EXHIBIT 10 (BB)
RESTATED LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of August 31, 2001, by and
between M-Tron Industries, ("BORROWER"), a Delaware corporation, and First
National Bank of Omaha, a national banking association with principal business
offices in Omaha, Nebraska ("BANK").
This LOAN AND SECURITY AGREEMENT replaces the previously executed RESTATED
REVOLVING LOAN AND SECURITY AGREEMENT dated April 30, 2000.
WITNESSETH:
BACKGROUND. The BANK will provide the following credit facilities
to BORROWER: a TERM LOAN for $1,200,000.00 and a REVOLVING LOAN for
$5,000,000.00.
NOW, THEREFORE, in consideration of the promises herein contained, and
each intending to be legally bound thereby, the parties agree as follows:
Section I. Definitions as used herein:
1. "Accounts", "Chattel Paper", "Commercial Tort Claims", "Contracts",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Health-care-insurance" receivable/account", "Instruments", "Inventory",
"Investment Property", "Letter-of-credit right" and "Payment intangible",
shall have the same meanings as are given to those terms in the Uniform
Commercial Code as presently adopted and in effect in the State of
Nebraska. The term "Instruments" shall also include all forms of chattel
paper, including chattel paper involving related software as well as
electronic chattel paper and tangible chattel paper.
2. Accounting. Accounting terms used and not otherwise defined in this
AGREEMENT have the meanings determined by, and all calculations with
respect to accounting or financial matters unless otherwise provided
herein shall be computed in accordance with, GAAP.
3. "AFFILIATE" means as to any PERSON, each other PERSON that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or under common control with, such PERSON.
4. "AGREEMENT" means this Agreement, as the same may from time to time be
amended or supplemented.
5. "BORROWING BASE" means, at any time, the amount computed as Total
Borrowing Base on the BORROWING BASE CERTIFICATE most recently
delivered to, and accepted by, the BANK in accordance with this AGREEMENT,
and equal to the lesser of:
A. $5,000,000.00 or
B. (i)Eighty (80%) of ELIGIBLE ACCOUNTS of the BORROWER, (ii)plus fifty
per cent (50%) of the Inventory of BORROWER at cost; provided
however, no amount in excess of $2,400,000.00 attributable to
INVENTORY shall be included in Borrowing Base Certificate.
6. "BORROWING BASE CERTIFICATE" means a fully completed certificate in the
form of Exhibit I.6 to this AGREEMENT certified by the chief financial
officer of the BORROWER to be correct and delivered to, and accepted by,
the BANK.
7. "BUSINESS DAY" means other than a Saturday, a Sunday, or a day on which
commercial banks in Nebraska are authorized to close.
8. "CLOSING" has the meaning given to such term in Section III.
9. "COLLATERAL" has the meaning given to such term in Section IV.
10. "COLLATERAL DOCUMENTS" means the NOTE, financing statements, security
agreement, pledge agreements, and other documents required by BANK as set
forth herein, together with any real estate mortgage or deed of trust
documents used in this transaction.
11. "ELIGIBLE ACCOUNT" means, at any time, an Account that conforms and
continues to conform to the following conditions:
A. The Account arose from a bona fide outright sale of Goods by the
BORROWER or from services performed by the BORROWER, and such Goods
have been shipped to the appropriate account debtors or their
designees (or the sale has otherwise been consummated), or the
services have been performed for the appropriate account debtors;
B. The Account is based upon an enforceable order or contract, written
or oral, for Goods shipped or held, or for services performed, and
the same were shipped or held, or performed in accordance with such
order or contract;
C. Title of the BORROWER to the Account is absolute and is not subject
to a prior assignment, claim, lien, or security interest.
D. The amount shown on the books of the BORROWER and on any invoice or
statement delivered to the BANK is owing to the BORROWER, less any
partial payment that has been made thereon by anyone;
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E. The Account shall be eligible only to the extent that it is not
subject to any claim of reduction, counterclaim, set-off,
recoupment, or any claim or credits, allowances, or adjustments by
the Account debtor because of returned, inferior, or damaged Goods
or unsatisfactory services, or for any other reason;
F. The Account debtor has not returned or otherwise notified the
BORROWER of any dispute concerning, or claimed nonconformity of, any
of the Goods or services from the sale of which the Account arose;
G. The Account is due and payable not more than 60 days from the
statement date, and the statement must be dated contemporaneously
with the shipment of goods sold or services performed;
H. The Account or any portion thereof is not more than 60 days past due
nor outstanding more than 60 days from the date of the invoice
therefor;
I. If more than ten per cent (10%) of the invoices to a particular
account debtor are ineligible, then all invoices to such account
debtor shall become ineligible for borrowing purposes;
J. The BORROWER has not received any note, trade acceptance, draft or
other Instrument with respect to, or in payment of, the Account, nor
any Chattel Paper with respect to the Goods giving rise to the
Account, unless, if any such Instrument or Chattel Paper has been
received, the BORROWER immediately notifies the BANK and, at the
latter's request, endorses or assigns and delivers the same to BANK;
K. The BORROWER has not received any notice of the filing of a petition
in bankruptcy or insolvency laws by or against, the account debtor.
Upon the receipt by the BORROWER of any such notice, it will
immediately give the BANK written advice thereof;
L. The account debtor is not a subsidiary or other AFFILIATE of the
BORROWER; and
M. The BANK has not deemed such account ineligible because of
uncertainty about the credit worthiness of the account debtor or
because the BANK otherwise reasonably considers the collateral value
thereof to the BANK to be impaired or its ability to realize such
value to be insecure.
In addition to the foregoing, ELIGIBLE ACCOUNT shall mean any amount
receivable by the BORROWER under any insurance policy covering Goods which have,
within the preceding forty-five (45) days, been damaged or destroyed by fire or
other direct casualty loss, provided that a claim therefor has been made in
compliance with such insurance policy, to the extent that such claim has not
been in any way denied or contested by the insurer and provided that such
insurer, if such insurer were an account debtor of the BORROWER, would be a
qualified account debtor under this paragraph.
