpreted in accordance with 12 C.F.R. §382.2(b).
Daily Simple SOFR: with respect to any applicable determination date, SOFR published on such date on the FRBNY website (or any successor source satisfactory to Lender).
Debt: as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet in accordance with GAAP, excluding trade payables incurred and being paid
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in the Ordinary Course of Business, accrued expenses incurred in the Ordinary Course of Business, deferred revenue incurred in the Ordinary Course of Business and Operating Leases (but including Finance Leases); (b) all Contingent Obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account of such Person; and (d) in the case of a Borrower, the Obligations. The Debt of a Person shall include any recourse Debt of any partnership in which such Person is a general partner or joint venturer.
Default: an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.
Default Rate: for any Obligation (including, to the extent permitted by law, interest not paid when due), 2% plus the interest rate otherwise applicable thereto.
Deposit Account Control Agreement: control agreement satisfactory to Lender executed by an institution maintaining a Deposit Account for an Obligor, to perfect Lender’s Lien on such account.
Dilution Percent: the percent, determined for Borrowers’ most recent Fiscal Quarter, equal to (a) bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to Accounts, divided by (b) gross sales.
Dilution Reserve: a reserve established by the Lender in its Permitted Discretion in an amount not greater than the Value of all Eligible Accounts multiplied by 1.0% for each percentage point (or fraction thereof) that the Dilution Percent exceeds 5.0%.
Distribution: any declaration or payment of a distribution, interest or Dividend on any Equity Interest (other than payment-in-kind); distribution, advance or repayment of Debt to a holder of Equity Interests; or purchase, redemption, or other acquisition or retirement for value of any Equity Interest.
Dividend: as defined in Section 7.8.4. Dollars: lawful money of the United States.
Dominion Account: a special account established by Borrowers at Lender or a bank acceptable to Lender, over which Lender has exclusive control for withdrawal purposes.
Dominion Trigger Period: the period (a) commencing on any day that (i) an Event of Default occurs or (ii) Availability is at any time is less than the greater of (A) 15% of the Commitment or (B)
$3,000,000 and (b) continuing until the date that, during each of the preceding 30 consecutive days both
(i) no Event of Default has occurred and (ii) Availability has been greater than the greater of (A) 15% of the Commitment and (B) $3,000,000 for each such day, provided that Dominion Trigger Periods shall not end more than two times in any calendar year.
EBITDA: determined on a consolidated basis for Borrowers and Subsidiaries for any period, an amount equal to the sum of the following for such period (a) net income calculated before interest expense (net of interest income), provision for income taxes (net of refunds), depreciation and amortization expense, gains or losses arising from the sale of capital assets, gains arising from the write-up of assets, losses arising from the write-down of assets (other than write-down or write-off of inventory), any extraordinary gains, and any extraordinary losses, plus (b) one-time fees costs and expenses incurred in connection with the consummation of the transactions contemplated hereby in an amount not to exceed $225,000 plus (c) non-cash Equity Interest based compensation expense plus (d) the Voltrek and Stay-Lite Earn-Out Obligations minus (d) any non-cash gains or income, in each case for all of the foregoing, to the extent included in determining net income.
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Electronic Copy: as defined in Section 12.8.
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Eligible Account: an Account owing to a Borrower that arises in the Ordinary Course of Business from the sale of goods or rendition of services, is payable in Dollars and is deemed by Lender, in its Permitted Discretion, to be an Eligible Account. Without limiting the foregoing, no Account shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date, or more than 90 days after the original invoice date; (b) 20% or more of the Accounts owing by the Account Debtor are not Eligible Accounts under the foregoing clause; (c) when aggregated with other Accounts owing by the Account Debtor, it exceeds the Applicable Concentration Percentage of the aggregate of all Eligible Accounts; (d) it does not conform in all material respects with a covenant or representation herein; (e) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, is not Solvent, or is the target of any Sanction or on any specially designated nationals list maintained by OFAC; or the Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (g) the Account Debtor is organized or has its principal offices or assets outside the United States or Canada, unless the Account is supported by a letter of credit (delivered to and directly drawable by Lender) or credit insurance satisfactory in all respects to Lender; (h) it is owing by a Governmental Authority, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and the Account has been assigned to Lender in compliance with the federal Assignment of Claims Act; (i) it is not subject to a duly perfected, first priority Lien in favor of Lender, or is subject to any other Lien other than Permitted Liens that do not have priority over the Lender’s Lien; (j) the goods giving rise to it have not been delivered to the Account Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l) its payment has been extended or the Account Debtor has made a partial payment; (m) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale or return, sale on approval, consignment, or other repurchase or return basis, or from a sale for personal, family or household purposes; (n) it represents a progress billing or retainage other than Eligible Progress Billings or relates to services for which a performance, surety or completion bond or similar assurance has been issued; or (o) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof. In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 90 days old will be excluded.
Eligible Cash Amount: the lesser of (a) the balance of all cash and cash equivalents of the Borrowers deposited in a Qualified Account and (b) 25% of the Borrowing Base determined without giving effect to the Eligible Cash Amount.
Eligible Inventory: Inventory owned by a Borrower that Lender, in its Permitted Discretion, deems to be Eligible Inventory. Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, has not been acquired from an entity that is the target of any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms, in all material respects, with the covenants and representations herein; (g) is subject to Lender’s duly perfected, first priority Lien, and no other Lien other than Permitted Liens that do not have priority over the Lender’s Lien; (h) is within the continental United States or Canada, is not in transit except between locations of Borrowers, and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrower’s or Lender’s right to dispose of such
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Inventory, unless Lender has received an appropriate Lien Waiver; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; and (l) is reflected in the details of a current perpetual inventory report.
Eligible Progress Billings: Accounts that otherwise would constitute Eligible Accounts but for the fact they represent progress billings or retainage and as to which any applicable work order has been completed and any applicable certificate of completion or substantial completion has been issued or commissioning has occurred.
Enforcement Action: any action to enforce any Obligations or Loan Documents or to realize upon any Collateral, whether by judicial action, self-help, notification of Account Debtors, setoff or recoupment, credit bid, deed in lieu of foreclosure, action in an Insolvency Proceeding or otherwise.
Environmental Laws: Applicable Laws (including programs, permits and guidance promulgated by regulators) relating to public health (other than occupational safety and health regulated by OSHA) or the protection or pollution of the environment, including the Resource Conservation and Recovery Act (42 U.S.C. §§6991-6991i), Clean Water Act (33 U.S.C. §1251 et seq.) and CERCLA.
Environmental Notice: a notice (whether written or oral) from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.
Environmental Release: a release as defined in CERCLA or under any other Environmental Law.
Equity Interest: the interest of any (a) shareholder in a corporation; (b) partner in a partnership (whether general, limited, limited liability or joint venture); (c) member in a limited liability company; or
(d) other Person having any other form of equity security or ownership interest.
ERISA: the Employee Retirement Income Security Act of 1974.
ERISA Affiliate: any trade or business (whether or not incorporated) under common control with an Obligor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) withdrawal of an Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) complete or partial withdrawal of an Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) filing of a notice of intent to terminate, treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or institution of proceedings by the PBGC to terminate a Pension Plan; (e) determination that a Pension Plan is considered an at-risk plan or a plan in critical or endangered status under the Code or ERISA; (f) an event or condition that constitutes grounds under Section 4042 of ERISA for termination of, or appointment of a trustee to administer, any Pension Plan; (g) imposition of any liability on an Obligor or ERISA Affiliate under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA; or (h) failure by an Obligor or ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or to make a required contribution to a Multiemployer Plan.
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Event of Default: as defined in Section 11.
Excluded Deposit Account: any Deposit Account of an Obligor that is used as (a) a payroll, pension, trust, or employee benefits or related employee benefit account, to the extent used solely for such purposes, (b) a withholding, tax, escrow, and fiduciary account, to the extent used solely for such purposes, (c) zero balance disbursement accounts and (d) petty cash or similar accounts in which the amounts deposited do not exceed $50,000 in such accounts.
Excluded Property: collectively, (a) United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law; provided, that upon submission and acceptance by the United States Patent and Trademark Office of such intent-to-use trademark applications, such intent-to-use trademark applications shall automatically be included in the definition of Collateral and shall automatically be included in the grant of security interest under Section 5.1 hereof), (b) all Excluded Deposit Accounts, (c) any lease, license, contract, permit, letter of credit, instrument, agreement or other property right to which a Obligor is a party or any of its rights or interests thereunder if and to the extent that the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of a Obligor therein or (ii) result in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, permit, agreement or other property right (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law); provided, however, that such security interest or lien (x) shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall no longer exist or be remedied, (y) to the extent severable, shall attach immediately to each term of such lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above and (z) shall attach immediately to each such lease, license, contract, property rights or agreement to which the account debtor or a Obligor’s counterparty has consented to such attachment, and (d) so long as no Event of Default exists, more than sixty-five percent (65%) of the equity interests of a Foreign Subsidiary. For the avoidance of doubt, and the foregoing to the contrary notwithstanding, no Account or Proceeds shall be Excluded Property for purposes hereof.
Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to which, and only to the extent that, such Obligor’s guaranty of or grant of a Lien as security for such Swap Obligation is or becomes illegal under the Commodity Exchange Act because the Obligor does not constitute an “eligible contract participant” as defined in the act (determined after giving effect to any keepwell, support or other agreement for the benefit of such Obligor and all guarantees of Swap Obligations by other Obligors) when such guaranty or grant of Lien becomes effective with respect to the Swap Obligation. If a hedge agreement governs more than one Swap Obligation, only the Swap Obligation(s) or portions thereof described in the foregoing sentence shall be Excluded Swap Obligation(s) for the applicable Obligor.
