LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is entered into as of the 31st day of
December, 1997, by and between Photran Corporation, a Minnesota corporation,
whose address is 00000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter
referred to as the "Borrower") and Community National Bank, a national banking
corporation, whose address is 00 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxx 00000
(hereinafter referred to as the "Lender").
The Borrower has requested the Lender to make a loan (hereinafter referred
to as the "Loan") to the Borrower for business purposes, and the Lender is
willing to make such a Loan subject to the terms and conditions of this
Agreement.
NOTE AND INTEREST RATE
The note shall be for a maximum principal amount of Eight Hundred Thirty
Three Thousand Dollars ($833,000.00) ("Note"). The Note shall bear multiple
advance and open end features. In no event shall an advance be made under the
Note at a later date than November 27, 1998.
Interest shall accrue on the Note at the rate of ten and one-half percent
(10.50%) per annum. The interest rate shall be fixed for the term of the Note
and shall be calculated on a 360 day year basis.
CONDITIONS OF LENDING
The Borrower shall continue to comply with all agreements and conditions
contained in this Agreement, the Loan Documents and any other document executed
in connection with the Loan.
The obligation of the Lender to make the Loan to the Borrower is subject to
the condition that the Lender shall have received on or before the date of such
Loan, each of the following documents or instruments, in a form and in substance
satisfactory to the Lender and to the Lender's counsel:
a. The Note, described above, executed by the Borrower;
b. Security Agreement, executed by the Borrower;
c. UCC-1 Financing Statement, executed by the Borrower;
d. Security Interest Clarification Letter, executed by Textron Financial
Corporation;
e. Security Interest Subordination Agreement, executed by Xxxxxx & Efron,
P.A.;
f. Lockbox Agreement, executed by the Borrower;
g. The U.S. Small Business Administration Authorization and Loan
Agreement, executed by Borrower (collectively the "Loan Documents");
and
h. Security interest estoppel letter from Xxxxxx Xxxx.
The initial advance and any future advances on the Loan shall be permitted,
upon Lender approval and provided that no default exists under and Borrower is
in full compliance with this Agreement and the Loan Documents, subject to the
following terms and conditions:
a. Requested advance is less than seventy-five percent (75%) of export
purchase order which is supported by either an irrevocable letter of
credit assigned to Lender or export credit insurance; and
b. Requested advance does not exceed aggregate limit of Eight Hundred
Thirty-Three Thousand Dollars ($833,000.00); and
c. Sufficient collateral exists, subject to the borrowing base
certificate which is attached as Exhibit "A" ("Borrowing Base"), so
that the collateral balance exceeds the outstanding loan balance plus
the requested advance.
ISSUANCE OF LETTERS OF CREDIT
Subject to the Borrowing Base and so long as in doing so Borrower's
indebtedness to Lender under the Note together with all Letters of Credit issued
on Borrower's behalf do not exceed $833,000.00, Borrower may request and Lender
shall issue letters of credit on Borrower's behalf. As a further condition
precedent, Borrower shall execute individual applications for each requested
Letter of Credit.
FINANCIAL STATEMENTS AND BORROWER WARRANTIES
The Lender has relied upon financial statements prepared by and on behalf
of the Borrower in extending this Loan. Borrower warrants that the financial
statements and supporting schedules are true and correct to the best of their
knowledge and fairly represents their financial condition today.
Notwithstanding the foregoing, Lender acknowledges that it has been advised by
Borrower that Borrower's financial statements may contain certain misstatements
about the financial condition and results of operations of the Borrower. Lender
acknowledges that it has been provided with proposed changes to the financial
statements which statements are being reviewed by Borrower's auditors. To the
best of Borrower's knowledge, the financial statements, once revised as proposed
by Borrower, will in all material respects fairly present the financial
condition and the results of operations of the Borrower for the periods
described therein.
The Borrower warrants that they own the collateral and that it is free and
clear of all liens and encumbrances except as disclosed to the Lender. Except
for loan agreements by and between Xxxxxx Xxxx, NBD Equipment Finance, Inc. and
Borrower, the Borrower warrants that they are not in default on other loans or
loan agreements with third parties and that all federal, state and local tax
returns have been filed and all taxes paid, as required. The Borrower agrees to
execute all other
supporting loan documents which may from time to time be required to perfect or
maintain the Lender's rights to repayment and to the collateral pledged to
secure the Loan. Whenever Borrower obtains an advance supported by an
irrevocable letter of credit, such advance shall constitute Borrower's absolute
assignment to Lender of the subject irrevocable letter of credit. Borrower
agrees that until all indebtedness has been paid to the Lender, they shall:
a. Comply with the terms and conditions of this Agreement and all Loan
Documents which specifically include but are not limited to the
Authorization and Loan Agreement by and between Lender, Photran
Corporation and the U.S. Small Business Administration dated December
18, 1997;
b. Allow the Lender to inspect the collateral and Borrower's books and
records periodically as requested;
c. Maintain the primary payroll account for Borrower with the Lender; and
d. Maintain an operating account for Borrower with the Lender.
