Summary of INTRICON CORP - Yahoo! Finance

Entry into a Material Definitive Agreement, Results of Operations and Financial Con

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

PrivateBank Loan Agreement

On August 13, 2009, IntriCon and its wholly-owned United States subsidiaries, IntriCon, Inc., RTI Electronics, Inc., IntriCon Tibbetts Corporation and Jon Barron, Inc. ("Datrix") (collectively, the "U.S. Subsidiaries" and with the Company, the "Borrowers") entered into a Loan and Security Agreement (the "Loan Agreement") and related agreements with The PrivateBank and Trust Company (the "Lender") providing for a new credit facility consisting of: (i) an $8.0 million revolving line of credit (with a $200,000 subfacility for letters of credit) and (ii) a $3.5 million term loan. Loan availability under the revolving line of credit is limited to the borrowing base amount, defined as the sum of (i) 80% of eligible accounts receivable, (ii) the lesser of (a) 50% of the lower of cost or market value of eligible inventory and
(b) $3.0 million and (iii) the product of the Equipment Advance Rate (as defined therein) multiplied by the net orderly liquidation value of all eligible equipment. This facility replaces the Company's prior credit facilities with Bank of America. Borrowers paid Lender a net closing fee in the amount of $143,750.

Loans under the new credit facility are secured by a security interest in substantially all of the assets of the Borrowers including a pledge of the stock of the U.S. Subsidiaries owned by the Company. All of the Borrowers are jointly and severally liable for all borrowings under the new credit facility. The new credit facility will expire, and all outstanding loans will become due and payable, on August 13, 2012.

Loans under the new credit facility will bear interest, at the option of the Company, at:

• the London InterBank Offered Rate ("LIBOR") plus the Applicable LIBOR Rate Margin or

• the base rate, which is the higher of (a) the rate publicly announced from time to time by the Lender as the "prime rate" and (b) the Federal Funds Rate plus 0.5%, plus the Applicable Base Rate Margin.

The Applicable LIBOR Rate Margin and the Applicable Base Rate Margin vary depending on the type of loan and the Borrowers' Leverage Ratio (as defined in the Loan Agreement), as set forth in the table below:

                                      Revolving Loans                    Term Loan
                                Applicable       Applicable      Applicable      Applicable
                                LIBOR Rate       Base Rate       LIBOR Rate      Base Rate
      Leverage Ratio              Margin           Margin          Margin          Margin
      ? 3.25 to 1.00                 4.00%           1.25%           4.00%           1.25%
 ? 2.75 to 1.00 and < 3.25
          to 1.00                    3.75%           1.00%           3.75%           1.00%
 ? 2.25 to 1.00 and < 2.75
          to 1.00                    3.50%           0.75%           3.50%           0.75%
      < 2.25 to 1.00                 3.00%           0.25%           3.00%           0.25%

Interest is payable monthly in arrears, except that interest on LIBOR based loans is payable at the end of the one, two or three month interest periods applicable to LIBOR based loans.

The Borrowers are also required to pay a non-use fee equal to 0.25% per year of the unused portion of the revolving line of credit facility, payable quarterly in arrears.

The outstanding principal balance of the term loan is payable in installments, commencing on September 30, 2009, payable on dates set forth below, in the following amounts:

                           Payment Date       Installment
                        September 30, 2009   $     100,000
                        December 31, 2009    $     150,000
                        March 31, 2010       $     175,000
                        June 30, 2010        $     175,000
                        September 30, 2010   $     168,750
                        December 31, 2010    $     168,750
                        March 31, 2011       $     168,750
                        June 30, 2011        $     168,750
                        September 30, 2011   $     187,500
                        December 31, 2011    $     187,500
                        March 31, 2012       $     187,500
                        June 30, 2012        $     187,500

Any remaining principal and accrued interest is payable on August 13, 2012. The Borrowers are also required to use 100% of the net cash proceeds of certain asset sales (excluding inventory and certain other dispositions), sale of capital securities or issuance of debt to pay down the term loan.

As of August 13, 2009, the Borrowers borrowed $3,500,000 on the term loan and $6,458,148 on the revolving line of credit and had a remaining availability under the revolving credit facility of approximately $1,262,457. Proceeds from the loans were used to repay amounts owed under the Borrower's prior credit facilities of approximately $8,524,057 and a portion of the purchase price to complete the acquisition of Datrix.

In the Loan Agreement, the Borrowers made representations and warranties to the Lender concerning, among other things: their corporate status; authorization of the new credit facilities; the validity and binding nature of the Loan Agreement and other loan documents; conflicts with existing laws and agreements; ownership of assets and liens; ownership of the stock of the U.S. Subsidiaries; intellectual property; financial statements; litigation and contingent liabilities; events of default; material adverse effects; environmental matters; solvency; employee benefit matters; labor relations; security interests created under the Loan Agreement; the nature of the relationship between the lender and the Borrowers; the business nature of the loans; taxes; compliance with federal margin regulations; compliance with federal statutes and regulation concerning investment companies and public utilities; bank accounts; place of business; completeness of information furnished; internal controls over financial reporting and disclosure controls and procedures; insurance; and the Datrix acquisition.

It is a condition precedent to the Lender's obligation to make any additional advances or issue any letter of credit under the Loan Agreement that the Borrowers' representations and warranties must be true and correct in all material respects at and that no default or event of default shall exist.

The Loan Agreement contains affirmative covenants regarding, among other things: payments of any increased regulatory costs incurred by the Lender with respect to the loans; the Borrowers' existence; compliance with laws; payment of taxes and liabilities; maintenance of the Borrowers' property and assets; insurance; employee benefit plans; financial statements; management letters and supplemental financial statements; reports and certificates to be provided to the Lender; the Lender's right to inspect and audit the collateral pledged to the Lender; intellectual property; notices of proceedings, events of default and material adverse effects; environmental matters; use of the Lender as Borrowers' primary bank; the obtaining of interest rate protection with respect to at least $1.0 million of the loans; and annual projections.

Under the Loan Agreement, except as otherwise permitted in the Loan Agreement, the Borrowers may not, among other things: incur or permit to exist any indebtedness; grant or permit to exist any liens or security interests on their assets or pledge the stock of any subsidiary; make investments; be a party to any merger or consolidation, or purchase of all or substantially all of the assets or equity of any other entity; sell, transfer, convey or lease all or any substantial part of its assets or capital securities; sell or assign, with or without recourse, any receivables; issue any capital securities; make any distribution or dividend (other than stock dividends), whether in cash or otherwise, to any of its equityholders; purchase or redeem any of its equity interests or any warrants, options or other rights in respect thereof; enter into any transaction with any of its affiliates or with any director, officer or employee of any Borrower; be a party to any unconditional purchase obligations; cancel any claim or debt owing to it; make payment on or changes to any subordinated debt; enter into any agreement inconsistent with the provisions of the Loan Agreement or other agreements and documents entered into in connection with the Loan Agreement; engage in any line of business other than the businesses engaged in on the date of the Loan Agreement and businesses reasonably related thereto; or permit its charter, bylaws or other . . .