Excluded Taxes: (a) Taxes imposed on or measured by a Recipient’s net income (however denominated), franchise Taxes and branch profits Taxes (i) as a result of such Recipient being organized under the laws of, or having its principal office or applicable Lending Office located in, the jurisdiction imposing such Tax, or (ii) constituting Other Connection Taxes; and (b) U.S. federal withholding Taxes imposed pursuant to FATCA. In no event shall “Excluded Taxes” include any withholding Tax imposed on amounts paid by or on behalf of a foreign Obligor.
Extraordinary Expenses: all costs, expenses or advances incurred by Lender during a Default or Event of Default or an Obligor’s Insolvency Proceeding, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for
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sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Lender, any Obligor, any creditor(s) of an Obligor or any other Person) in any way relating to any Collateral, Lender’s Lien, Loan Documents, Letters of Credit or Obligations, including any lender liability or other Claims; (c) exercise of any rights or remedies of Lender in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; and (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations. Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, reasonable legal fees, appraisal fees, brokers’ and auctioneers’ fees and commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating any Collateral, and travel expenses.
FATCA: Sections 1471 through 1474 of the Code (including any amended or successor version if substantively comparable and not materially more onerous to comply with), and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
Federal Funds Rate: (a)for any day, the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System on the applicable day (or the preceding Business Day, if such day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if the rate is not so published, the average per annum rate (rounded up to the nearest 1/8 of 1%) charged to Lender on the applicable day on such transactions, as determined by Lenderper annum rate calculated by FRBNY based on such day's federal funds transactions by depository institutions (as determined in such manner as FRBNY shall set forth on its public website from time to time) and published on the next Business Day by FRBNY as the federal funds effective rate; provided, that in no event shall the Federal Funds Rate be less than zero.
Fee Letter: the Fee Letter dated as of the date hereof between Borrower Agent and Lender.
Finance Lease: any lease which qualifies as a finance lease in accordance with ASC 842 under
GAAP.
Financial Covenant Trigger Period: the period (a) commencing on any day that Availability at any time is less than the greater of (i) 15% of the Revolver Commitments or (ii) $3,000,000 and (b) continuing until the date that, during each of the preceding 30 consecutive days, (i) Availability has been greater than the greater of (A) 15% of the Commitment and (B) $3,000,000 for each such day and (ii) no Event of Default has occurred.
Fiscal Quarter: each period of three months, commencing on the first day of a Fiscal Year. Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and tax purposes,
ending on March 31 of each year.
Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for Borrowers and Subsidiaries for the most recent 12 months, of (a) EBITDA minus Capital Expenditures (except those financed with Borrowed Money other than Loans) minus cash income taxes paid minus Distributions paid in cash to (b) Fixed Charges.
Fixed Charges: the sum of cash interest expense (other than payment-in-kind) and scheduled principal payments made on Borrowed Money.
Flood Laws: the National Flood Insurance Act of 1968, Flood Disaster Protection Act of 1973 and related laws.
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FLSA: the Fair Labor Standards Act of 1938.
Foreign Plan: any employee benefit plan or arrangement (a) maintained or contributed to by any Obligor or Subsidiary that is not subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of any Obligor or Subsidiary.
Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code, such that a guaranty by such Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to secure the Obligations would result in material tax liability to Borrowers.
FRBNY: Federal Reserve Bank of New York.
Full Payment: with respect to any Obligations, (a) the full cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding), but excluding contingent indemnification obligations for which no claim has been asserted;
(b) if such Obligations are LC Obligations or inchoate or contingent in nature, Cash Collateralization thereof (or delivery of a standby letter of credit acceptable to Lender in its Permitted Discretion, in the amount of required Cash Collateral); and (c) a release of any Claims of Obligors against Lender arising on or before the payment date. The Loans shall not be deemed to have been paid in full unless the Commitment is terminated.
GAAP: generally accepted accounting principles in effect in the United States from time to time. Governmental Approvals: all authorizations, consents, approvals, licenses and exemptions of,
registrations and filings with, and required reports to, all Governmental Authorities.
Governmental Authority: any federal, state, local, foreign or other agency, authority, body, commission, court, instrumentality, political subdivision, central bank, or other entity or officer exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions for any governmental, judicial, investigative, regulatory or self-regulatory authority (including the Financial Conduct Authority, the Prudential Regulation Authority and any supra-national bodies such as the European Union or European Central Bank).
Guarantor Payment: as defined in Section 5.8.3.
Guarantors: each Person that guarantees payment or performance of Obligations, including pursuant to Section 10.1.9.
Guaranty: each guaranty agreement executed by a Guarantor in favor of Lender.
Indemnified Taxes: (a) Taxes, other than Excluded Taxes, imposed on or relating to any payment of an Obligation; and (b) to the extent not otherwise described in clause (a), Other Taxes.
Indemnitees: Lender, other Secured Parties, and their officers, directors, employees, Affiliates and Lender Professionals.
Insolvency Proceeding: any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.
Inspection Trigger Event: (a) an Event of Default occurs or (b) Availability at any time is less than
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the greater of (A) 20% of the Commitment and (B) $4,000,000.
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Intellectual Property: all intellectual and similar Property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases; all embodiments or fixations thereof and all related documentation, applications, registrations and franchises; all licenses or other rights to use any of the foregoing; and all books and records relating to the foregoing.
Intellectual Property Claim: any claim or assertion (whether in writing, by suit or otherwise) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property violates another Person’s Intellectual Property.
Interest Payment Date: (a) for each LIBOR Loan, the last day of the applicable Interest Period and, if the Interest Period is more than three months, each three month anniversary of the beginning of the Interest Period; and (b) for all other Loans,means the first day of each calendar month.
Interest Period: as defined in Section 3.1.3.
Inventory: as defined in the UCC, including all goods intended for sale, lease, display or demonstration; all work in process; and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture, printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Borrower’s business (but excluding Equipment).
Inventory Formula Amount: the lesser of (a) 65% of the Value of Eligible Inventory or (b) 85% of the NOLV Percentage of the Value of Eligible Inventory.
Inventory Reserve: reserves established by Lender in its Permitted Discretion to reflect factors that may negatively impact the Value of Inventory, including change in salability, obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor chargebacks.
Investment: an Acquisition, an acquisition of record or beneficial ownership of any Equity Interests of a Person, or an advance or capital contribution to or other investment in a Person.
IP Assignment: a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Lender, as security for any Obligations.
IRS: the United States Internal Revenue Service.
ISDA Definitions: 2006 ISDA Definitions (or successor definitional booklet for interest rate derivatives) published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time.
LC Application: an application by Borrower Agent to Lender for issuance of a Letter of Credit, in form and substance satisfactory to Lender.
LC Conditions: upon giving effect to issuance of a Letter of Credit, (a) the conditions in Section 6 are satisfied; (b) total LC Obligations do not exceed the Letter of Credit Subline and Revolver Usage does not exceed the Borrowing Base; (c) the Letter of Credit and payments thereunder are denominated in Dollars or other currency satisfactory to Lender; and (d) the purpose and form of the Letter of Credit are satisfactory to Lender in its Permitted Discretion.
LC Documents: all documents, instruments and agreements (including requests and applications) delivered by any Borrower or other Person to Lender in connection with a Letter of Credit.
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LC Obligations: the sum of (a) all amounts owing by Borrowers for draws under Letters of Credit; and (b) the Stated Amount of all outstanding Letters of Credit.
LC Request: a request by Borrower Agent for issuance of a Letter of Credit, in form satisfactory to Lender.
Lender Professionals: attorneys, accountants, appraisers, auditors, advisors, consultants, agents, service providers, business valuation experts, environmental engineers or consultants, turnaround consultants, and other professionals, experts and representatives retained or used by Lender.
Lending Office: any office (including a domestic or foreign Affiliate or branch) used by Lender to fulfill any of its obligations hereunder.
Letter of Credit: any standby or documentary letter of credit, foreign guaranty, documentary bankers’ acceptance, indemnity, reimbursement agreement or similar instrument issued by Lender for the account or benefit of a Borrower or Affiliate of a Borrower.
Letter of Credit Subline: $2,000,000.
LIBOR: the per annum rate of interest (rounded up to the nearest 1/8th of 1%) determined by Lender at or about 11:00 a.m. (London time) two Business Days prior to an interest period, for a term equivalent to such interest period, equal to the London interbank offered rate, or comparable or successor rate approved by Lender, as published on the applicable Reuters screen page (or other available source designated by Lender from time to time); provided, that any comparable or successor rate shall be applied by Lender, if administratively feasible, in a manner consistent with market practice; and provided further, that in no event shall LIBOR be less than 0.25%.
LIBOR Loan: a Loan that bears interest based on LIBOR.
LIBOR Replacement Date: as defined in Section 3.6.2.
LIBOR Screen Rate: the LIBOR quote on the applicable screen page that Lender designates to determine LIBOR (or such other commercially available source providing such quotations as designated by Lender from time to time).
LIBOR Successor Rate: as defined in Section 3.6.2.
LIBOR Successor Rate Conforming Changes: with respect to any proposed LIBOR Successor Rate, any conforming changes to this Agreement, including changes to Base Rate, Interest Period, timing and frequency of determining rates and payments of interest, and other technical, administrative or operational matters (including, for the avoidance of doubt, the definition of Business Day, timing of borrowing requests or prepayment, conversion or continuation notices, and length of look-back periods) as may be appropriate, in Lender’s discretion, to reflect the adoption and implementation of such LIBOR Successor Rate and to permit its administration by Lender in a manner substantially consistent with market practice (or, if Lender determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate exists, in such other manner of administration as Lender determines is reasonably necessary in connection with administration of this Agreement or any other Loan Document).
License: any license or agreement under which an Obligor is authorized to use Intellectual Property in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.