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In the event of any dispute, under the foregoing criteria, about whether
an Account is or has ceased to be an ELIGIBLE ACCOUNT the decision of the BANK
shall control.
12. "EVENT OF DEFAULT" has the meaning provided for in Section VII.
13. "FINANCIAL STATEMENTS" means the balance sheet of the BORROWER as of
December 31, 2000 and statements of income, stockholders' equity, and
statement of cash flow, and notes thereto, of the BORROWER for the years
or, as appropriate, month ended on such dates as audited by independent
certified public accountants of recognized standing to present fairly the
consolidated financial position and results of operations of the BORROWER
at such dates and for such periods in accordance with GAAP.
14. "GAAP" means generally accepted accounting principles applied consistently
as was done in the preparation of the FINANCIAL STATEMENTS with such
changes or modifications hereto as may be approved in writing by the BANK.
15. "INDEBTEDNESS" means, as to the BORROWER, all items of indebtedness,
obligation or liability, whether matured or unmatured, liquidated or
unliquidated, direct or contingent, joint or several.
16. "INTELLECTUAL PROPERTY" means all of the BORROWER's now owned or
subsequently acquired or developed designs, patents, patent rights (and
applications therefor), trademarks and registrations (and applications
therefor), trade names, inventions, copyrights, software and computer
programs, license rights, trade secrets, methods, processes, know how,
drawings, specifications, descriptions, and all memoranda, notes, and
records with respect to any research and development, whether now owned or
subsequently acquired or developed by the BORROWER and whether in tangible
or intangible form.
17. "LAWS" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision
or agency thereof, or of any court or similar entity established by any
thereof.
18. "LOAN TERMINATION DATE" means the earliest to occur of the following: (i)
as to the REVOLVING LOAN May 31, 2002; as to the TERM LOAN September 30,
2004, (ii) and the date the OBLIGATIONS are accelerated pursuant to this
AGREEMENT, and (iii) the date BANK receives (a) notice in writing from
BORROWER of BORROWER's election to terminate this AGREEMENT and (b)
indefeasible payment in full of the OBLIGATIONS, or such other date or
dates as may later be agreed to by BANK and BORROWER in a written
amendment to this AGREEMENT.
19. "NOTE" or "NOTES" means any and all of the promissory notes and letter of
credit agreements referred to in Section II.
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20. "OBLIGATIONS" means the obligation of the BORROWER:
A. To pay the principal of, and interest on, any promissory note in
accordance with the terms thereof and to satisfy all of its other
liabilities to the BANK, whether hereunder or otherwise, whether now
existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions,
modifications, renewals thereof, and substitutions therefor and
including, but not limited to, any obligations under letter of
credit agreements;
B. To repay to the BANK all amounts advanced by the BANK hereunder or
otherwise on behalf of the BORROWER, including, but without
limitation, advances for principal or interest payments to prior
secured parties, mortgagees, or licensors, or taxes, levies,
insurance, rent, or repairs to, or maintenance or storage of, any of
the COLLATERAL; and
C. To reimburse the BANK, on demand, for all of the BANK's expenses and
costs, including the reasonable fees and expenses of its counsel, in
connection with the preparation, administration, amendment,
modification, or enforcement of this AGREEMENT and the documents
required hereunder, including, without limitation, any proceeding
brought or threatened, to enforce payment of any of the OBLIGATIONS
referred to in the foregoing Paragraphs A and B.
21. "PERMITTED LIENS" means:
A. Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business that are not yet delinquent;
B. Pledges or deposits made in the ordinary course of business to
secure payment of workers' compensation, or to participate in any
fund in connection with workers' compensation, unemployment
insurance, old-age pensions or other social security programs;
C. Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable;
D. Liens in favor of the BANK; and
E. Any liens identified on Exhibit I.19.E attached hereto.
22. "PERSON" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
court, or government or political subdivision or agency thereof.
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23. "RECORDS" means correspondence, memoranda, tapes, discs, papers, books and
other documents, or transcribed information of any type, whether expressed
in ordinary or machine readable language.
Section II. THE LOANS.
1. TYPES OF CREDIT. The BANK will provide the following credit facilities to
BORROWER: a TERM LOAN and a REVOLVING LOAN. Each of these facilities refer
to the LOANS described in this Section II, and are collectively and
individually referred to herein as the "LOAN" or "LOANS".
2. TERM LOAN. BANK agrees to lend $1,200,000.00 to BORROWER pursuant to this
agreement (the "TERM LOAN").
A. THE NOTE. The TERM LOAN shall be evidenced by a NOTE having a stated
maturity on the LOAN TERMINATION DATE, in the form attached hereto
as Exhibit II.2.A. The NOTE shall specify the manner of principal
and interest payments and rate of interest accrued.
3. REVOLVING LOAN. BANK agrees to lend $5,000,000.00 to BORROWER pursuant to
this facility. BANK will credit proceeds of this revolving loan
("REVOLVING LOAN") to BORROWER'S deposit account with the BANK, bearing
number 26712880.
A. Subject to the terms hereof the BANK will lend the BORROWER, from
time to time until the LOAN TERMINATION DATE such sums in integral
multiples of $1,000.00 as the BORROWER may request by reasonable
same day notice to the BANK, received by the BANK not later than
11:00 A.M. of such day, but which shall not exceed in the aggregate
principal amount at any one time outstanding, $5,000,000.00 (the
"LOAN COMMITMENT"). The BORROWER may borrow, repay without penalty
or premium and reborrow hereunder, from the date of this AGREEMENT
until the LOAN TERMINATION DATE, either the full amount of the LOAN
COMMITMENT or any lesser sum which is $1,000.00 or an integral
multiple thereof. It is the intention of the parties that the
outstanding principal amount of the REVOLVING LOAN shall at no time
exceed the amount of the then existing BORROWING BASE and if, at any
time, an excess shall for any reasons exist, the full amount of such
excess, together with accrued and unpaid interest thereon as herein
provided, shall be immediately due and payable in full.
