-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P9gSemrbC4ICUx8tm7tvEPkhmF5IwhHZ+oAwcoN312wXKJikZWSC7pEt1Dlg4fQz YWPqQCRcGBI2ZHaazxxyEw== 0001019687-07-002657.txt : 20070816 0001019687-07-002657.hdr.sgml : 20070816 20070816171532 ACCESSION NUMBER: 0001019687-07-002657 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070813 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070816 DATE AS OF CHANGE: 20070816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Emrise CORP CENTRAL INDEX KEY: 0000854852 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 770226211 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10346 FILM NUMBER: 071063199 BUSINESS ADDRESS: STREET 1: 9485 HAVEN AVENUE STREET 2: STE 100 CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 BUSINESS PHONE: 9099879220 MAIL ADDRESS: STREET 1: 9485 HAVEN AVENUE STREET 2: STE 100 CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 FORMER COMPANY: FORMER CONFORMED NAME: MICROTEL INTERNATIONAL INC DATE OF NAME CHANGE: 19951117 FORMER COMPANY: FORMER CONFORMED NAME: CXR CORP DATE OF NAME CHANGE: 19920703 8-K 1 emrise_8k-081607.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (EARLIEST EVENT REPORTED): AUGUST 13, 2007 EMRISE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-10346 77-0226211 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) file number) Identification No.) 9485 HAVEN AVENUE, SUITE 100 RANCHO CUCAMONGA, CALIFORNIA 91730 (Address of principal executive offices) (Zip code) (909) 987-9220 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On August 13, 2007, EMRISE Corporation, Emrise Electronics Corporation, RO Associates Incorporated, and CXR Larus Corporation entered into a First Amendment to Credit and Security Agreement and Waiver of Defaults (the "Amendment") with Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division. The Amendment resets certain financial covenants contained in the existing Credit and Security Agreement dated December 1, 2006 ("Existing Agreement"), which covenants apply to EMRISE Corporation and its subsidiaries on a consolidated basis, as described below. The minimum debt service coverage ratio must be greater than 1.20:1:00 on a trailing quarterly basis. "Debt service coverage ratio" is defined as net income after taxes, plus depreciation, plus amortization, plus or minus changes in deferred taxes, minus capital expenditures and minus dividends or distributions, divided by the current maturities of long-term debt paid or scheduled to be paid plus any payments on subordinated debt. The amended covenants also require that we maintain a minimum book net worth, determined at the end of each calendar month, in an amount not less than the sum of (i) $23 million and (ii) 90% of consolidated net income for each calendar quarter ending on or after September 30, 2007, but only to the extent such net income for each such quarter is positive. The amended covenants also specify minimum year-to-date net income (loss) thresholds that are measured monthly. We were not permitted to incur a net loss of greater than $1.5 million for the six months ended June 30, 2007. For the year-to-date period ending September 30, 2007, we are not permitted to incur a net loss of greater than $1.2 million and for the year-to-date period ending December 31, 2007 our net income must not be less than $100,000. The Amendment also provides a formal waiver of defaults for the periods ended April 30, 2007 and May 31, 2007 that occurred under the financial covenants relating to Minimum Book Net Worth that existed under the Existing Agreement prior to the Amendment. A copy of the Amendment is attached hereto and incorporated by reference as Exhibit 10.1. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS d. Exhibits: EXHIBIT NO. DESCRIPTION ----------- ----------- 10.1 FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS dated August 13, 2007, by and among Emrise Corporation, a Delaware corporation, Emrise Electronics Corporation, a New Jersey corporation, RO Associates Incorporated, a California corporation, CXR Larus Corporation, a Delaware corporation, and WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Wells Fargo Business Credit operating division. SIGNATURES 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. EMRISE CORPORATION Dated: August 15, 2007 By: /S/ D. JOHN DONOVAN --------------------------------- D. John Donovan, Vice President of Finance and Administration (principal financial officer) INDEX TO EXHIBITS ATTACHED TO THIS REPORT EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.1 FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS dated August 13, 2007, by and among Emrise Corporation, a Delaware corporation, Emrise Electronics Corporation, a New Jersey corporation, RO Associates Incorporated, a California corporation, CXR Larus Corporation, a Delaware corporation, and WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Wells Fargo Business Credit operating division. EX-10.1 2 emrise_8kex10-1.txt EXHIBIT 10.1 FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS (the "Amendment"), dated August _13_, 2007, is entered into by and among Emrise Corporation, a Delaware corporation, Emrise Electronics Corporation, a New Jersey corporation, RO Associates Incorporated, a California corporation, CXR Larus Corporation, a Delaware corporation (collectively, the "Borrowers"), and WELLS FARGO BANK, NATIONAL ASSOCIATION (the "Lender"), acting through its Wells Fargo Business Credit operating division. RECITALS A. The Borrowers and the Lender are parties to a Credit and Security Agreement dated as of December 1, 2006 (as amended from time to time, the "Credit Agreement"). Capitalized terms used in these recitals have the meanings given to them in the Credit Agreement unless otherwise specified. B. The Borrowers have requested that (i) certain amendments be made to the Credit Agreement, and (ii) certain Events of Default be waived, both of which the Lender is willing to agree to pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows: 1. Section 6.2(a) of the Credit Agreement is hereby deleted in its entirety