Licensor: any Person from whom an Obligor obtains the right to use any Intellectual Property.
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Lien: an interest in Property securing an obligation or claim, including any lien, security interest, pledge, hypothecation, assignment, trust, reservation, assessment right, encroachment, easement, right-of-way, covenant, condition, restriction, lease, or other title exception or encumbrance.
Lien Waiver: an agreement, in form and substance satisfactory to Lender, by which (a) for any material Collateral located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and allows Lender to enter the premises and remove, store and dispose of Collateral; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for Lender, and agrees to deliver Collateral to Lender upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Lender’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver Collateral to Lender upon request; and (d) for any Collateral subject to a Licensor’s Intellectual Property rights, the Licensor grants to Lender the right, vis-à-vis such Licensor, to enforce Lender’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.
Loan: a loan made by Lender under the credit facility established by this Agreement. Loan Documents: this Agreement, Other Agreements and Security Documents.
Margin Stock: as defined in Regulation U of the Federal Reserve Board of Governors.
Material Adverse Effect: the effect of any event or circumstance that, taken alone or in conjunction with other events or circumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, Properties or financial condition of Obligors taken as a whole, the value of any material Collateral, the enforceability of any Loan Document, or the validity or priority of Lender’s Lien on any Collateral; (b) impairs the ability of an Obligor to perform its material obligations under the Loan Documents, including repayment of any Obligations; or (c) otherwise impairs Lender’s ability to enforce or collect any Obligations or to realize upon any material portion of the Collateral.
Material Contract: any agreement or arrangement to which a Borrower or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b) for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or
(c) that relates to Subordinated Debt, or to any Debt in an aggregate amount of $250,000 or more.
Material License: as defined in Section 10.1.8.
Moody’s: Moody’s Investors Service, Inc. or any successor acceptable to Lender.
Mortgage: a mortgage or deed of trust in which an Obligor grants a Lien on its Real Estate to Lender, as security for any Obligations.
Multiemployer Plan: any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which an Obligor or ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
Multiple Employer Plan: a Plan with two or more contributing sponsors, including an Obligor or ERISA Affiliate, at least two of whom are not under common control, as described in Section 4064 of ERISA.
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Net Proceeds: with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments) received by a Borrower or Subsidiary in cash from such disposition, net of (a) reasonable and customary costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Lender’s Liens on Collateral sold; (c) transfer or similar taxes; and (d) reserves for indemnities, until such reserves are no longer needed.
NOLV Percentage: the net orderly liquidation value of Inventory, expressed as a percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of Borrowers’ Inventory performed by an appraiser and on terms satisfactory to Lender.
Notice of Borrowing: a request by Borrower Agent for a Borrowing, in form satisfactory to
Lender.
Notice of Conversion/Continuation: a request by Borrower Agent for conversion or continuation of a Loan as a LIBORTerm SOFR Loan, in form satisfactory to Lender.
Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest, expenses, fees, indemnification obligations, Claims and other amounts payable by Obligors under Loan Documents, (d) Bank Product Debt, and (e) other Debts, obligations and liabilities of any kind owing by any Obligor to Lender, in each case whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several; provided, that Obligations of an Obligor shall not include its Excluded Swap Obligations.
Obligor: each Borrower, Guarantor or other Person that is liable for payment of any Obligations or that has granted a Lien on its assets in favor of Lender to secure any Obligations.
OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.
Operating Lease: any lease which qualifies as an operating lease in accordance with ASC 842 under GAAP.
Ordinary Course of Business: the ordinary course of business of any Borrower or Subsidiary, consistent with Applicable Law and past practices.
Organic Documents: with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.
OSHA: the Occupational Safety and Hazard Act of 1970.
Other Agreement: the Fee Letter, each LC Document, Lien Waiver, Related Real Estate Document (if any), Borrower Material, or other document, instrument or agreement (other than this Agreement or a Security Document) now or hereafter delivered by an Obligor or other Person to Lender in connection with any transactions relating hereto.
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Other Connection Taxes: Taxes imposed on a Recipient due to a present or former connection between it and the taxing jurisdiction (other than connections arising from the Recipient having executed, delivered, become party to, performed obligations or received payments under, received or perfected a Lien or engaged in any other transaction pursuant to, enforced, or sold or assigned an interest in, any Loan or Loan Document).
Other Taxes: all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a Lien under, or otherwise with respect to, any Loan Document, except Other Connection Taxes imposed with respect to an assignment and Excluded Taxes.
Overadvance: the amount by which Revolver Usage exceeds the Borrowing Base at any time. Patriot Act: the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).
Payment Conditions: with respect to any Specified Transaction, the satisfaction of the following conditions:
Payment Item: each check, draft or other item of payment payable to a Borrower, including those constituting proceeds of any Collateral.
PBGC: the Pension Benefit Guaranty Corporation.
Pension Funding Rules: Code and ERISA rules regarding minimum required contributions (including installment payments) to Pension Plans set forth in Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.
Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by an Obligor or ERISA Affiliate or to which the Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years.
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Permitted Acquisition: any Acquisition as long as (a) no Default or Event of Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the assets, business or Person being acquired is useful or engaged in the business of Borrowers and Subsidiaries, is located or organized within the United States, and had positive EBITDA for the 12 month period most recently ended; (d) no Debt or Liens are assumed or incurred, except as permitted by Sections 10.2.1(f), 10.2.1(i) and 10.2.2(j); (e) the Payment Conditions are satisfied with respect thereto; and (f) Borrowers deliver to Lender, at least 10 Business Days prior to the Acquisition, copies of all material agreements relating thereto and a certificate, in form and substance satisfactory to Lender, stating that the Acquisition is a “Permitted Acquisition” and demonstrating compliance with the foregoing requirements.
Permitted Asset Dispositions: (a) sales of Inventory in the Ordinary Course of Business, (b) sales or transfers of Property by a Subsidiary or Obligor to a Borrower, (c) dispositions of Equipment under Section 8.4.2(b), (d) non-exclusive licenses, sublicenses, leases or subleases granted to third parties in the Ordinary Course of Business not interfering with the business of Obligors or any of their Subsidiaries and not adversely impacting the Collateral or Lender’s rights therein; (e) a disposition approved in writing by Lender, (f) the Sentry Transactions and (g) as long as no Default or Event of Default exists and all Net Proceeds are remitted to a Dominion Account, (i) dispositions of Equipment up to a fair market or book value (whichever is more) of $250,000 in the aggregate during any 12 month period; (ii) dispositions of obsolete, unmerchantable or otherwise unsalable Inventory; (iii) terminations of leases of real or personal Property not necessary for the Ordinary Course of Business, which could not reasonably be expected to have a Material Adverse Effect and which do not result from an Obligor’s default and (iv) sales or discounts, in each case without recourse, of past due Accounts in the Ordinary Course of Business in connection with the compromise or collection thereof.
Permitted Contingent Obligations: Contingent Obligations (a) arising from endorsements of Payment Items for collection or deposit in the Ordinary Course of Business; (b) relating to Swaps permitted hereunder; (c) existing on the Closing Date, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in the Ordinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising from customary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder; (f) arising under the Loan Documents; (g) arising with respect to customary indemnification obligations in connection with a Permitted Acquisition (other than obligations for Debt or earn-out obligations), or (h) arising from other customary indemnification obligations in commercial agreements entered into in the Ordinary Course of Business or otherwise in an aggregate amount of $500,000 or less at any time.
Permitted Discretion: a determination made in the exercise of reasonable (from the perspective of an asset-based lender) credit judgment.
Permitted Lien: as defined in Section 10.2.2.
Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed
$500,000 at any time and its incurrence does not violate Section 10.2.3.
Person: any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization, Governmental Authority or other entity of any kind.
Plan: any Benefit Plan maintained for employees of an Obligor or ERISA Affiliate, or to which an Obligor or ERISA Affiliate is required to contribute on behalf of its employees.
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Platform: as defined in Section 12.3.3. Pledged Interests: as defined in Section 7.8.1.
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Pre-Adjustment Successor Rate: as defined in Section 3.6.2.
Prime Rate: the rate of interest announced by Lender from time to time as its prime rate. Such rate is set by Lender on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such rate. Any change in such rate publicly announced by Lender shall take effect at the opening of business on the day specified in the announcement.
Properly Contested: with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regarding amount or the Obligor’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the satisfaction of Lender; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.
Property: any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
PTE: a prohibited transaction class exemption issued by the U.S. Department of Labor, as amended from time to time.
Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of the purchase price of fixed assets; (b) Debt (other than the Obligations) incurred within 10 days before or after acquisition of any fixed assets, for the purpose of financing any of the purchase price thereof; and (c) any renewals, extensions or refinancings (but not increases) thereof.
Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only the fixed assets acquired with such Debt or a purchase money security interest under the UCC.
Qualified Account: any investment or other non-operating account of a Borrower maintained by the Lender and subject to a Deposit Account Control Agreement in favor of Lender providing for sole control of the disposition of the amounts held in such account, without regard to whether a Dominion Trigger Period is in effect.
Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” under Section 1a(18)(A)(v)(II) of such act.
Real Estate: all right, title and interest (whether as owner, lessor or lessee) in any real Property or any buildings, structures, parking areas or other improvements thereon.
Recipient: Lender or any other recipient of a payment to be made by an Obligor under a Loan Document or on account of an Obligation.
Refinancing Conditions: no Default or Event of Default exists upon giving effect to the Refinancing Debt and such Debt, when compared to the Debt being extended, renewed or refinanced, (a) does not have a greater principal amount or interest rate, earlier final maturity or shorter weighted average life, (b) is subordinated to the Obligations to at least the same extent, (c) has representations, covenants, defaults and other terms no less favorable to Borrowers and Lender, and (d) has no additional obligor, guarantor, Lien, or other recourse to any Person or Property.