B. THE NOTE. The LOAN COMMITMENT shall be evidenced by a NOTE having
stated maturity on the LOAN TERMINATION DATE, in the form attached
hereto as Exhibit II.3.B. The NOTE shall specify the manner of
principal and interest payments and rate of interest accrual.
4. PAYMENT TO THE BANK AND COLLECTIONS.
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A. All sums payable to the BANK hereunder shall be paid directly to the
BANK in immediately available funds. The BANK shall provide the BORROWER
statements of all amounts due hereunder, which statements shall be considered
correct and conclusively binding on the BORROWER unless BORROWER notifies the
BANK to the contrary within thirty (30) days of its receipt of any statement
that it deems to be incorrect. Alternatively, at its sole discretion, the BANK
may charge against any deposit account, including the LOCKBOX CHECKING ACCOUNT
of the BORROWER all or any portion of any amount due hereunder. Lockbox checking
account is defined in paragraph B hereof.
B. COLLECTION OF ACCOUNTS AND LOCKBOX.
1. Accounts will be collected through direct lockbox
deposit by account debtors, pursuant to the provisions
of the COLLATERAL DOCUMENTS. BORROWER will take such
action with respect to the collection of Accounts and of
the proceeds thereof, as BANK may reasonably request.
2. BANK shall have the rights at any time or times
hereafter all the rights of a secured creditor holding a
valid, and indefeasibly perfected security interest in
accounts pursuant to the Nebraska Uniform Commercial
Code, as well as the rights conferred by the COLLATERAL
DOCUMENTS.
3. BORROWER hereby authorizes BANK to endorse, in the name
BORROWER, any item, howsoever received by BANK
representing payment on or other proceeds of any of the
COLLATERAL.
4. BORROWER covenants that all receipts of money on the
Accounts or any other payments of money to be received
by the BORROWER shall be directed to a lockbox to be
established at post xxxxxx xxx 000, Xxxxxxx, Xxxxx
Xxxxxx 00000 under the exclusive control of BANK, it
being the intention that all monies coming to the
BORROWER on account of any of the COLLATERAL shall be
directed to such lockbox, and thereafter deposited in a
checking account established for such purpose, herein
referred to as the LOCKBOX CHECKING ACCOUNT. BORROWER
agrees that all invoices or other instructions for
payment will bear a notation that payment must be made
to such lockbox number. Deposits in the LOCKBOX CHECKING
ACCOUNT shall be deemed payments directly to BANK and
all such deposits shall be the property of the BANK.
BORROWER covenants that it will perform the duties set
forth in the separate security agreement specified in
paragraph 4, thereof.
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5. For purposes of determining the amount of the
OBLIGATIONS, including, without limitation, the
computations of interest which may from time to time be
owing by BORROWER to BANK, the receipt of any check or
other item of payment by BANK shall not be treated as a
payment on account of the liabilities until such check
or other item of payment is actually paid in cash or
cash equivalent.
Section III. CONDITIONS PRECEDENT.
1. CERTAIN EVENTS. At the time of, and as a condition to, the CLOSING and
each disbursement of any part of the REVOLVING LOAN to be made by the BANK
at or subsequent to the CLOSING:
A. No EVENT OF DEFAULT shall have occurred and be continuing, and
no event shall have occurred and be continuing that, with the
giving of notice or passage of time or both, would be an EVENT
OF DEFAULT;
B. No material adverse change shall have occurred in the business
prospects, financial condition, or results of operations of
the BORROWER since the dates of the FINANCIAL STATEMENTS; and
C. All of the COLLATERAL DOCUMENTS shall have remained in full
force and effect.
Section IV. COLLATERAL SECURITY.
1. COMPOSITION OF THE COLLATERAL. The property in which a security interest
is granted pursuant to the provisions of Section IV.2. and IV.3. is herein
collectively called "COLLATERAL". The COLLATERAL, together with all other
property of the BORROWER of any kind held by the BANK, shall stand as one
general, continuing collateral security for all OBLIGATIONS and may be
retained by the BANK until all OBLIGATIONS have been satisfied in full.
This security agreement is intended by the parties to include all
OBLIGATIONS of BORROWER to BANK which have arisen in the past or which
arise in the future, regardless of form or purpose, including, without
limitation, loans for consumer, agricultural or business purposes;
OBLIGATIONS which are primary or secondary, absolute or contingent, sole
or joint; and credit evidenced by promissory notes, open accounts,
overdrafts or letters of credit.
2. RIGHTS IN PROPERTY HELD BY THE BANK. As security for the prompt
satisfaction of all OBLIGATIONS the BORROWER hereby assigns, transfers,
and sets over to the BANK all of its right, title and interest in and to,
and grants the BANK a lien on and a security interest in, all amounts that
may be owing, from time to time, by the BANK to the BORROWER in any
capacity, including, but without limitation, any balance or share
belonging to the BORROWER in any capacity, including, but without
limitation, any balance or share belonging to the BORROWER, or any deposit
or other account with the BANK, which lien and
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security interest shall be independent of, and in addition to, any right
of set-off that the BANK has under applicable LAWS or otherwise.