EVENTS OF DEFAULT
Borrower understands that the Lender may declare the entire debt due and
payable should the Borrower:
a. Fail to pay principal, interest and other charges when due under the
Note;
b. Materially breach any agreement contained in this Agreement or any
Loan Document;
c. An event of default is declared and remaining continuing under any
other financing arrangement Borrower has with a third party which is
secured in any way by any assets of Borrower, and such third party has
exercised or notified Lender of its intent to exercise any of its
remedies against Borrower by reason of such event of default;
d. Represent to Lender information that is materially false; or
e. File a petition in Bankruptcy or take other steps evidencing
insolvency (whether in the equity sense or the bankruptcy sense).
Where applicable, Borrower has an affirmative duty to notify Lender the same day
Borrower has actual knowledge of a default as described above.
REMEDIES AND WAIVER
All of the Lender's rights hereunder are cumulative and shall be in
addition to all rights granted to the Lender by law, and nothing herein shall be
deemed to be a limitation upon any of the Lender's rights granted by law or in
any Loan Document. Failure of the Lender to exercise any right
or power under this Agreement or any Loan Document shall not constitute a waiver
of the Lender's rights to declare the debt immediately due and payable or to
institute or pursue collection thereof. Nothing in this Agreement shall be
deemed a waiver or prohibition of Lender's right of a banker's lien, offset or
counterclaim, which right the Borrower hereby grants Lender.
ATTORNEYS' FEES
The Borrower promises to pay all costs of collection, including but not
limited to, reasonable attorney's fees paid or incurred by the Lender on account
of the enforcement or interpretation of Lender's rights under this Agreement or
any Loan Document whether or not suit is filed with respect thereto and whether
or not such cost or expense is paid or incurred or to be paid or incurred prior
to or after the entry of judgment or for the pursuance of, or defense of, any
appellate procedure.
CONSISTENCY
In the event that any of the terms and provisions of this Agreement are
inconsistent with any of the terms and provisions as contained in any of the
Loan Documents, Lender may enforce such terms and provisions which it, in its
sole discretion, deems to best protect its interests, and, the Borrower waives
any objections thereto despite the existence of any such inconsistency.
ACCEPTANCE
The Borrower's signature below indicates their approval of all of the terms
in this Agreement. This Agreement shall become a contract between the Lender
and Borrower, with the Loan Documents being incorporated by reference and
becoming a part of the contract.
PHOTRAN CORPORATION
(a Minnesota corporation)
By: /s/ Xxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx
Its Chief Financial Officer
COMMUNITY NATIONAL BANK
(a national banking corporation)
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx
Its Commercial Loan Officer
EXHIBIT "A"
BORROWING BASE CERTIFICATE
FOR: Photran Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
TO: Community National Bank
25 Bridge Square, P. O. Xxx 000
Xxxxxxxxxx, XX 00000
Pursuant to a Loan Agreement between Community National Bank and the undersigned
dated December 31, 1997, the undersigned certifies that as of ________________,
it has export purchase orders to be used for draws which are supported by the
following accounts receivable and inventory and that all of said accounts
receivable and export purchase orders are 100% covered by irrevocable letters of
credit and/or credit insurance and that any draw request is in compliance with
the Loan Agreement.
1. Accounts receivable supported with an irrevocable letter
of credit assigned to Bank or export credit insurance less
than 75 days past due
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2. Less: Discount of 25% of accounts receivable (25% X #1) ( )
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3. Total available accounts receivable (#1 - #2)
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4. Inventory
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5. Less: Discount of 50% of inventory (50% X #4) ( )
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6. Total available inventory (#4 - #5)
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7. Total available borrowing base (#3 + #6)
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8. Less: Loan balance ( )
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9 Subtotal available borrowing base (#7 - #8)
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10. Less: Outstanding letters of credit ( )
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11. Available credit (#9 - #10)
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The loan balance does not exceed total available borrowing base and any
requested draws do not exceed the available credit. The undersigned is not in
default under this borrowing base or any other covenants of the Loan Agreement.
PHOTRAN CORPORATION
(a Minnesota corporation )
By:
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Xxxx Xxxxxx
Its Chief Financial Officer