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Refinancing Debt: Borrowed Money that is the result of an extension, renewal or refinancing of Debt permitted under Section 10.2.1(b), (d) or (f).
Reimbursement Date: as defined in Section 2.2.2.
Related Adjustment: in determining any LIBOR Successor Rate, the first relevant available alternative set forth in the order below that can be determined by Lender applicable to such LIBOR Successor Rate: (a) the spread adjustment, or method for calculating or determining such spread adjustment, that has been selected or recommended by the Relevant Governmental Body for the relevant Pre-Adjustment Successor Rate (taking into account the interest period, interest payment date or payment period for interest calculated and/or tenor thereto) and which adjustment or method (i) is published on an information service selected by Lender from time to time in its discretion, or (ii) solely with respect to Term SOFR, if not currently published, which was previously so recommended for Term SOFR and published on an information service acceptable to Lender; or (b) the spread adjustment that would apply (or has previously been applied) to the fallback rate for a derivative transaction referencing the ISDA Definitions (taking into account the interest period, interest payment date or payment period for interest calculated and/or tenor thereto).
Related Real Estate Documents: with respect to any Real Estate subject to a Mortgage, the following, in form and substance satisfactory to Lender and received by Lender for review: (a) at least 45 days prior to the effective date of the Mortgage, all information requested by Lender for due diligence pursuant to Flood Laws; and (b) at least 15 days prior to the effective date of the Mortgage: (i) a mortgagee title policy (or binder therefor) covering Lender’s interest under the Mortgage, by an insurer acceptable to Lender, which must be fully paid on such effective date; (ii) such assignments of leases, estoppel letters, attornment agreements, consents, waivers and releases as Lender may require with respect to other Persons having an interest in the Real Estate; (iii) a current, as-built survey of the Real Estate, containing a metes-and-bounds property description and certified by a licensed surveyor acceptable to Lender; (iv) a life-of-loan flood hazard determination and, if any Real Estate is located in a special flood hazard zone, flood insurance documentation and coverage satisfactory to Lender; (v) a current appraisal of the Real Estate, prepared by an appraiser, and in form and substance satisfactory to Lender; (vi) an environmental assessment, prepared by environmental engineers acceptable to Lender, an environmental indemnity agreement if appropriate, and such other reports, certificates, studies or data as Lender may reasonably require; and (vii) such other information, documents, instruments or agreements as Lender may reasonably request.
Relevant Governmental Body: the Federal Reserve Board and/or FRBNY, or a committee officially endorsed or convened by the Federal Reserve Board and/or FRBNY.
Rent and Charges Reserve: the aggregate of (a) all past due rent and other amounts owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any Collateral; and (b) a reserve at least equal to three months rent and other charges that could be payable to any such Person, unless it has executed a Lien Waiver.
Reportable Event: an event set forth in Section 4043(c) of ERISA, other than an event for which the 30 day notice period has been waived.
Reporting Trigger Period: the period (a) commencing on any day that (i) an Event of Default occurs or (ii) Availability at any time is less than the greater of (A) 15% of the Commitment or (B)
$3,000,000 and (b) continuing until the date that, during each of the preceding 30 consecutive days (i) no Event of Default has occurred and (ii) Availability has been greater than the greater of (A) 15% of the Commitment and (B) $3,000,000 for each such day.
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Restricted Investment: any Investment by a Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the Closing Date; (b) Cash Equivalents that are subject to Lender’s Lien and control, pursuant to documentation in form and substance satisfactory to Lender, or otherwise permitted by Lender hereunder; (c) loans and advances permitted under Section 10.2.7; (d) Permitted Acquisitions and (e) Investments not otherwise permitted under clauses (a) through (d) above, so long as the Payment Conditions are satisfied with respect thereto.
Restrictive Agreement: an agreement (other than a Loan Document) that conditions or restricts the right of any Borrower, Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt.
Revolver Usage: the aggregate amount of outstanding Loans plus the Stated Amount of outstanding Letters of Credit.
S&P: Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., or any successor acceptable to Lender.
Sanction: any sanction administered or enforced by the U.S. government (including OFAC), United Nations Security Council, European Union, U.K. government or other sanctions authority.
Scheduled Unavailability Date: as defined in Section 3.6.2. Secured Parties: Lender and providers of Bank Products.
Security Documents: the Guaranties, Mortgages, IP Assignments, Deposit Account Control Agreements, and all other documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.
Senior Officer: the chairman of the board, president, chief executive officer, chief financial officer or controller of the applicable Obligor.
Sentry: Sentry Financial Corporation.
Sentry Related Assets: as defined in the definition of Sentry Transactions.
Sentry Transactions: the transactions contemplated by that certain purchase agreements and schedules thereto entered into from time to time between Sentry and Company on terms consistent with past practice, which transactions relate to the transfer and assignment of certain leased lighting equipment and payment rights of the Company under that certain energy service agreements (or similar agreements entered into from time to time) with Ford Motor Company (as amended, supplemented or replaced from time to time, collectively, the “Ford ESA Agreements”), pursuant to which the company has assigned to Sentry its rights to the leased lighting equipment and its payment rights under the Ford ESA Agreements (collectively, the “Sentry Related Assets”). All Sentry Related Assets, including all Accounts owing from Ford Motor Company arising in connection the Ford ESA Agreements (whether or not subject to assignment to Sentry, except to the extent otherwise agreed by Lender), shall be excluded from Eligible Accounts and Eligible Inventory and not otherwise included in the calculation of the Borrowing Base.
Side Letter Agreement: Thatthat certain Side Letter Agreement dated as of the date hereof by and between Lender and Borrowers.
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SOFR: with respect to any Business Day, the secured overnight financing rate that is published for such dayas administered by FRBNY as administrator of the benchmark (or a successor administrator) on FRBNY’s website (or any successor source) at approximately 8:00 a.m. (New York City time) on the next Business Day and, in each case, that has been selected or recommended by the Relevant Governmental Body.
SOFR Adjustment: means 0.10%.
Solvent: as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates. “Fair salable value” means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.
Specified Account Debtor: each Account Debtor identified as such in the Side Letter Agreement; provided that each such Account Debtor shall remain a Specified Account Debtor only until written notice from Lender to Borrower Agent that such Account Debtor is no longer an acceptable Specified Account Debtor in its Permitted Discretion.
Specified Debt Payment: any payment or prepayment of Debt made pursuant to the proviso to
Section 10.2.8.
Specified Distribution: any Distribution made pursuant to Section 10.2.4(a)(ii).
Specified Investment: any Investment made pursuant to clauses (d) or (e) of the definition of Restricted Investment.
Specified Obligor: an Obligor that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 5.8.3).
Specified Transaction: each Specified Debt Payment, Specified Investment and Specified Distribution.
Spot Rate: the exchange rate, as determined by Lender, that is applicable to conversion of one currency into another currency, which is (a) the exchange rate reported by Bloomberg (or other commercially available source designated by Lender) as of the end of the preceding business day in the financial market for the first currency; or (b) if such report is unavailable for any reason, the spot rate for the purchase of the first currency with the second currency as in effect during the preceding business day in Lender’s principal foreign exchange trading office for the first currency.
Stated Amount: the outstanding amount of a Letter of Credit, including any automatic increase or tolerance (whether or not then in effect) provided by the Letter of Credit or related LC Documents.
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Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Lender.
Subsidiary: any entity at least 50% of whose voting securities or Equity Interests is owned by a Borrower or combination of Borrowers (including indirect ownership through other entities in which a Borrower directly or indirectly owns 50% of the voting securities or Equity Interests).
Successor Rate: as defined in Section 3.6.2.
Swap: as defined in Section 1a(47) of the Commodity Exchange Act. Swap Obligations: obligations under an agreement relating to a Swap.
Taxes: all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Term SOFR: the forward-looking term rate for any period that is approximately (as determined by Lender) as long as any interest period option set forth in the definition of “Interest Period” and that is based on SOFR and has been selected or recommended by the Relevant Governmental Body, in each case as published on an information service selected by Lender from time to time in its discretion. (a) for any Interest Period relating to a Term SOFR Loan, a per annum rate equal to the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to such Interest Period, with a term equivalent to such Interest Period (or if such rate is not published prior to 11:00 a.m. on the determination date, the applicable Term SOFR Screen Rate on the U.S. Government Securities Business Day immediately preceding such date), plus the SOFR Adjustment for such Interest Period; and (b) for any Interest Period relating to a Base Rate Loan on any day, a per annum rate equal to the Term SOFR Screen Rate with a term of one month commencing that day; provided, that in no event shall Term SOFR be less than 0.25%.
Term SOFR Loan: a Loan that bears interest based on clause (a) of the definition of Term SOFR.
Term SOFR Screen Rate: the forward-looking SOFR term rate administered by CME (or any successor administrator satisfactory to Lender) and published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by Lender from time to time).
Termination Date: December 29, 2025, or such earlier date on which the Commitment terminates hereunder.
Tier I Account Debtors: Account Debtors (a) with a credit rating of at least Baa3 from Moody’s or BBB- from S&P or (b) with an acceptably strong credit profile, as determined by the Lender in its sole Permitted Discretion, including, as of the Closing Date, the Tier I Account Debtors identified in the Side Letter Agreement, and such other Account Debtors as may be approved in writing by Lender from time to time (following written request from Borrower Agent) as meeting its requirements for Tier I Account Debtors. All Tier I Account Debtors included under clause (b) above shall remain Tier I Account Debtors until written notice from Lender to Borrower Agent that such Account Debtor is no longer an acceptable Tier I Account Debtor.
