Exhibit 10.10
MARQUETTE CAPITAL BANK, N. A. - LETTER AGREEMENT
November 4, 1999
To: August Technology Corporation (the "Borrower")
0000 Xxxxx Xxxxxxxxxx Xxxx.
Xxxxx, Xxxxxxxxx 00000
Gentlemen:
This letter agreement confirms the additional agreements between the Borrower
and Marquette Capital Bank, N. A. (the "Bank"). In consideration of the mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, the
Borrower and the Bank agree as follows:
1. Subject to the provisions of this letter agreement, at the
Borrower's request, the Bank shall make loans to the Borrower during the period
from the date of this letter agreement to May 31, 2000 in an aggregate amount
not exceeding Two Million Seven Hundred and Fifty Thousand Dollars
($2,750,000.00) at any time outstanding (the "Line of Credit"). The Line of
Credit is a revolving line of credit, and the Borrower may borrow, prepay and
reborrow under the Line of Credit. The Borrower's obligation to repay such loans
and to pay interest and other charges, fees and expenses thereon is evidenced by
the Borrower's promissory note dated November 4, 1999 payable to the order of
the Bank in the principal amount of exceeding Two Million Seven Hundred and
Fifty Thousand Dollars ($2,750,000.00) (together with any amendments,
extensions, renewals and replacements thereof, called the "Revolving Note"). The
Bank shall have no obligation to make any such loan after the occurrence of any
Event of Default.
2. Subject to the provisions of this letter agreement, at the
Borrower's request, the Bank shall issue one or more standby letters of credit
for the account of the Borrower (each a "Letter of Credit") from time to time
during the period from the date hereof to and including the expiration date in
an aggregate amount at any time outstanding not to exceed the amount of the line
of credit less the sum of (A) all outstanding advances under the line of credit
and (B) the letter of credit amount. The Borrower acknowledges and agrees that
the letter of Credit amount shall reduce the line of credit amount available for
advances. Each Letter of Credit request will be further evidenced by an
application and reimbursement agreement.
3. The Borrower shall pay the following fees to the Bank: With respect
to each Letter of Credit, the Borrower shall pay to the Bank annually and in
advance a letter of credit fee equal to one percent (1.0%) per annum on the face
amount of such Letter of Credit, computed for the period commencing on the date
of issuance of such Letter of Credit and ending on the expiration date thereof.
In addition, the Borrower agrees to pay to the Bank, on written demand
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by the Bank, the administrative fees charged by the Bank in the ordinary
course of business in connection with the honoring of drafts under any Letter
of Credit and for all other activity with respect to any Letter of Credit at
the then-current rates of the Bank.
THE BORROWER SHALL NOT AT ANY TIME PERMIT THE UNPAID PRINCIPAL BALANCE
OF THE REVOLVING NOTE PLUS THE AMOUNT OF OUTSTANDING LETTERS OF CREDIT TO EXCEED
THE BORROWING BASE.
4. As long as any now existing or hereafter arising debt, obligation or
liability of the Borrower to the Bank (including but not limited to any debt,
obligation or liability relating to any letter of credit) shall remain
outstanding, the Borrower shall comply with the following requirements:
a. The Borrower shall deliver to the Bank, in form and
substance acceptable to the Bank:
As soon as available, and in any event within 120 days after
each fiscal year of the Borrower, the annual audited financial
statements of the Borrower for such fiscal year, prepared in
accordance with GAAP; and
As soon as available, and in any event within 30 days after
the end of each fiscal year of the Borrower, the projected
financial statements of the Borrower for the next fiscal year;
and
As soon as available, and in any event within 30 days after
the end of each month, the financial statements. of the
Borrower for such period, prepared by the Borrower in
accordance with GAAP; and
As soon as available, and in any event within 30 days after
the end of each month, an aging and a listing of accounts
receivable of the Borrower and a listing of inventory of the
Borrower as of the end of such period; and
As soon as available, and in any event within 30 days after
the end of each month, a Borrowing Base and Covenant
Compliance Certificate in the form of Exhibit A attached
hereto, completed with amounts determined as of the end of
such period; and
At least once every 12 months, and as otherwise requested by
the Bank, the current signed personal financial statements of
any guarantors of any of the Borrower's indebtedness to the
Bank (called the "Guarantors"); and
Within 45 days after the same are filed with the United States
Internal Revenue Service, the annual federal income tax
returns of the Borrower and any Guarantors, including all
schedules, attachments and amendments thereto; and
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Within 10 days after the Bank's request therefor, such other
information about the Borrower and any Guarantors as the Bank
may reasonably request from time to time.
