Item
1.01. Entry into a Material Definitive Agreement.
Loan
Agreement
On
July 29, 2022, Greystone Logistics, Inc. (“Greystone Logistics”), Greystone Manufacturing, L.L.C. (“Greystone Manufacturing,”
and together with Greystone Logistics, the “Borrowers”) and International Bank of Commerce (the “Lender”) entered
into an Amended and Restated Loan Agreement (the “IBC Loan Agreement”). Greystone Manufacturing
is a wholly-owned subsidiary of Greystone Logistics.
The
IBC Loan Agreement provides for the Lender to make to the Borrowers (i) a term loan in the amount of $7,854,707.54 to consolidate all
existing term loans in the aggregate amount of $2,669,891.67 with Lender, extend credit in the amount of $3,271,986.98 to pay
off a note payable to Robert B. Rosene, Jr. and extend additional credit to fund the purchase in the amount of $1,912,828.89 of the equipment
subject to the iGPS Logistics, LLC, leases and (ii) an advancing term loan facility whereby Greystone may obtain advances up to the aggregate
amount of $7,000,000 (items i and ii referred to collectively as “Term Loans”) (iii) a renewal of the revolving loan
with an increase of $2,000,000 (the “Revolving Loan”). The exact amount which can be borrowed under the Revolving Loan from
time to time is dependent upon the amount of the borrowing base but can in no event exceed $6,000,000.
The
Revolving Loan bears interest at the higher per annum rate of (i) the New York Prime Rate, plus 0.5%, and (ii) 4.5%. The Borrowers are
required to pay all interest accrued on the outstanding principal balance of the Revolving Loan beginning August 29, 2022 and continuing
on the 29th of each month thereafter until July 29, 2024. The Borrowers are required to pay the outstanding principal balance of the
Revolving Loan on July 29, 2024. Any principal on the Revolving Loan that is prepaid by the Borrowers may be reborrowed by the Borrowers.
The
Term Loans bear interest at the higher per annum rate of (i) the New York Prime Rate, plus 0.5%, and (ii) 4.5%. The Borrowers are required
to make equal payments of principal and interest in an amount sufficient to amortize the principal balance of the Term Loan over seven
years, commencing on August 29, 2022 and continuing on the 29th day of each month thereafter until July 29, 2027.
The
IBC Loan Agreement requires the Borrowers to pay aggregate fees totaling $35,452.45 to the Lender on July 29, 2022.
The
IBC Loan Agreement includes customary representations and warranties and affirmative and negative covenants. Some of the noteworthy covenants
include (i) requiring the Borrowers to maintain a debt service coverage ratio of 1:25 to 1:00 and a funded debt to EBIDA ratio of 3:00
to 1:00, (ii) subject to certain exceptions, limiting the Borrowers’ combined capital expenditures on fixed assets to $2,000,000
per year other than those expenditures for equipment additions to meet and fulfill customer requirements or designs, (iii) prohibiting
Greystone Logistics, without the Lender’s prior written consent, from declaring or paying any dividends, redemptions, distributions
and withdrawals (as applicable) with respect of its equity interests, other than distributions to holders of its preferred stock in an
amount not to exceed $500,000 in any fiscal year, (iv) subject to certain exceptions, prohibiting the incurrence of additional indebtedness
by the Borrowers, and (v) requiring the Borrowers to cause, permit or suffer any change of control. The foregoing list of covenants is
not exhaustive and there are several other covenants contained in the IBC Loan Agreement.
The
IBC Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts
owing under the IBC Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements,
bankruptcy and similar events, the death of a guarantor, certain material adverse changes relating to a Borrower or guarantor, certain
judgments or awards against a Borrower, or government action affecting a Borrower’s or guarantor’s ability to perform under
the IBC Loan Agreement or the related loan documents. Among other things, a default under the IBC Loan Agreement would permit the Lender
to cease lending funds under the IBC Loan Agreement and require immediate repayment of any outstanding loans with interest and any unpaid
accrued fees.
The
IBC Loan Agreement is secured by a lien on substantially all of the assets of the borrowers. Kruger and Rosene have provided a combined
limited guaranty of the Borrowers’ obligations under the IBC Loan Agreement, with such guaranty for Kruger being limited to 32.4%
of outstanding debt to IBC and for Rosene the amount of $3,500,000 decreasing in an amount equal to principal payment on the Term Loans
(the “Guaranties”).
The
IBC Loan Agreement, the Promissory Note evidencing the Revolving Loan and the Promissory Notes evidencing the Term Loans (collectively,
the “Loan Documents”) are filed as exhibits to this Current Report on Form 8-K and incorporated herein by reference. The
Loan Documents have been filed in order to provide investors with information regarding their terms. The Loan Documents are not intended
to provide any other factual information about Greystone Logistics or the other parties to the Loan Documents or any of their respective
subsidiaries or affiliates. The foregoing description of the Loan Documents is not complete and is subject to and qualified in its entirety
by reference to the full text of the Loan Documents. The representations, warranties and covenants contained in the Loan Documents may
be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors
are not third-party beneficiaries of the Loan Documents and should not rely on the representations, warranties and covenants contained
therein, or any descriptions thereof, as characterizations of the actual state of facts or conditions of Greystone Logistics.