3. RIGHTS IN PROPERTY HELD EITHER BY THE BORROWER OR BY THE BANK. As further
security for the prompt satisfaction of all OBLIGATIONS, the BORROWER
hereby assigns to the BANK all of its right, title and interest in and to,
and grants the BANK a lien upon and a security interest in, all of the
following, wherever located, whether now owned or hereafter acquired,
together with all replacements therefore and proceeds (including without
limitation, insurance proceeds) and products thereof:
Accounts;
Chattel Paper;
Commercial Tort Claims;
Contracts;
Contract rights;
Documents;
Equipment;
Fixtures;
General Intangibles;
Goods;
Health-care-insurance receivables/accounts;
Instruments;
INTELLECTUAL PROPERTY;
Inventory;
Investment Property;
Letter-of-credit rights;
Payment intangibles;
Tangible chattel paper;
Rights as seller of Goods and rights to
returned or repossessed goods; and
All RECORDS pertaining to COLLATERAL
BORROWER may also be granting liens in real property by a separate deed of
trust, assignment or real estate mortgage. Such real estate constitutes
COLLATERAL, and the document granting BANK an interest in the real estate
constitutes a COLLATERAL DOCUMENT.
4. PRIORITY OF LIENS. The foregoing liens shall be first and prior liens
except for PERMITTED LIENS to PERSONS other than BANK.
5. FINANCING STATEMENTS.
A. The BORROWER will:
1. Join with the BANK in executing such Uniform Commercial
Code financing statements, (which, together with
amendments thereto and continuation statements thereof
are called "FINANCING
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STATEMENTS") in form satisfactory to the BANK as the
BANK, from time to time, may specify;
2. Pay, or reimburse the BANK for paying, all costs and
taxes of filing or recording the same in such public
offices as the BANK may designate; and
3. Take such other steps as the BANK, from time to time,
may direct, including the noting of the BANK's lien on
the COLLATERAL and on any certificates of title
therefor, all to perfect to the satisfaction of the BANK
the BANK's interest in the COLLATERAL.
B. In addition to the foregoing, and not in limitation thereof;
1. A carbon, photographic, or other reproduction of this
AGREEMENT shall be sufficient as a FINANCING STATEMENT
and may be filed in any appropriate office in lieu
thereof; and
2. To the extent lawful, the BORROWER hereby appoints the
BANK as its attorney-in-fact (without requiring the BANK
to act as such) to execute any financing statement in
the name of the BORROWER, and to perform all other acts
that the BANK deems appropriate to perfect and continue
its security interest in, and to protect and preserve,
the COLLATERAL.
Section V. REPRESENTATIONS AND WARRANTIES.
1. ORIGINAL. To induce the BANK to enter into this AGREEMENT, the BORROWER
represents and warrants to the BANK as follows:
A. The BORROWER is a corporation duly organized, validly existing, and
in good standing under the LAWS of the State of Delaware; the
BORROWER has no subsidiaries except for a $350,000.00 investment in
the BORROWER'S Hong Kong subsidiary; the BORROWER has the lawful
power to own its properties and to engage in the businesses it
conducts and is duly qualified and in good standing as a foreign
corporation in the jurisdictions wherein the nature of the business
transacted by it or property owned by it make such qualification
necessary; the states in which the BORROWER is qualified to do
business are disclosed to the BANK in writing; the addresses of all
places of business of the BORROWER are disclosed to the BANK in
writing; and the BORROWER has not been the surviving corporation in
a merger, acquired any business, or changed its principal executive
office within five (5) years and one (1) month prior to the date
hereof, nor acquired any assets from a transferor which remain
subject to a security interest granted by such transferor within one
(1) year prior to the date hereof, nor moved any COLLATERAL to its
present location from another State
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where it was subject to a security interest granted to another
entity, except as is set forth in an Exhibit hereto;
B. The BORROWER is not directly or indirectly controlled by, or acting
on behalf of, any PERSON which is an "Investment Company" within the
meaning of the Investment Company Act of 1940, as amended;
C. The BORROWER is not in default with respect to any of its existing
INDEBTEDNESS, and the making and performance of this AGREEMENT and
the COLLATERAL DOCUMENTS will not (immediately or with the passage
of time, the giving of notice, or both):
1. Violate the articles of incorporation or by-laws of the
BORROWER, or violate any laws or result in a default under any
contract, agreement, or instrument to which the BORROWER is a
party or by which the BORROWER or its property is bound; or
2. Result in the creation or imposition of any security interest
in, or lien or encumbrance upon, any of the assets of the
BORROWER except in favor of the BANK;
D. The BORROWER has the power and authority to enter into and perform
this AGREEMENT, the NOTES, and the COLLATERAL DOCUMENTS, and to
incur the obligations herein and therein provided for, and has taken
all actions necessary to authorize the execution, delivery, and
performance of this AGREEMENT, the NOTES, and the COLLATERAL
DOCUMENTS;
E. This AGREEMENT, the NOTES, and the COLLATERAL DOCUMENTS are, or when
delivered will be, valid, binding, and enforceable in accordance
with their respective terms;
F. There is no pending order, notice, claim, litigation, proceeding, or
litigation against or affecting the BORROWER, whether or not covered
by insurance, that would materially or adversely affect the
financial condition or business prospects of the BORROWER if
adversely determined;
G. The BORROWER has good and marketable title to all of its assets,
none of which is subject to any security interest, encumbrance or
lien, or claim of any third PERSON except for PERMITTED LIENS;
H. The FINANCIAL STATEMENTS, including any schedules and notes
pertaining thereto, have been prepared in accordance with GAAP, and
