BEAVERTON, OR -- On January 9, 2017, ESI Leasing, LLC ("ESI Leasing"), a wholly owned subsidiary of Electro Scientific Industries, Inc. (the "Company"), entered into a loan agreement (the "Loan Agreement") with First Technology Federal Credit Union (the "Lender").

The Loan Agreement provides for a term loan from the Lender to ESI Leasing in the principal amount of $14,000,000 (the "Loan").

In connection with the Loan, the Company contributed to ESI Leasing the real property, improvements and related property located at 13900 and 14000 NW Science Park Drive, Portland, Oregon 97229 (the "Property"), which is where the Company's headquarters and principal executive offices are located. ESI Leasing executed a Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing (the "Deed of Trust") pursuant to which ESI Leasing granted to WFG National Title Insurance Company, as trustee, for the benefit of the Lender, a security interest in all or substantially all of ESI Leasing's assets, including the Property; buildings, other improvements, and fixtures located on the Property; and related real and personal property, including the Lease and other leases and accounts related to the Property.

In addition, in connection with the Loan, on January 9, 2017, ESI Leasing and the Company entered into a Lease (the "Lease") pursuant to which ESI Leasing leased the Property to the Company. The lease is a "net" lease and provides, among other things, that the Company shall (i) pay monthly base rent (ii) pay real property taxes and assessments, liability and property insurance premiums, and utility expenses with respect to the Property, and (iii) keep the Property in good working repair, operating condition, working order and appearance, and make all necessary repairs and replacements necessary to that end, at the Company's expense.

The interest rate of the Loan is fixed at 4.75% per annum, except that it may be increased if certain covenants under the Loan Agreement are not satisfied and after and during the continuation of an "Event of Default" as defined in the Loan Agreement. The loan amortizes over a period of approximately 20 years, but the maturity date of the loan is January 1, 2027, meaning that, if ESI Leasing does not prepay or refinance the Loan, a significant portion of the principal of the Loan will become due on January 1, 2027. ESI Leasing will pay monthly principle and interest payments on the Loan totaling annual amount $1,085,802.

The Loan Agreement provides that ESI Leasing and the Company must comply with certain financial covenants, including (among others) that: (i) ESI Leasing must maintain a "Debt Service Coverage Ratio" (as defined in the Loan Agreement) and (ii) ESI Leasing and the Company shall, on a combined basis, maintain "Liquid Assets" (as defined in the Loan Agreement) in the amount of $15,000,000, calculated on a quarterly basis.

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