Tier II Account Debtor: one Account Debtor identified by Borrower Agent for any one month period as being a Tier II Account Debtor. Each Tier II Account Debtor shall remain a Tier II Account
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Debtor only for such one month period (but may be re-designated for a consecutive or any subsequent month) but shall cease to be a Tier II Account Debtor prior to the end of such month (and for any subsequent month) if Lender delivers written notice to Borrower Agent that such Account Debtor is no longer an acceptable Tier II Account Debtor.
Tier III Account Debtors: all Account Debtors other than a Specified Account Debtor, Tier I Account Debtors and Tier II Account Debtors.
UCC: the Uniform Commercial Code as in effect in the State of Illinois or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.
Unrestricted Cash: Cash Equivalents not subject to Lender’s Lien and control under documents satisfactory to Lender.
Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of 2006 for the applicable plan year.
Unused Line Fee Rate: a per annum rate equal to 0.25%.
Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.
U.S. Government Securities Business Day: any Business Day, except any day on which the Securities Industry and Financial Markets Association, New York Stock Exchange or FRBNY is not open for business because the day is a legal holiday under New York law or U.S. federal law.
Value: (a) for Inventory, its value determined on the basis of the lower of cost or market, calculated on a first-in, first out basis, and excluding any portion of cost attributable to intercompany profit among Borrowers and their Affiliates; and (b) for an Account, its face amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person and net of all premiums with respect to any applicable credit insurance or cost associated with applicable supporting letters of credit or costs associated with similar applicable credit support therefor.
Voltrek and Stay-Lite Earn-Out Obligations: means the earn out obligations described in (i) that certain Stock Purchase Agreement dated as of December 31, 2021 by and between Company and Kirk Tuson and (ii) that certain Membership Interest Purchase Agreement dated as of October 5, 2022 by and among Company, Final Frontier, LLC and the Members of Final Frontier, LLC, all in a maximum aggregate amount not in excess of $14,350,000;
WAB Credit Card Program: the credit card program outstanding on the Closing Date provided by Western Alliance Bank to the Company, to the extent such program is terminated within 90 days of the Closing Date.
. Under the Loan Documents (except as otherwise specified therein), all accounting terms shall be interpreted, all accounting determinations shall be made, and all financial statements shall be prepared, in accordance with GAAP applied on a basis consistent with the most recent audited financial statements of Borrowers delivered to Lender before the Closing Date and using the same inventory valuation method and lease accounting treatment as used in such financial statements; provided, that Borrowers may adopt
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a change required or permitted by GAAP after the Closing Date as long as Borrowers’ certified public accountants concur in such change, it is disclosed to Lender and the Loan Documents are amended in a manner satisfactory to Lender to address the change. Upon request by Lender, Borrowers’ financial statements and Borrower Materials shall set forth a reconciliation between calculations made before and after giving effect to any change in GAAP.
. As used herein, the following terms are defined in accordance with the UCC in effect in the State of Illinois: “Account,” “Account Debtor,” “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”
. The rules of construction and interpretation included in this Section apply to all Loan Documents. The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to the applicable document as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later date, “from” means “from and including,” and “to” and “until” each mean “to but excluding.” The terms “including” and “include” shall mean “including, without limitation” and the rule of ejusdem generis shall not apply to limit any provision. Section titles appear as a matter of convenience only and shall not affect the interpretation of a Loan Document. Reference to any (a) law includes all related regulations, interpretations, supplements, amendments and successor provisions; (b) document, instrument or agreement includes any amendment, extension, supplement, waiver, replacement and other modification thereto (to the extent permitted by the Loan Documents); (c) section means, unless the context otherwise requires, a section of the applicable document; (d) exhibit or schedule means, unless the context otherwise requires, an exhibit or schedule to the applicable document, which is thereby incorporated by reference; (e) Person includes its permitted successors and assigns; (f) time of day means the time at Lender’s notice address under Section 12.3.1; or (g) discretion of Lender means its sole and absolute discretion exercised at any time. All determinations (including calculations of Borrowing Base and financial covenants) made from time to time by an Obligor under the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Lender (and not necessarily calculated in accordance with GAAP). Obligors have the burden of establishing any alleged negligence, misconduct or lack of good faith by any Indemnitee under a Loan Document. No provision of a Loan Document shall be construed against a party by reason of it having, or being deemed to have, drafted the provision. Reference to an Obligor’s “knowledge” or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.
. Any reference herein to a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation) as if it were a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer or similar term, as applicable, to, of or with a separate Person. Any division of a limited liability company shall constitute a separate Person hereunder.
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SECTION 2. CREDIT FACILITIES
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SECTION 3. INTEREST, FEES AND CHARGES
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the effect of any of the foregoing or of any Conforming Changes. Lender may select information source(s) in its discretion to ascertain any reference rate referred to herein or any alternative, successor or replacement rate (including any Successor Rate), or any component thereof, in each case pursuant to the terms hereof, and shall have no liability to Borrowers or any other Person for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise, and whether at law or in equity) for any error or other act or omission related to or affecting the selection, determination or calculation of any rate (or component thereof) provided by such information source(s). During a Default or Event of Default, Lender may elect not to make, convert or continue a Loan as a LIBORTerm SOFR Loan.
. All interest, as well as fees and other charges calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 360 days. Each determination by Lender of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error. All fees shall be fully earned when due and shall not be subject to rebate, refund or proration. All fees payable under Section 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money. A certificate as to amounts
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payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.7 that is submitted to Borrower Agent by Lender shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers shall pay such amounts to the appropriate party within 10 days following receipt of the certificate.
. Borrowers shall pay all Claims promptly upon request. Borrowers shall also reimburse Lender for all reasonable legal, accounting, appraisal, consulting, and other fees and expenses incurred by it in connection with (a) negotiation and preparation of Loan Documents, including any modification thereof;
(b) administration of and actions relating to any Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority of Lender’s Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits of Section 10.1.1(b), any examination or appraisal with respect to any Obligor or Collateral by Lender’s personnel or a third party. All reasonable legal, accounting and consulting fees shall be charged to Borrowers by Lender’s professionals at their full hourly rates, regardless of any alternative fee arrangements that Lender or any of its Affiliates may have with such professionals that otherwise might apply to this or any other transaction. Borrowers acknowledge that counsel may provide Lender with a benefit (such as a discount, credit or accommodation for other matters) based on counsel’s overall relationship with Lender, including fees paid hereunder. If, for any reason (including inaccurate information in Borrower Materials), it is determined that (y) a higher Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall immediately pay to Lender an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid or (z) a lower Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall be entitled to a credit from Lender in an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid. All amounts payable by Borrowers under this Section shall be due on demand.
. Subject to Section 3.6, ifIf Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for Lender or its applicable Lending Office to perform any of its obligations hereunder, to make, maintain, issue, fund, or commit to or charge applicable interest or fees with respect to any Loan or Letter of Credit whose interest or fee is determined by reference to SOFR or Term SOFR, or to determine or charge interest or fees based on LIBOR,SOFR or any Governmental Authority has imposed material restrictions on the authority of Lender to purchase or sell, or to take deposits of, Dollars in the London interbank marketTerm SOFR, then, on notice thereof by Lender to Borrower Agent, (a) any obligation of Lender to perform such obligations, to make, maintain, issue, fund or commit to the Loan or Letter of Credit (or to charge interest or fees otherwise applicable thereto), or to continue or convert Loans as LIBORTerm SOFR Loans, shall be suspended, and Borrowers shall make such appropriate accommodations regarding affected Letters of Credit as Lender may reasonably request, and (b) if Lender cannot lawfully make or maintain Base Rate Loans whose interest rate is determined by reference to Term SOFR, the interest rate applicable to Base Rate Loans shall, as necessary to avoid illegality, be determined without reference to Term SOFR component of Base Rate, in each case until Lender notifies Borrower Agent that the circumstances giving rise to such determination no longer exist. Upon delivery of such notice, Borrowers shall prepay the applicable Loan, Cash Collateralize the applicable LC Obligations or, if applicable,or convert LIBOR Loan(s)Term SOFR Loans to Base Rate Loan(s)Loans, either on the last day of the Interest Period therefor, if Lender may lawfully continue to maintain the Loan and charge applicable interest to such day, or immediately, if Lender cannot so maintain the Loan. Upon any such prepayment or conversion of a Loan pursuant to this Section, Borrowers shall also pay accrued interest on the amount so prepaid or converted.
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. Lender will promptly notify Borrower Agent if,If in connection with any Loan or request for a Term SOFR Loan or a conversion to or continuation thereof, as applicable, (a) Lender determines (which determination shall be conclusive absent manifest error) that (i) no Successor Rate has been determined in accordance with Section 3.6.2, and the circumstances under Section 3.6.2(a) or the Scheduled Unavailability Date has occurred (as applicable), or (ii) adequate and reasonable means do not otherwise exist for determining Term SOFR for any requested Interest Period with respect to a proposed Term SOFR Loan or in connection with an existing or proposed Base Rate Loan, or (b) Lender determines that
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then, in the case of clauses (a) through (c) above, on a date and time determined by Lender (any such date, “LIBORTerm SOFR Replacement Date”), which date shall be at the end of an Interest Period or on the relevant interest payment date, as applicable, for interest calculated and shall occur reasonably promptly upon the occurrence of any of the events or circumstances under clauses (a), (b) or (c) above and, solely with respect to clause (b) above, no later than the Scheduled Unavailability Date, LIBORTerm SOFR will be replaced hereunder and under theany other applicable Loan DocumentsDocument with, subject to the proviso below, the first available alternative set forth in the order below Daily Simple SOFR plus the SOFR Adjustment for any payment period for interest calculated that can be determined by Lender, in each case, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document (“LIBOR Successor Rate”; and any such rate before giving effect to the Related Adjustment, “Pre-Adjustment). If the Successor Rate”):
(x) Term is Daily Simple SOFR plus the Related Adjustment; and
(y) SOFR plus the Related Adjustment; , all interest will be payable on a monthly basis.
and in the case of clause (d) above, Lender may amend this Agreement solely for the purpose of replacing LIBOR under this Agreement and the other Loan Documents in accordance with the definition of “LIBOR Successor Rate” and such amendment will become effective at 5:00 p.m. on the fifth Business Day after Lender has notified Borrower Agent of the occurrence of the circumstances described in clause (d) above; provided that if Lender determines that Term SOFR has become available, is administratively feasible for Lender and would have been identified as the Pre-Adjustment Successor Rate in accordance with the foregoing if it had been so available at the time that the LIBOR Successor Rate then in effect was so identified, and notifies Borrower Agent of such availability, then from and after the beginning of the Interest Period, relevant interest payment date or payment period for interest calculated, in each case, commencing no less than 30 days after the date of such notice, the Pre-Adjustment Successor Rate shall be Term SOFR and the LIBOR Successor Rate shall be Term SOFR plus the relevant Related Adjustment.
