Revolving Line of Credit Our revolving line of credit (“loan facility”), amended and effective October 8, 2009, is provided by The David E. Chymiak Trust Dated December 15, 1999 (the “Trust”). The Trust is controlled by David E. Chymiak who is a beneficial owner of approximately 8.5% of our outstanding common stock. The loan facility provides a maximum credit limit of $4,250,000 excluding any accrued unpaid interest and bears interest at the rate of eight percent (8.0%) per annum. At November 28, 2014, the outstanding balance on the loan facility was at the maximum credit limit of $4,250,000 and accrued unpaid interest amounted to approximately $1,889,000. Subsequent to November 28, 2014, WCI and the Trust entered into a Deed in Lieu Agreement whereby WCI transferred title of its land, including 4.4 acres of undeveloped land, and its 40,000 square foot building and related improvements (“properties”) to the Trust as payment against the outstanding balances owed under the WEGENER CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 11 loan facility. The fair market value of the properties was $3,480,000 (three million four hundred eighty thousand dollars). As a result, the outstanding balance and the maximum credit limit on the loan facility was reduced from $4,250,000 to $770,000. In addition, as part of the property transfer, WCI and the Trust entered into a triple net lease agreement for the building facility. The initial term of the lease agreement is two years with an option to renew for up to three consecutive renewal terms of one year each. Monthly rental payments shall be $15,000 per month during the initial term and $18,000 per month during any renewal term. At December 29, 2014, the outstanding balance on the line of credit remained at $770,000. All principal and interest shall be payable in U.S. dollars or, upon mutual agreement of the parties decided in good faith at the time payment is due, other good and valuable consideration. The loan facility is secured by a first lien on substantially all of WCI’s assets, including at November 28, 2014, land and buildings, and is guaranteed by Wegener Corporation. The loan facility matures on April 7, 2015, and automatically renews for successive twelve (12) month periods provided, however, the Trust may terminate the loan facility, as further amended August 26, 2013, by providing a not more than ten (10) day written notice of termination at any time. Principal and interest shall be payable upon the earlier of the maturity date, an event of default as provided by the loan facility, or not more than 10 days following the date on which the Trust provides written notice to terminate the agreement. In the event of a notice of termination of our loan facility, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan. There is no assurance that such financing would be available or, if available, that we would be able to complete financing on satisfactory terms. Under the terms of the facility’s debt covenants we are required to retain certain executive officers and we are precluded from paying dividends. At November 28, 2014, we were in compliance with the debt covenants.
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