fully and fairly present the financial condition of the BORROWER at
the dates thereof and the results of operations for the periods
covered thereby, and there have been no material adverse changes in
the consolidated financial condition or business of the BORROWER
from December 31, 2000, to the date hereof;
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I. As of the date hereof the BORROWER has no material INDEBTEDNESS of
any nature, including but without limitation, liabilities for taxes
and any interest or penalties relating thereto except to the extent
reflected (in a footnote or otherwise) in the FINANCIAL STATEMENT or
as disclosed in, or permitted by, this agreement; and the BORROWER
does not know or have reasonable ground to know of any basis for the
assertion against it of any such INDEBTEDNESS as of the date of the
CLOSING;
J. Except as otherwise permitted herein, the BORROWER has filed all
federal, state, and local tax returns and other reports required by
an applicable LAWS to have been filed prior to the date hereof, has
paid or caused to be paid all taxes, assessments, and other
governmental charges that are due and payable prior to the date
hereof, and has made adequate provisions for the payment of such
taxes, assessments, or other charges accruing but not yet payable;
the BORROWER has no knowledge of any deficiency or additional
assessment in a materially important amount in connection with any
taxes, assessments, or charges not provided for on its books;
K. Except to the extent that the failure to comply would not materially
interfere with the conduct of the business of the BORROWER, the
BORROWER has complied with all applicable LAWS with respect to (1)
any restrictions, specifications, or other requirements pertaining
to products that it manufactures or sells or to the services it
performs; (2) the conduct of its business; and (3) the use,
maintenance, and operation of the real and personal properties owned
or leased by it in the conduct of its business;
L. No representation or warranty by or with respect to the BORROWER
contained herein or in any certificate or other document furnished
by the BORROWER pursuant hereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the
circumstances under which it was made;
M. Each consent, approval or authorization of, or filing, registration
or qualification with, any PERSON required to be obtained or
effected by the BORROWER in connection with the execution and
delivery of this AGREEMENT, any NOTE, and the COLLATERAL DOCUMENTS
or the undertaking or performance of any obligation hereunder or
thereunder has been duly obtained or effected;
N. All existing INDEBTEDNESS of the BORROWER: (1) for money borrowed,
or (2) under any security agreement, mortgage, or agreement covering
the lease by the BORROWER as lessee of real or personal property is
described in a writing delivered to BANK this date;
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O. Except as disclosed to the BANK in writing (1) the BORROWER has no
material leases, contracts, or commitments of any kind (including,
without limitation, employment agreements, collective bargaining
agreements, powers of attorney, distribution arrangements, patent
license agreements, contracts for future purchase or delivery of
goods or rendering of services, bonuses, pension, and retirement
plans accrued vacation pay, insurance and welfare agreements); (2)
to the best of BORROWER's knowledge, all parties to all such
material leases, contracts and other commitments to which the
BORROWER is a party have complied with the provisions of such
leases, contracts, and other commitments; and (3) to the best of
BORROWER's knowledge, no party is in default under any provisions
thereof and no event has occurred which, but for the giving of
notice or the passage of time, or both, would constitute a default;
P. The BORROWER has not made any agreement or taken any action which
may cause anyone to become entitled to a commission or finder's fee
as a result of or in connection with the making of this AGREEMENT;
Q. Any federal tax returns for all years of operation, including the
last tax year for BORROWER have been filed with the Internal Revenue
Service and have not been challenged;
R. Any Employee Pension Benefit Plans, as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), of the
BORROWER meet, as of the date hereof, the minimum funding standards
of 29 U.S.C. Sec. 1082 (Sec. 302 of ERISA), and no Reportable Event
or Prohibited Transaction as defined in ERISA, has occurred with
respect to any Employee Benefit Plans, as defined in ERISA, of the
BORROWER;
S. The liens and security interests created pursuant to Section IV of
this AGREEMENT, including any separate real estate liens granted in
connection herewith, are in all cases first and prior liens except
for PERMITTED LIENS;
T. BORROWER warrants (and this shall be a continuing warranty which
shall survive until all the OBLIGATIONS of BORROWER to BANK have
been fully satisfied) that it is in compliance with all federal,
state and local environmental laws and regulations and has obtained
all environmental permits necessary or appropriate to the conduct of
its business. There is not pending nor, to the best of the
BORROWER's knowledge after due inquiry, are there any threatened
environmental enforcement actions, suits or proceedings before any
court, tribunal or administrative body or official. Responsible
officers and agents of the BORROWER have made an extensive
investigation and have determined that the BORROWER has not, nor has
any former owner of real property occupied by BORROWER stored, used
or disposed of any toxic or hazardous substance on its properties or
transported any such substance to or from its properties in
violation of any presently existing or previously existing
13
laws, regulations or policies. The BORROWER will not store, use or
dispose of such substances on its properties.
2. SURVIVAL. All of the representations and warranties set forth in Section
V.1. shall survive until all OBLIGATIONS are satisfied in full and there
remain no outstanding commitments hereunder.
Section VI. COVENANTS OF THE BORROWER.