Lender will promptly (in one or more notices) notify Borrower Agent of (x) any occurrence of any events, periods or circumstances under clauses (a) through (c) above, (y) a LIBOR Replacement Date, and (z) the LIBOR Successor Rate. Any LIBOR Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for Lender, such LIBOR Successor Rate shall be applied in a manner as otherwise reasonably determined by Lender. Notwithstanding anything to the contrary in any Loan Document, if at any time any LIBOR Successor Rate as so determined would otherwise be less than 0.25%, the LIBOR Successor Rate will be deemed to be 0.25% for the purposes of this Agreement and the other Loan Documents.
In connection with the implementation of a LIBOR Successor Rate, Lender will have the right to make LIBOR Successor Rate Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such LIBOR Successor Rate Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that, with respect to any such amendment effected, Lender shall deliver each amendment implementing such LIBOR Successor Rate Conforming Changes to Borrower Agent reasonably promptly after such amendment becomes effective.
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If events or circumstances of the type described in clauses (a) through (c) above occur with respect to any LIBOR Successor Rate then in effect, the successor rate thereto shall be determined in accordance with the definition of “LIBOR Successor Rate.”
Lender will promptly (in one or more notices) notify Borrowers of implementation of any Successor Rate. A Successor Rate shall be applied in a manner consistent with market practice; provided, that to the extent market practice is not administratively feasible for Lender, the Successor Rate shall be applied in a manner as determined by Lender in its discretion. If a Successor Rate includes a SOFR-based rate, then as of the Term SOFR Replacement Date, the Unused Line Fee Rate shall increase by percentage points equal to the SOFR Adjustment for a one month interest period. Notwithstanding anything else herein, if at any time any Successor Rate as so determined would otherwise be less than 0.25%, the Successor Rate will be deemed to be 0.25% for all purposes of the Loan Documents.
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and the result thereof shall be to increase the cost to Lender of making or maintaining any Loan or the Commitment, or converting to or continuing any interest option for a Loan, or to increase the cost to Lender of issuing or maintaining any Letter of Credit (or of maintaining its obligation to issue a Letter of Credit), or to reduce the amount of any sum received or receivable by Lender hereunder (whether of principal, interest or any other amount) then, upon request by Lender, Borrowers will pay to Lender such additional amount(s) as will compensate it for the additional costs incurred or reduction suffered.
3.7.3. 3.7.4. Compensation. Failure or delay on the part of Lender to demand compensation pursuant to this Section shall not constitute a waiver of its right to demand such compensation, but Borrowers shall not be required to compensate Lender for any increased costs or reductions suffered more than nine months (plus any period of retroactivity of the Change in Law giving rise to the demand) prior to the date that Lender notifies Borrower Agent of the applicable Change in Law and of Lender’s intention to claim compensation therefor.
. If Lender gives a notice under Section 3.5 or requests compensation under Section 3.7, or if Borrowers are required to pay any Indemnified Taxes or additional amounts under Section 5.7, then at the request of Borrower Agent, Lender shall use reasonable efforts to designate or assign its obligations hereunder to a different Lending Office, if, in the judgment of Lender, such designation or assignment would eliminate the need for such notice or reduce amounts payable or to be withheld in the future, and would not subject Lender to any unreimbursed cost or expense, and would not otherwise be disadvantageous to it or unlawful. Borrowers shall pay all reasonable costs and expenses incurred by Lender in connection with any such designation or assignment.
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. If for any reason (a) any Borrowing, conversion or continuation of a LIBORTerm SOFR Loan does not occur on the date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b) any repayment or conversion of a LIBORTerm SOFR Loan occurs on a day other than the end of its Interest Period, or (c) Borrowers fail to repay a LIBORTerm SOFR Loan when required, then Borrowers shall pay to Lender all losses, expenses and fees arising from redeployment of funds or termination of match funding. For purposes of calculating such amounts, Lender shall be deemed to have funded a LIBOR Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and period, even if the Loan was not in fact so funded.
. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law (“maximum rate”). If Lender shall receive interest in an amount that exceeds the maximum rate, the excess interest shall be applied to the principal of the Obligations or, if it exceeds such unpaid principal, refunded to Borrowers. In determining whether the interest contracted for, charged or received by Lender exceeds the maximum rate, Lender may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread (in equal or unequal parts) the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 4. LOAN ADMINISTRATION
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. Lender may make Conforming Changes from time to time with respect to SOFR, Term SOFR or any Successor Rate. Notwithstanding anything to the contrary in any Loan Document, any amendment implementing such changes shall be effective without further action or consent of any party to any Loan Document. Lender shall post or provide each such amendment to Borrower Agent reasonably promptly after it becomes effective.
. Each Borrowing of LIBORTerm SOFR Loans when made shall be in a minimum amount of
$1,000,000, plus an increment of $100,000 in excess thereof. No more than six (6) Borrowings of LIBORTerm SOFR Loans may be outstanding at any time, and all LIBORTerm SOFR Loans having the same length and beginning date of their Interest Periods shall be aggregated together and considered one Borrowing for this purpose. Upon determining LIBORTerm SOFR for any Interest Period requested by Borrowers, Lender shall promptly notify Borrowers thereof by telephone or electronically and, if requested by Borrowers, shall confirm any telephonic notice in writing. Notwithstanding anything to the contrary set forth herein, all Loans outstanding on the Amendment Effective Date which are LIBOR Loans (as defined in this Agreement immediately before giving effect to the Amendment No. 1) shall be permitted to continue as LIBOR Loans for the duration of such LIBOR Loans’ respective Interest Periods and, upon expiration of such Interest Periods, such Loans shall be converted to a Term SOFR Loan and/or a Base Rate Loan pursuant to and in accordance with the terms hereof.
. Each Borrower hereby designates the Company (“Borrower Agent”) as its representative and agent for all purposes under the Loan Documents, including requests for and receipt of Loans and Letters of Credit, designation of interest rates, delivery or receipt of Communications, delivery of Borrowing Base and financial information and reports, payment of Obligations, requests for waivers, amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and all other dealings with Lender. Borrower Agent hereby accepts such appointment. Lender shall be entitled to rely upon any Communication (including any notice of borrowing) delivered by or to Borrower Agent on behalf of any Borrower and shall have the right, in its discretion, to deal exclusively with Borrower Agent for all purposes under the Loan Documents. Each Borrower agrees that any Communication, delivery, action, omission or undertaking by Borrower Agent hereunder shall be binding upon and enforceable against such Borrower.
. The Loans, LC Obligations and other Obligations shall constitute one general obligation of Borrowers and are secured by Lender’s Lien on all Collateral; provided, that Lender shall be deemed to be a creditor of, and the holder of a separate claim against, each Borrower to the extent of any Obligations jointly or severally owed by such Borrower.
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. On the effective date of the termination of the Commitment, the Obligations shall be immediately due and payable, and each Secured Party may terminate its Bank Products. Until Full Payment of the Obligations, all undertakings of Borrowers contained in the Loan Documents shall continue, and Lender shall retain its Liens in the Collateral and all rights and remedies under the Loan Documents. Lender shall not be required to terminate its Liens unless it receives Cash Collateral or a written agreement, in each case satisfactory to it, protecting it from dishonor or return of any Payment Item previously applied to the Obligations. Sections 2.2, 3.4, 3.6, 3.7, 3.9, 5.4, 5.7, 12.2, this Section, and each indemnity or waiver given by an Obligor in any Loan Document, shall survive any assignment by Lender of rights or obligations hereunder, termination of the Commitment, and any repayment, satisfaction, discharge or Full Payment of any Obligations.
SECTION 5. PAYMENTS
. All payments of Obligations shall be made in Dollars, without offset, counterclaim or defense of any kind, free and clear of (and without deduction for) any Taxes, and in immediately available funds, not later than 12:00 noon on the due date. Any payment after such time shall be deemed made on the next Business Day. Any payment of a LIBORTerm SOFR Loan prior to the end of its Interest Period shall be accompanied by all amounts due under Sections 3.1.1(c) and 3.9. Lender shall have the continuing, exclusive right to apply and reapply payments and proceeds of Collateral against Obligations, at Lender’s discretion, but whenever possible (provided no Default or Event of Default exists) any prepayment shall be applied to Base Rate Loans before LIBORTerm SOFR Loans.
. Loans may be prepaid from time to time, without penalty or premium. Loans shall be due and payable in full on the Termination Date, unless payment is sooner required hereunder, and any Overadvance shall be due and payable as provided in Section 2.1.4. If an Asset Disposition includes Accounts or Inventory (other than collection of Accounts in the Ordinary Course or Business and sales of Inventory in the Ordinary Course of Business), Borrowers shall apply Net Proceeds to repay Loans equal to the greater of
(a) the net book value (or fair market value, if higher) of such Accounts and Inventory, or (b) the reduction in Borrowing Base resulting from the disposition.
