07/21/2025 | Press release | Distributed by Public on 07/21/2025 04:01
Item 1.01 Entry Into a Material Definitive Agreement
On July 15, 2025, ZRCN, Inc. (the "Company"), and its wholly owned subsidiary, Zircon Corporation ("Zircon"), and its affiliates, Zircon de Mexico, S.A. de C.V. and Zircon Corporation Ltd. (collectively the "Affiliates"), entered into a forbearance agreement and first amendment to Credit Agreement (the "Forbearance Agreement") with FGI Worldwide LLC, as Agent for the lender ("FGI") amending, modifying and other wise affecting that certain Revolving Credit Agreement, dated May 31, 2024 (the "Credit Agreement"). As previously reported on a Current Report on Form 8-K, the Company is in default of certain of its obligations under the Credit Agreement, which defaults include non-compliance with its Fixed Cost Coverage Ratio covenant (as defined in the Credit Agreement) and one additional non-financial covenant.
Pursuant to the Forbearance Agreement, the Agent has agreed to forbear from exercising any of its rights and remedies arising under the Credit Agreement and applicable law as a result of the occurrence and continuance of certain specified existing events of default until the earlier of (a) February 28, 2026 and (b) the date on which any Termination Event (as defined in the Forbearance Agreement) occurs (the "Forbearance Period"). The Forbearance Agreement, among other things: (i) permits the Company to not comply with its Fixed Cost Coverage Ratio covenant until the end of the Forbearance Period, (ii) increases the Revolving Interest Rate (as defined in the Credit Agreement) from 3.0% to 3.3%, (iii) increases the Management Fee (as defined in the Credit Agreement) from 0.2% to 0.3%, (iv) requires the Company to prepare and deliver to Agent a budget on a weekly basis, (v) requires the Company to enter into a payment plan with its Key Supplier (as defined in the Forbearance Agreement), (vi) requires the Company to maintain certain minimum consolidated EBITDA through the Forbearance Period, (vii) requires the Company to use commercially reasonable efforts to contribute $2,000,000 to the capital of Zircon on or prior to February 28, 2026, which amounts shall be held in a Blocked Account (as defined in the Credit Agreement), and (viii) requires Zircon to engage the services of a third party consultant to advise on all aspects of the business, operations and properties of the Company and Zircon within 21 days of the date of execution of the Forbearance Agreement.
The description of the Forbearance Agreement in this Current Report on Form 8-K is a summary and is qualified in its entirety by reference to the complete terms of the Forbearance Agreement included therein. The Forbearance Agreement is filed hereto as Exhibit 10.1 and is incorporated by reference herein.