1. AFFIRMATIVE COVENANTS. The BORROWER does hereby covenant and agree with
the BANK that, so long as any of the OBLIGATIONS remain unsatisfied or any
commitments hereunder remain outstanding, it will comply at all times with
the following covenants:
A. The BORROWER will furnish the BANK:
1. Within thirty-five (35) days after the close of each monthly
accounting period in each fiscal year an income statement and
balance sheet of the BORROWER for such month in reasonable
detail, subject to normal year-end audit adjustments and
certified by the BORROWER's president or principal financial
officer to have been prepared in accordance with GAAP;
2. Within thirty-five (35) days after the end of each calendar
month, in such form and detail as shall be satisfactory to the
BANK, an aging, as of the end of such month, of (a) the then
ELIGIBLE ACCOUNTS, and (b) all other Accounts of the BORROWER,
certified by the president or chief financial officer of the
BORROWER to be complete and correct;
3. Each month (and at any additional time in the discretion of
the BANK or if any material deterioration in the BORROWING
BASE would be disclosed thereby) a BORROWING BASE CERTIFICATE
as of the end of such period. Each BORROWING BASE CERTIFICATE
shall be effective only as accepted by the BANK (and with such
revisions, if any, as the BANK may require as a condition to
such acceptance);
B. Contemporaneously with each monthly financial report required by the
foregoing paragraph, a certificate of the president or principal
financial officer of the BORROWER stating that he has individually
reviewed the provisions of this AGREEMENT and that a review of the
activities of the BORROWER during such monthly period, has been made
by him or under his supervision, with a view to determining whether
the BORROWER has fulfilled all its obligations under this AGREEMENT
and is not in default in the observance or performance of any of the
provisions
14
hereof or, if the BORROWER shall be so in default, specifying all
such defaults and events of which he may have knowledge;
C. Promptly after the sending or making available of filing of the
same, copies of all reports bearing on the financial condition of
BORROWER, proxy statements, and financial statements that the
BORROWER sends or makes available to its stockholders and all
registration statements and reports that the BORROWER files with the
Securities and Exchange Commission or any successor person;
D. The BORROWER will maintain its Inventory, Equipment, real estate,
and other properties in workable and operable condition and repair,
and will pay and discharge or cause to be paid and discharged, when
due, the cost of repairs to, or maintenance of, the same, and will
pay or cause to be paid in a timely manner all rental or mortgage
payments due on such real estate. The BORROWER hereby agrees that,
in the event it fails to pay or cause to be paid any such payment,
it will promptly notify the BANK thereof, and the BANK may, in its
discretion, do so and on demand be reimbursed therefor by the
BORROWER;
E. The BORROWER will maintain, or cause to be maintained, public
liability insurance (subject to a maximum of $10,000.00 in
deductibles) and fire and extended coverage insurance on all assets
that are of a character usually insured by corporations engaged in
the same or similar businesses, all in form and amount sufficient to
indemnify the BORROWER for 100% of the replacement value of any such
asset lost or damaged (subject to any deductible customary in the
BORROWER'S industry) or in an amount consistent with the amount of
insurance generally carried on comparable assets within the industry
and with such insurers rated A or higher by the latest rating
published by A.M. Best & Co. The BORROWER will cause all such
insurance policies to contain a standard mortgage clause and to be
payable to the BANK as its interest may appear, and BORROWER shall
deliver the policies of insurance to the BANK. Such policies shall
contain a provision whereby they cannot be cancelled except after
ten (10) days' written notice to the BANK. The BORROWER will furnish
to the BANK such evidence of insurance as the BANK may require.
The BORROWER will pay or cause to be paid when due, all taxes,
assessments, and charges or levies imposed upon it or on any of its
property on which it is required to withhold and pay except where
contested in good faith by appropriate proceedings with adequate
reserves therefor having been set aside on its books; provided,
however, that the BORROWER shall pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure
on any lien that may have attached (or security therefor) appears
imminent.
G. The BORROWER will maintain:
15
1. A BORROWING BASE such that the amount of the BORROWER's
outstanding REVOLVING LOAN will not, at any time, exceed its
BORROWING BASE.
3. A ratio of Consolidated Liabilities to Consolidated
Tangible Net Worth of not more than 2.3:1.0.
For purposes of this agreement, Consolidated Current Assets
and Consolidated Current Liabilities mean, at any time, all
assets or liabilities, respectively, that should, in
accordance with GAAP, be classified as current assets or
current liabilities, respectively, on a balance sheet of
BORROWER. Consolidated Net Working Capital means, at any time,
the amount by which Consolidated Current Assets exceed
Consolidated Current Liabilities. Consolidated Tangible Net
Worth means, at any time, Stockholders' Equity (the par value
of outstanding capital stock, plus capital surplus, plus
retained earnings), less the sum of:
a. Any surplus resulting from any write up of assets
subsequent to December 31, 2000;
b. Goodwill, including any amounts, however designated on a
balance sheet of the BORROWER, representing the excess
of the purchase price paid for assets or stock acquired
over the value assigned thereto on the books of the
BORROWER;
c. Any amount reflecting value of patents, trademarks,
trade names, and copyrights;
d. Any amount at which shares of capital stock of the
BORROWER appear as an asset on the BORROWER's balance
sheet;
e. Loans and advances to stockholders, directors, officers,
employees, or AFFILIATES;
f. Deferred expenses; and
g. Any other amount in respect of an intangible that should
be classified as an asset on a balance sheet of the
BORROWER in accordance with GAAP.
H. The BORROWER will take all necessary steps to preserve its corporate
existence and franchises and comply with all present and future laws
applicable to it in the operation of its business, and all material
agreements to which it is subject.
16
I. The BORROWER will give immediate notice to the BANK of (1) any
litigation or proceeding in which it is a party if an adverse
decision therein would require it to pay more than $25,000.00 or
deliver assets the value of which exceeds such sum (whether or not
the claim is considered to be covered by insurance); and (2) the
institution of any other suit or proceeding involving it that might
materially and adversely affect its operations, financial condition,
property, or business prospects.
J. The BORROWER will pay when due all of its INDEBTEDNESS due third
persons except when the amount thereof is being contested in good
faith by appropriate proceedings and with adequate reserves therefor
being set aside on its books.
K. The BORROWER will notify the BANK immediately 1) if it becomes aware
of the occurrence of any EVENT OF DEFAULT or of any fact, condition,
or event that only with the giving of notice or passage of time or
both, could become an EVENT OF DEFAULT; 2) if it becomes aware of
any material adverse change in the business prospects, financial
condition (including, without limitation, proceedings in bankruptcy,
insolvency, or reorganization), or results of operations of the
BORROWER, or 3) upon the failure of the BORROWER to observe any of
its respective undertakings hereunder or under the COLLATERAL
DOCUMENTS.
L. The BORROWER will (1) fund any of its Employee Pension Benefit Plans
in accordance with no less than the minimum funding standards of 29
U.S.C. Sec. 1082 (Section 302 of ERISA); (2) furnish the BANK,
promptly after the filing of the same, with copies of any reports or
other statements filed with the United States Department of Labor or
the Internal Revenue Service with respect to any such Plan; and (3)
promptly advise the BANK of the occurrence of any Reportable Event
or Prohibited Transaction with respect to any Employee Benefit Plan.