. Obligations other than Loans, including LC Obligations and Claims, shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, on demand.
. Lender shall have no obligation to marshal any assets in favor of any Obligor or against any Obligations. If any payment by or on behalf of Borrowers is made to Lender or if Lender exercises a right of setoff, and any of such payment or setoff is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment or setoff had not occurred.
. The ledger balance in the main Dominion Account as of the end of a Business Day shall be applied to the Obligations at the beginning of the next Business Day, during any Dominion Trigger Period. Any
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resulting credit balance shall not accrue interest in favor of Borrowers and shall be made available to Borrowers as long as no Default or Event of Default exists. In no event shall monies and collateral proceeds obtained from an Obligor be applied to pay its Excluded Swap Obligations.
. Lender shall maintain, in accordance with its customary practices, loan account(s) evidencing the Debt of Borrowers hereunder. Any failure of Lender to record anything in a loan account, or any error in doing so, shall not limit or otherwise affect the obligation of Borrowers to pay any amount owing hereunder. Entries in a loan account shall be presumptive evidence of the information contained therein. If information in a loan account is provided to or inspected by or on behalf of a Borrower, the information shall be conclusive and binding on Borrowers for all purposes absent manifest error, except to the extent Borrower Agent notifies Lender in writing within 30 days of specific information subject to dispute.
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copy of a receipt issued by the appropriate Governmental Authority evidencing the payment, a copy of any return required by Applicable Law to report the payment or other evidence of payment reasonably satisfactory to Lender.
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performance and not of collection, that such obligations shall not be discharged until Full Payment of the Obligations, and that such obligations are absolute and unconditional, irrespective of (a) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Obligor is or may become a party or be bound; (b) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by any Secured Party with respect thereto; (c) the existence, value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for any Obligations or any action or inaction of any Secured Party in respect thereof (including the release of any security or guaranty); (d) insolvency of any Obligor; (e) election by any Secured Party in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g) disallowance of any claims of a Secured Party against any Obligor for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (h) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, other than Full Payment of the Obligations.
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SECTION 6. CONDITIONS PRECEDENT
. In addition to the conditions set forth in Section 6.2, Lender shall not be required to fund any requested Loan, issue any Letter of Credit or otherwise extend credit to Borrowers hereunder, until the date (“Closing Date”) that each of the following conditions has been satisfied:
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Closing Date.
. Lender shall not be required to make any credit extension hereunder (including funding any Loan, issuing any Letter of Credit, or granting any other accommodation to or for the benefit of any Borrower), if the following conditions are not satisfied on such date and upon giving effect thereto:
Each request (or deemed request) by a Borrower for any credit extension shall constitute a representation by Borrowers that the foregoing conditions are satisfied on the date of such request and on the date of the credit extension. As an additional condition to a credit extension, Lender may request any other information, certification, document, instrument or agreement as it deems reasonably appropriate.
SECTION 7. COLLATERAL
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. To secure the prompt payment and performance of its Obligations, each Obligor hereby grants to Lender a continuing Lien on all Property of such Obligor, including the following, whether now owned or hereafter acquired, and wherever located:
Notwithstanding the foregoing, no Obligor shall be deemed to have granted to Lender an security interest in any Excluded Property.
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segregated cash collateral account or otherwise. Lender may apply Cash Collateral to the payment of such Obligations as they become due, in such order as Lender may elect. All Cash Collateral and related deposit accounts shall be under the sole dominion and control of Lender, and no Borrower or other Person shall have any right to any Cash Collateral until Full Payment of the Obligations.
. The Lien on Collateral granted hereunder is given as security only and shall not subject Lender to, or in any way modify, any obligation or liability of Obligors relating to any Collateral. In no event shall any Obligor’s grant of a Lien under any Loan Document secure its Excluded Swap Obligations.
. All Liens granted to Lender under the Loan Documents are for the benefit of Secured Parties. Promptly upon request, Obligors shall deliver such instruments and agreements, and shall take such actions, as Lender deems appropriate under Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise to give effect to the intent of this Agreement. Each Obligor authorizes Lender to file any financing statement that describes the Collateral as “all assets” or “all personal property” of such Obligor, or words to similar effect, and ratifies any action taken by Lender before the Closing Date to effect or perfect its Lien on any Collateral.7.7.
. Notwithstanding Section 7.1, the Collateral shall include only 65% of the voting stock of any Foreign Subsidiary.
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SECTION 8. COLLATERAL ADMINISTRATION
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. Borrowers shall deliver to Lender a Borrowing Base Report (i) by the 20th of each month, reporting as of the close of business of the previous accounting month, (ii) during a Reporting Trigger Period, by Wednesday of each week, reporting as of the close of business of the previous week, and (iii) otherwise at such other times and for such periods as Lender may reasonably request. All information (including calculation of Availability) in a Borrowing Base Report shall be certified by Borrowers. Lender may from time to time adjust such report (a) to reflect Lender’s reasonable estimate of declines in value of Collateral, due to collections received in the Dominion Account, reductions in Eligible Cash Amount balances or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (bc) to the extent any information or calculation does not comply with this Agreement.
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(c) Lender is promptly notified if the aggregate Value of all Inventory returned in any month exceeds
$250,000; and (d) any payment received by a Borrower for a return is promptly remitted to Lender for application to the Obligations.
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. Schedule 8.5 lists all Deposit Accounts maintained by Borrowers, including Dominion Accounts. Each Borrower shall take all actions necessary to establish Lender’s first priority Lien on each Deposit Account (other than Excluded Deposit Accounts). Borrowers shall be the sole account holder(s) of each Deposit Account and shall not allow any Person (other than Lender) to have control over their Deposit Accounts or any Property deposited therein. Borrowers shall promptly notify Lender of any opening or closing of a Deposit Account and, with the consent of Lender, will amend Schedule 8.5 to reflect same.
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. Each Borrower hereby irrevocably constitutes and appoints Lender (and all Persons designated by Lender) as such Borrower’s true and lawful attorney (and agent-in-fact) for the purposes provided in this Section. Lender, or Lender’s designee, may (in its discretion), without notice and in either its or a Borrower’s name, but at the cost and expense of Borrowers:
SECTION 9. REPRESENTATIONS AND WARRANTIES
. To induce Lender to enter into this Agreement and to make available the Commitment, Loans and Letters of Credit, each Borrower represents and warrants that:
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have a Material Adverse Effect. No Obligor is, or is a subsidiary of, a credit institution, investment firm, or parent company of a credit institution or investment firm, in each case that is established in a member state of the European Union, Iceland, Liechtenstein or Norway, and no Obligor is a Covered Entity. The information included in the most recently provided Beneficial Ownership Certification is true and complete in all material respects.
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Business and disclosed to Lender; and it is absolutely owing by the Account Debtor, without contingency of any kind;
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Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or Subsidiary pays or owes any royalty or other compensation to any Person with respect to any Intellectual Property. All Intellectual Property owned, used or licensed by, or otherwise subject to any interests of, any Borrower or Subsidiary is shown on Schedule 9.1.11.
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. No Loan Document contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make the statements contained therein not materially misleading. There is no fact or circumstance that any Obligor has failed to disclose to Lender in writing that could reasonably be expected to have a Material Adverse Effect.
SECTION 10. COVENANTS AND CONTINUING AGREEMENTS
. As long as the Commitment or any Obligations are outstanding, each Borrower shall, and shall cause each Subsidiary to:
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Default, all charges, costs and expenses relating thereto shall be reimbursed by Borrowers without regard to the limits set forth above. Subject to and without limiting the foregoing, Borrowers agree to pay Lender’s then standard charges for examination activities, including charges of Lender’s internal examination and appraisal groups, as well as the charges of any third party used for such purposes. No Borrowing Base calculation shall include Collateral acquired in a Permitted Acquisition or outside the Ordinary Course of Business until completion of applicable field examinations and appraisals (which shall not be included in the limits provided above) satisfactory to Lender.
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$250,000; (f) the assertion of any Intellectual Property Claim, if an adverse resolution could have a Material Adverse Effect; (g) any violation or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an adverse resolution could have a Material Adverse Effect; (h) any Environmental Release by an Obligor or on any Property owned, leased or occupied by an Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA Event;
$500,000 in the aggregate in any Fiscal Year.
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. As long as the Commitment or any Obligations are outstanding, each Borrower shall not, and shall cause each Subsidiary not to:
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Section 10.2.7(d);
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Disposition.
$250,000 at any time.
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liquidate, wind up its affairs or dissolve itself; or consummate (or unwind) a statutory division; or merge, combine or consolidate with any Person, whether in a single transaction or in a series of related transactions, except for (a) mergers or consolidations of a wholly-owned Subsidiary with another wholly-owned Subsidiary or into an Obligor (so long as if such transaction involves a Borrower, the Borrower is the surviving Person) or (b) Permitted Acquisitions.