and restated as follows: "(a) MINIMUM BOOK NET WORTH. The Borrowers, on a consolidated basis, will maintain, during each month described below, their Book Net Worth, determined as of the end of each calendar month, in an amount not less than the amount set forth for each such period: 1 Period Minimum Book Net Worth ------ ---------------------- Calendar month ending June 30, 2007, The sum of (i) $23,000,000 and and each calendar month thereafter: (ii) 90% of Borrowers' consolidated Net Income for each calendar quarter ending on or after September 30, 2007, but only to the extent such Net Income for each such quarter is positive. Borrowers' Book Net Worth calculation shall be adjusted by Lender to eliminate any foreign translation adjustments occurring on or after June 30, 2007. The foregoing minimum Book Net Worth for Borrowers shall be adjusted by Lender on an annual basis for the calendar year ending December 31, 2008, and continuing each year thereafter, such that the minimum required Book Net Worth shall be the greater of (i) the required Book Net Worth determined in accordance with the above requirements as if no adjustment had been made, and (ii) an amount equal to the actual Book Net Worth of the Borrowers as determined by Borrowers' audited consolidated year-end financial statements less $500,000." 2. Section 6.2(b) of the Credit Agreement is hereby deleted in its entirety and restated as follows: "(b) MINIMUM NET INCOME. The Borrowers will achieve, for each year to date period described below, determined as of the end of such period, Net Income of not less than the amount set forth for each such period (numbers appearing between "( )" are negative): Period Minimum Net Income ------ ------------------ January 1, 2007 through June 30, 2007 ($1,515,000) January 1, 2007 through July 31, 2007 ($1,430,000) January 1, 2007 through August 31, 2007 ($1,290,000) January 1, 2007 through September 30, 2007 ($1,150,000) January 1, 2007 through October 31, 2007 ($715,000) January 1, 2007 through November 30, 2007 ($280,000) January 1, 2007 through December 31, 2007 $100,000 2 Borrowers' Net Income calculation shall be adjusted by Lender to eliminate any foreign translation adjustments occurring on or after June 30, 2007." 3. Section 6.2(c) of the Credit Agreement is hereby deleted in its entirety and restated as follows: "(c) MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrowers, on a consolidated basis, will maintain a Debt Service Coverage Ratio, determined as at the end of each calendar quarter for the period indicated below, of not less than the ratio set forth for each such period: Minimum Debt Service Test Dates/Periods Coverage Ratio ------------------ -------------- December 31, 2007, and the last day of each calendar 1.20 to 1.00 quarter thereafter, for the four quarter period ending on the last day of such calendar quarter. 4. NO OTHER CHANGES. Except as explicitly amended or waived by this Amendment, all of the terms and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any advance or letter of credit thereunder. 5. WAIVER OF DEFAULTS. The Borrowers are in default of the following provisions of the Credit Agreement with respect to the calendar months ending April 30, 2007 and May 31, 2007 (collectively, the "Existing Defaults"): - ------------------------- ----------------------------------------------- ------------------ ------------------------- Required Section/Covenant Test Date/Period Performance Actual Performance - ------------------------- ----------------------------------------------- ------------------ ------------------------- Section 6.2(a) Calendar month ending April 30, 2007 $26,900,000 $23,433,000 - ------------------------- ----------------------------------------------- ------------------ ------------------------- Section 6.2(a) Calendar month ending May 31, 2007 $26,900,000 $23,251,000 - ------------------------- ----------------------------------------------- ------------------ -------------------------
Upon the terms and subject to the conditions set forth in this Amendment, the Lender hereby waives the Existing Defaults. This waiver shall be effective only in this specific instance and for the specific purpose for which it is given, and this waiver shall not entitle the Borrowers to any other or further waiver in any similar or other circumstances. 3 6. AMENDMENT FEE. The Borrowers shall pay the Lender as of the date hereof a fully-earned and non-refundable fee in the amount of $10,000 in consideration of the Lender's execution and delivery of this Amendment. 7. CONDITIONS PRECEDENT. This Amendment, and the waiver set forth in Section 5 of this Amendment, shall be effective when the Lender shall have received and accepted an executed facsimile of this Amendment, together with each of the following, each in substance and form acceptable to the Lender in its sole discretion: (a) Payment of the fee described in Section 6 of this Amendment. 8. CONDITIONS SUBSEQUENT. The following documents, each in substance and form acceptable to the Lender in its sole discretion, shall be required as indicated, otherwise, Borrowers will be in default of the Credit Agreement: (a) The Acknowledgment and Agreement of Subordinated Creditors set forth at the end of this Amendment, duly executed by the Subordinated Creditors and received by Lender within 30 business days of the date of this amendment; and (b) A Certificate of the Secretary of each Borrower certifying as to (i) the resolutions of the board of directors of such Borrower approving the execution and delivery of this Amendment, (ii) the fact that the articles of incorporation and bylaws of such Borrower, which were certified and delivered to the Lender pursuant to the Certificate of Authority of such Borrower's secretary or assistant secretary dated December 1, 2006, continue in full force and effect and have not been amended or otherwise modified except as set forth in the Certificate to be delivered, and (iii) certifying that the officers and agents of such Borrower who have been certified to the Lender, pursuant to the Certificate of Authority of such Borrower's secretary or assistant secretary dated December 1, 2006, as being authorized to sign and to act on behalf of such Borrower continue to be so authorized or setting forth the sample signatures of each of the officers and agents of such Borrower authorized to execute and deliver this Amendment and all other documents, agreements and certificates on behalf of such Borrower, each and all received by Lender within 15 business days of the date of this amendment. 9. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and warrants to the Lender as follows: (a) Such Borrower has all requisite power and authority to execute this Amendment and any other agreements or instruments required hereunder and to perform all of its obligations hereunder, and this Amendment and all such other agreements and instruments has been duly executed and delivered by such Borrower and constitute the legal, valid and binding obligation of such Borrower, enforceable in accordance with its terms. 4 (b) The execution, delivery and performance by such Borrower of this Amendment and any other agreements or instruments required hereunder have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability to such Borrower, or the articles of incorporation or by-laws of such Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which such Borrower is a party or by which it or its properties may be bound or affected. (c) All of the representations and warranties contained in Article V of the Credit Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date. 10. REFERENCES. All references in the Credit Agreement to "this Agreement" shall be deemed to refer to the Credit Agreement as amended hereby; and any and all references in the Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. 11. NO OTHER WAIVER. Except as otherwise provided in Section 5 of this Amendment, the execution of this Amendment and the acceptance of all other agreements and instruments related hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit Agreement or a waiver of any breach, default or event of default under any Security Document or other document held by the Lender, whether or not known to the Lender and whether or not existing on the date of this Amendment. 12. RELEASE. The Borrowers, and each Subordinated Creditor signing the Acknowledgment and Agreement of Subordinated Creditors set forth below, hereby absolutely and unconditionally release and forever discharge the Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrowers or each Subordinated Creditor has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. 13. COSTS AND EXPENSES. The Borrowers hereby reaffirm their agreement under the Credit Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the Lender in connection with the Loan Documents, including without limitation all reasonable fees and disbursements of 5 legal counsel. Without limiting the generality of the foregoing, the Borrowers specifically agree to pay all fees and disbursements of counsel to the Lender for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto. The Borrowers hereby agree that the Lender may, at any time or from time to time in its sole discretion and without further authorization by the Borrowers, make a loan to the Borrowers under the Credit Agreement, or apply the proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and expenses and the fee required under Section 6 of this Amendment. 14. MISCELLANEOUS. This Amendment and the Acknowledgment and Agreement of Subordinated Creditors may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument. [Signatures on the next page] 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. WELLS FARGO BANK, NATIONAL ASSOCIATION By /s/ Phillip Goessler --------------------------------------------- Phillip Goessler --------------------------------------------- Its Vice President EMRISE CORPORATION By /s/ Carmine T. Oliva --------------------------------------------- Carmine T. Oliva --------------------------------------------- Its President and Chief Executive Officer EMRISE ELECTRONICS CORPORATION By /s/ Carmine T. Oliva --------------------------------------------- Carmine T. Oliva --------------------------------------------- Its Chief Executive Officer RO ASSOCIATES INCORPORATED By /s/ Carmine T. Oliva --------------------------------------------- Carmine T. Oliva --------------------------------------------- Its Chief Executive Officer CXR LARUS CORPORATION By /s/ Carmine T. Oliva --------------------------------------------- Carmine T. Oliva --------------------------------------------- Its Chief Executive Officer S-1 ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATED CREDITORS The undersigned, each a subordinated creditor of Emrise Corporation, Emrise Electronics Corporation, RO Associates Incorporated, and CXR Larus Corporation (collectively, the "Borrowers") to Wells Fargo Bank, National Association (the "Lender"), acting through its Wells Fargo Business Credit operating division, pursuant to a Subordination Agreement to which it is a party dated December 1, 2006 (each, a "Subordination Agreement"), hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including without limitation the release set forth in Section 11 of the Amendment) and execution thereof; (iii) reaffirms all obligations to the Lender pursuant to the terms of such Subordination Agreement; and (iv) acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Loan Documents and any indebtedness or agreement of the Borrowers, or enter into any agreement or extend additional or other credit accommodations, without notifying or obtaining the consent of the undersigned and without impairing the obligations of the undersigned under such Subordination Agreement. __________________________________ NOEL MCDERMOTT, trustee of the Noel C. McDermott Revocable Living Trust dated December 18, 1995 ___________________________________ WARREN P. YOST, co-trustee Under Declaration of Trust dated March 9, 1988 ___________________________________ GAIL A. YOST, co-trustee Under Declaration of Trust dated March 9, 1988 S-1 -----END PRIVACY-ENHANCED MESSAGE-----