2. NEGATIVE COVENANTS. The BORROWER does hereby covenant and agree with the
BANK that, so long as any of the OBLIGATIONS remain unsatisfied or any
commitments hereunder remain outstanding, it will comply at all times with
the following negative covenants, unless the BANK shall otherwise have
agreed in writing:
A. The BORROWER shall not change its name, enter into any merger,
consolidation, reorganization or recapitalization, or reclassify its
capital stock;
B. BORROWER will not mortgage, pledge, grant, or permit to exist a
security interest in, or a lien upon, any of its assets of any kind,
now owned or hereafter acquired, except for liens in favor of BANK,
or PERMITTED LIENS;
17
C. BORROWER will not become liable, directly or indirectly, as
Guarantor or otherwise for any OBLIGATION of any other person;
D. BORROWER will not declare or pay any dividends, or make any other
payment or distribution on account of its capital stock in excess of
fifty percent (50%) of its prior year earnings as long as BORROWER
is in compliance with the covenants contained within this AGREEMENT;
E. BORROWER will form no subsidiary, make no investment in (including
any assignment of Inventory or other property), or make any loan in
the nature of an investment to, any PERSON, except for a $350,000.00
investment in the BORROWER's Hong Kong subsidiary;
F. BORROWER will not make any loan or advance to any officer,
shareholder, director, or employee of the BORROWER, except for
business travel and similar temporary advances in the ordinary
course of business;
G. BORROWER will not make payments on account of the purchase or lease
of fixed assets that, in the aggregate, in any fiscal year
(commencing with the current fiscal year) cannot exceed the amount
of depreciation expense taken during the fiscal year;
H. BORROWER will not redeem, purchase, or retire any of its capital
stock or grant or issue, or purchase or retire for any
consideration, any warrant, right or option pertaining thereto, or
permit any redemption, retirement, or other acquisition by BORROWER
of the ownership of the outstanding capital stock of the BORROWER;
I. BORROWER shall not furnish the BANK any certificate or other
document that will contain any untrue statement of material fact or
that will omit to state a material fact necessary to make it not
misleading in light of the circumstances under which it was
furnished; and
J. BORROWER will not directly or indirectly apply any part of the
proceeds of the OBLIGATIONS to the purchasing or carrying of any
"margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, or any regulations,
interpretations, or rulings thereunder.
Section VII. DEFAULT.
1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an EVENT OF DEFAULT hereunder:
A. The BORROWER shall fail to perform any covenant, promise, or payment
obligation made in this AGREEMENT or any COLLATERAL DOCUMENTS;
18
B. Any financial statement, representation, warranty, or certificate
made or furnished by or with respect to the BORROWER to the BANK in
connection with this AGREEMENT, or as an inducement to the BANK to
enter into this AGREEMENT, or in any separate statement or document
to be delivered to the BANK hereunder, shall be materially false,
incorrect, or incomplete when made.
C. Any financial statement, representation, warranty, or certificate
made or furnished by or with respect to the BORROWER to the BANK in
connection with this AGREEMENT, or as an inducement to the BANK to
enter into this AGREEMENT, or in any separate statement or document
to be delivered to the BANK hereunder, shall be materially false,
incorrect, or incomplete when made;
D. The BORROWER shall admit its inability to pay its debts as they
mature or shall make an assignment for the benefit of itself or any
of its creditors;
E. Proceedings in bankruptcy, or for reorganization of the BORROWER, or
for the readjustment of debt under the Bankruptcy Code, as amended,
or any part thereof, or under any other laws, whether state or
federal, for the relief of debtors, now or hereafter existing, shall
be commenced against or by the BORROWER, shall not be discharged
within thirty (30) days of their commencement;
F. A receiver or trustee shall be appointed for the BORROWER or for any
substantial part of its respective assets, or any proceedings shall
be instituted for the dissolution or the full or partial liquidation
of the BORROWER, and expect with respect to any such appointments
requested or instituted by the BORROWER, such receiver or trustee
shall not be discharged within thirty (30) days of his appointment,
and except with respect to any such proceedings instituted by the
BORROWER, such proceedings shall not be discharged within thirty
(30) days of their commencement, or the BORROWER shall discontinue
business or materially change the nature of its business, or the
COLLATERAL becomes, in the reasonable judgment of the BANK,
insufficient in value to satisfy the OBLIGATIONS, or the BANK
otherwise reasonably finds itself insecure as to the prompt and
punctual payment and discharge of the OBLIGATIONS;
G. The BORROWER shall suffer final judgments for payment of money
aggregating in excess of $25,000.00 and shall not discharge the same
within a period of thirty (30) days unless, pending further
proceedings, execution has not been commenced or, if commenced, has
been effectively stayed;
19
H. A judgment creditor of the BORROWER shall obtain possession of any
of the COLLATERAL by any means, including (without implied
limitation) levy, distraint, replevin, or self-help.
2. ACCELERATION. At the option of the BANK upon the occurrence of any EVENT
OF DEFAULT, all OBLIGATIONS, whether hereunder or otherwise, shall
immediately become due and payable.
3. REMEDIES. After any acceleration, as provided for in Section VII. 2., the
BANK shall have, in addition to the rights and remedies given it by this
AGREEMENT and the COLLATERAL DOCUMENTS, all those allowed by all
applicable LAWS, including, but without limitation, the Uniform Commercial
Code as enacted in the applicable jurisdiction in which any COLLATERAL may
be located. The rights of the BANK under this Section VII. 3. are in
addition to the other rights and remedies (including, without limitation,
other rights of set-off) which the BANK may have.
4. RIGHT OF SET-OFF. Upon the occurrence of any EVENT OF DEFAULT, the BANK
may, and is hereby authorized by the BORROWER, at any time and from time
to time, to the fullest extent permitted by applicable LAWS, without
advance notice to the BORROWER (any such notice being expressly waived by
the BORROWER), set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and any other
indebtedness at any time owing by the BANK, to, or for the credit or the
account of, the BORROWER against any or all of the OBLIGATIONS of the
BORROWER now or hereafter existing, whether or not such OBLIGATIONS have
matured and irrespective of whether the BANK has exercised any other
rights that it has or may have with respect to such OBLIGATIONS, including
without limitation any acceleration rights. The BANK agrees promptly to
notify the BORROWER after any such set-off and application, provided that
the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the BANK under this Section VII.4.
are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the BANK may have.