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. As long as the Commitment or any Obligations are outstanding, Borrowers shall:
SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT
. Each of the following shall be an “Event of Default” if it occurs for any reason whatsoever, whether voluntary or involuntary, by operation of law or otherwise:
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(i) a felony committed in the conduct of the Obligor’s business, or (ii) violating any state or federal law (including the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act) that could lead to forfeiture of any material Property or any Collateral; or
. If an Event of Default described in Section 11.1(j) occurs with respect to any Borrower, then to the extent permitted by Applicable Law, all Obligations shall become automatically due and payable and the Commitment shall terminate, without any action by Lender or notice of any kind. In addition, or if any other Event of Default occurs and has not been waived by Lender, Lender may in its discretion do any one or more of the following from time to time:
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premises are owned or leased by a Borrower, Borrowers agree not to charge for such storage); and (iv) sell or otherwise dispose of any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale, with such notice as may be required by Applicable Law, in lots or in bulk, at such locations, all as Lender, in its discretion, deems advisable. Each Borrower agrees that 10 days’ notice of any proposed sale or other disposition of Collateral by Lender shall be reasonable, and that any sale conducted on the internet or to a licensor of Intellectual Property shall be commercially reasonable. Lender may conduct sales on any Obligor’s premises, without charge, and any sales may be adjourned from time to time in accordance with Applicable Law. Lender shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and Lender may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may set off the amount of such price against the Obligations.
. Lender is hereby granted an irrevocable, non-exclusive license or other right to use, license or sub-license (without payment of royalty or other compensation to any Person) any or all Intellectual Property of Borrowers, computer hardware and software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other Property, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or remedies with respect to, any Collateral. Each Borrower’s rights and interests under Intellectual Property shall inure to Lender’s benefit.
. At any time during the existence of an Event of Default, Lender and its Affiliates are authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Lender or such Affiliate to or for the credit or the account of an Obligor against its Obligations, whether or not Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or are owed to a branch or office of Lender or such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness. The rights of Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rights of setoff) that such Person may have.
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SECTION 12. MISCELLANEOUS
. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR
ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have any obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that is determined in a final, non-appealable judgment by a court of competent jurisdiction to result from the gross negligence or willful misconduct of such Indemnitee.
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shall have any liability to Obligors or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) relating to use by any Person of the Platform, including any unintended recipient, nor for delivery of any information via the Platform, internet, e-mail, or any other electronic platform or messaging system.
. Lender may, in its discretion at any time and from time to time, at Borrowers’ expense, pay any amount or do any act required of a Borrower under any Loan Documents or otherwise lawfully requested by Lender to (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or realize upon any Collateral; or (c) defend or maintain the validity or priority of Lender’s Liens in any Collateral, including any payment of a judgment, insurance premium, warehouse charge, finishing or processing charge, or landlord claim, or any discharge of a Lien. All payments, costs and expenses (including Extraordinary Expenses) of Lender under this Section shall be reimbursed by Borrowers, on demand, with interest from the date incurred until paid in full, at the Default Rate applicable to Base Rate Loans. Any payment made or action taken by Lender under this Section shall be without prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents.
. Lender may (but shall have no obligation) to respond to usual and customary credit inquiries from third parties concerning any Obligor or Subsidiary.
. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be valid under Applicable Law. If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of the Loan Documents shall remain in full force and effect.
. The provisions of the Loan Documents are cumulative. The parties acknowledge that the Loan Documents may use several limitations or measurements to regulate similar matters, and they agree that these are cumulative and that each must be performed as provided. Except as otherwise provided in
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another Loan Document (by specific reference to the applicable provision of this Agreement), if any provision contained herein is in direct conflict with any provision in another Loan Document, the provision herein shall govern and control.
. A Communication, including any required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures. An Electronic Signature on or associated with a Communication shall be valid and binding on each Obligor and other party thereto to the same extent as a manual, original signature, and any Communication entered into by Electronic Signature shall constitute the legal, valid and binding obligation of each party, enforceable to the same extent as if a manually executed original signature were delivered. A Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. The parties may use or accept manually signed paper Communications converted into electronic form (such as scanned into pdf), or electronically signed Communications converted into other formats, for transmission, delivery and/or retention. Lender may, at its option, create one or more copies of a Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of the Person’s business, and may destroy the original paper document. Any Communication in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything herein, (a) Lender is under no obligation to accept an Electronic Signature in any form unless expressly agreed by it pursuant to procedures approved by it; (b) Lender is entitled to rely on any Electronic Signature purportedly given by or on behalf of an Obligor without further verification; and (c) upon request by Lender, an Electronic Signature shall be promptly followed by a manually executed counterpart. “Electronic Record” and “Electronic Signature” are used herein as defined in 15 U.S.C. § 7006.
. Time is of the essence with respect to all Loan Documents and Obligations. The Loan Documents constitute the entire agreement, and supersede all prior understandings and agreements, among the parties relating to the subject matter thereof.
. Nothing in any Loan Document and no action of Lender pursuant to any Loan Document shall be deemed to constitute control of any Obligor by Lender. In connection with all aspects of each transaction contemplated by any Loan Document, Borrowers acknowledge and agree that (a)(i) this credit facility and all related services by Lender or its Affiliates are arm’s-length commercial transactions between Borrowers and such Person; (ii) Borrowers have consulted their own legal, accounting, regulatory, tax and other advisors to the extent they have deemed appropriate; and (iii) Borrowers are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by the Loan Documents; (b) each of Lender and its Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrowers, their Affiliates or any other Person, and has no obligation with respect to the transactions contemplated by the Loan Documents except as expressly set forth therein; and (c) Lender and its Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrowers and their Affiliates, and have no obligation to disclose any of such interests to Borrowers or their Affiliates. To the fullest extent permitted by Applicable Law, each Borrower hereby waives and releases any claims that it may have against Lender and its Affiliates with respect to any breach of agency or fiduciary duty in connection with any transaction contemplated by a Loan Document.
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. Lender agrees to maintain the confidentiality of all Information (as defined below), except that Information may be disclosed (a) to its Affiliates, and its and their partners, directors, officers, employees and Lender Professionals (provided they are informed of the confidential nature of the Information and instructed to keep it confidential); (b) to the extent requested by any governmental, regulatory or self-regulatory authority purporting to have jurisdiction over it or its Affiliates; (c) to the extent required by Applicable Law or by any subpoena or other legal process; (d) to any other party hereto; (e) in connection with any action or proceeding relating to any Loan Documents or Obligations; (f) subject to an agreement containing provisions substantially the same as this Section, to any potential or actual transferee of any interest in a Loan Document or any actual or prospective party (or its advisors) to any Bank Product or to any swap, derivative or other transaction under which payments are to be made by reference to an Obligor or Obligor’s obligations; (g) to the extent such Information is (i) publicly available other than as a result of a breach of this Section, (ii) available to Lender or its Affiliates on a nonconfidential basis from a source other than Borrowers, or (iii) independently discovered or developed by a party hereto without utilizing any Information or violating this Section; (h) on a confidential basis to a provider of a Platform; or (i) with the consent of Borrower Agent. Borrowers consent to the publication by Lender of customary advertising material relating to transactions contemplated hereby, using the names, product photographs, logos or trademarks of Borrowers and Subsidiaries. Lender may disclose information regarding this Agreement and the credit facility hereunder to market data collectors, similar service providers to the lending industry, and Lender’s service providers in connection with the Loan Documents and Commitment. As used herein, “Information” means information received from an Obligor or Subsidiary relating to it or its business, that is identified as confidential when delivered. A Person required to maintain confidentiality of Information pursuant to this Section shall be deemed to have complied if it exercises a degree of care similar to that accorded its own confidential information. Lender acknowledges that (i) Information may include material non-public information; (ii) it has developed compliance procedures regarding the use of such information; and (iii) it will handle the material non-public information in accordance with Applicable Law.
. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.
NOTICES IN SECTION 12.3.1. A final judgment in any proceeding of any such court shall be
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conclusive and may be enforced in other jurisdictions by suit on the judgment or any other manner provided by Applicable Law.
. To the fullest extent permitted by Applicable Law, each Borrower waives (a) the right to trial by jury (which each Secured Party hereby also waives) in any proceeding or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents, instruments, chattel paper and guaranties at any time held by Lender on which a Borrower may in any way be liable, and hereby ratifies anything Lender may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security that might be required by a court prior to allowing Lender to exercise any rights or remedies; (e) the benefit of all valuation, appraisement and exemption laws; (f) any claim against an Indemnitee on any theory of liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice of acceptance hereof. Each Borrower acknowledges that the foregoing waivers are a material inducement to Lender entering into this Agreement and that Lender is relying upon the foregoing in its dealings with Borrowers. Each Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any Swap or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
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the Supported QFC and Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a defaulting lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
. Lender hereby notifies Borrowers that pursuant to the Patriot Act, Lender is required to obtain, verify and record information that identifies each Borrower, including its legal name, address, tax ID number and other information that will allow Lender to identify it in accordance with the Patriot Act. Lender will also require information regarding any personal guarantor and may require information regarding Borrowers’ management and owners, such as legal name, address, social security number and date of birth. Borrowers shall, promptly upon request, provide all documentation and information as Lender may request from time to time for purposes of complying with any “know your customer,” anti-money laundering or other requirements of Applicable Law, including the Patriot Act and Beneficial Ownership Regulation.
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
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Exhibit 31.1
Certification
I, Michael W. Altschaefl, certify that:
Date: November 8, 2022
/s/ Michael W. Altschaefl |
Michael W. Altschaefl |
Chief Executive Officer |
Exhibit 31.2
Certification
I, J. Per Brodin, certify that:
Date: November 8, 2022
/s/ J. Per Brodin |
J. Per Brodin |
Chief Financial Officer |
Exhibit 32.1
Certification of CEO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the Quarterly Report of Orion Energy Systems, Inc., a Wisconsin corporation (the “Company”), on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. Altschaefl, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
Date: |
November 8, 2022 |
|
|
/s/ Michael W. Altschaefl |
|
Michael W. Altschaefl |
|
Chief Executive Officer |
|
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of CFO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the Quarterly Report of Orion Energy Systems, Inc., a Wisconsin corporation (the “Company”), on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Per Brodin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
Date: |
November 8, 2022 |
|
|
/s/ J. Per Brodin |
|
J. Per Brodin |
|
Chief Financial Officer |
|
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.