Section VIII. MISCELLANEOUS.
1. CONSTRUCTION. Nothing herein contained shall prevent the BANK from
enforcing any or all other guaranty, pledge or security agreements, notes,
mortgages, deeds of trust, other evidences of liability, or other
COLLATERAL DOCUMENTS in accordance with their respective terms.
2. ENFORCEMENT AND WAIVER BY THE BANK. The BANK shall have the right at all
times to enforce the provisions of this agreement and the COLLATERAL
DOCUMENTS in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of the BANK in
refraining from so doing at any time or times to enforce its rights under
such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to
specific provisions of this
20
AGREEMENT or as having in any way or manner modified or waived the same.
All rights and remedies of the BANK are cumulative and concurrent and the
exercise of one right or remedy shall not be deemed a waiver or release of
any other right or remedy.
3. RENEWAL. On the existing LOAN TERMINATION DATE, all of the OBLIGATIONS
become due, and the BANK's commitment to lend shall terminate. BORROWER
may request an amendment of the LOAN TERMINATION DATE and a renewal, in
some form, of the commitment. BANK agrees to consider such request when
made, using as a basis for its decision all of the FINANCIAL STATEMENTS
furnished by BORROWER, together with any other information available to
BANK. BANK may make such renewal or amendment if, in BANK'S sole
discretion, such renewal or amendment is warranted in the exercise of
sound banking practices.
4. EXPENSE OF THE BANK. The BORROWER will, on demand, reimburse the BANK for
all expenses, including the reasonable fees and expenses of legal counsel
for the BANK, incurred by the BANK in connection with the preparation,
administration, amendment, modification, or enforcement of this AGREEMENT,
the COLLATERAL DOCUMENTS, and the collection or attempted collection of
the OBLIGATIONS.
5. NOTICES. Any notice or consents required or permitted by this AGREEMENT
shall be in writing and shall be deemed delivered if delivered in person
or if sent by certified mail, postage prepaid, return receipt requested,
or telegraph, as follows, unless such address is changed by written notice
hereunder:
A. If to the BORROWER: M-Tron Industries, Inc.
ATTN: Xx. Xxxxx Xxxx
X.X. Xxx 000
Xxxxxxx, Xxxxx Xxxxxx 00000-0000
B. If to the BANK: First National Bank of Omaha
0000 Xxxxx Xx. XXXX 0000
Xxxxx, XX 00000-0000
ATTN: Xx. Xxxx XxXxxxxx
6. WAIVER AND RELEASE BY THE BORROWER. To the maximum extent permitted by
applicable laws, the BORROWER:
A. Waives notice of acceleration and of intention to accelerate; and
notice and opportunity to be heard, after acceleration in the manner
provided in Section VII., before exercise by the BANK of the
remedies of self-help, set-off, or of other summary procedures
permitted by any applicable laws or by any agreement with the
BORROWER, and, except where required hereby or by any applicable
law, notice of any other action taken by the BANK; and
21
B. Releases the BANK and its officers, attorneys, agents, and employees
from all claims for loss or damage caused by any act or omission on
the part of any of them except willful misconduct or gross
negligence.
7. APPLICABLE LAW. This AGREEMENT is entered into and performable in Omaha,
Xxxxxxx County, Nebraska and shall be subject to and construed and
enforced in accordance with the laws of the State of Nebraska.
8. BINDING EFFECT, ASSIGNMENT, AND ENTIRE AGREEMENT. This AGREEMENT shall
inure to the benefit of, and shall be binding upon, the respective
successors and permitted assigns of the parties hereto. The BORROWER has
no right to assign any of its rights or OBLIGATIONS hereunder without the
prior written consent of the BANK. This AGREEMENT, including the Exhibits
hereto, all of which are hereby incorporated herein by reference, and the
documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed
on behalf of each party.
9. SEVERABILITY. If any provision of this AGREEMENT shall be held invalid
under any applicable law, such invalidity shall not affect any other
provision of this AGREEMENT that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
10. PARTICIPATIONS. Notwithstanding any other provision of this AGREEMENT, the
BORROWER understands that the BANK may enter into participation agreements
with other lenders whereby the BANK will allocate a certain percentage of
the OBLIGATIONS to them. The BORROWER specifically permits and authorizes
the BANK to exchange financial information about the BORROWER with actual
or potential participants. The BORROWER acknowledges that, for the
convenience of all parties, this AGREEMENT is being entered into with the
BANK only and that its obligations under this AGREEMENT are undertaken for
the benefit of, and as an inducement to, each of the Participating Lenders
as well as the BANK, and the BORROWER hereby grants to each of the
Participating Lenders to the extent of its participation in the
OBLIGATIONS, the right to set off deposit accounts maintained by the
BORROWER with such BANK. The BORROWER understands that the terms of such
participation agreements with any of the participants will limit the
BANK's rights to amend, waive or modify the terms and conditions of this
Agreement without the express written consent of all or a designated
percentage of such participants.
IN WITNESS WHEREOF, the parties hereto have duly executed this AGREEMENT
as of the day and year first above written.
22
FIRST NATIONAL BANK OF OMAHA
By /s/ Xxxx XxXxxxxx
-----------------
Title Vice President
--------------
M-TRON INDUSTRIES, INC.,
By /s/ Xxxxx Xxxx
--------------
Title VP and CFO
----------
23
Exhibit I.6. Borrowing Base Certificate
Exhibit I.19.E. Permitted Liens
Exhibit II.2.A. Term Promissory Note
Exhibit II.3.B Revolving Promissory Note
24