b. The Borrower shall keep accurate books and records in which
true and complete entries will be made in accordance with GAAP. Upon
request of the Bank, the Borrower, during normal business hours, shall
give any representatives of the Bank access to and permit such
representatives to examine and copy all books, records and other
writings in its possession, to inspect its property and to discuss its
finances, accounts, property and business with any of its officers and
directors.
c. The Borrower shall file when due all required tax returns,
shall pay when due all taxes, assessments and other governmental
charges levied or imposed upon it or upon its income or profits or upon
any of its property, and shall pay when due all lawful claims for
labor, materials and supplies which, if unpaid, might become a lien or
charge upon any property of the Borrower; provided, that the Borrower
shall not be required to pay any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
d. The Borrower shall keep and maintain its inventory,
equipment, real estate and other property necessary or useful in its
business in good condition and repair and shall pay when due all rental
and mortgage payments due on such property; provided, that nothing in
this Section shall prevent the Borrower from discontinuing the
operation and maintenance of any such property if such discontinuance
is desirable in the conduct of the Borrower's business and is not
disadvantageous to the Bank.
e. The Borrower shall obtain and maintain insurance with
insurers that are acceptable to the Bank, in such amounts and with such
coverages (including without limitation professional liability
insurance, public liability insurance, fire, hazard and extended
coverage insurance on all of its assets, necessary workers'
compensation insurance, and all other coverages as are consistent with
industry practice) as are acceptable to the Bank.
f. The Borrower shall not declare or pay any dividends or
other distributions on account of any shares of its stock or any of its
other ownership interests, or make any payment on account of any
purchase, redemption or other retirement of any shares of such stock or
any such ownership interests, or make any other payment or distribution
on account of any shares of stock or any ownership interests, or any
warrant or option therefor, either directly or indirectly.
g. The Borrower shall preserve and maintain its existence and
all of its rights, privileges and franchises, and shall comply with all
applicable laws and regulations.
h. The Borrower shall not create, incur or permit to exist in
favor of any person other than the Bank any mortgage, deed of trust,
assignment, security interest or
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other than on any of its property now owned or hereafter acquired,
except purchase money security interests securing indebtedness
permitted by Section 3(h)(ii).
i. The Borrower shall not incur, create, assume or permit to
exist any Funded Debt, except:
(i) Indebtedness to the Bank;
(ii) Indebtedness in an aggregate amount not to
exceed at any time outstanding $500,000 incurred in the
purchase (or borrowing for the purchase) or lease of
equipment.
j. The Borrower shall maintain its primary operating deposit
account at the Bank.
k. The Borrower shall comply with the following requirements:
The Borrower shall not permit the aggregate amount of the
Borrower's Capital Expenditures in any fiscal year of the
Borrower to exceed $750,000.
The Borrower shall not permit the Borrower's Tangible Net
Worth to be less than $2,750,000.
The Borrower shall not permit the ratio of Debt to Tangible
Net Worth of the Borrower to be more than 1.5 to 1.
The Borrower shall not permit the Borrower's cumulative EBITDA
to be less than the amounts described in the following table
for the indicated periods:
PERIOD MINIMUM EBITDA
12/31/98 - 9/30/99 $250,000
12/31/98 - 12/31/99 $350,000
12/31/99 - 3/31/00 $150,000
l. Year 2000 Compliance. "Year 2000 Compliance" means, with
regard to any person or entity, that all software, embedded microchips,
and other processing capabilities utilized by, and material to the
business operations or financial condition of, such person or entity
are able to interpret and manipulate data on and involving all calendar
dates correctly and without causing any abnormal ending scenario,
including but not limited to all dates in and after the year 2000. The
Borrower represents and warrants to the Bank and agrees that: (a) the
Borrower has made due inquiry to determine whether the computer
applications and hardware the Borrower and the Borrower's material
suppliers and customers will be Year 2000 Compliant by January 1, 2000;
and (b) the Borrower has a plan to become Year 2000 compliant. By
January 1, 2000, and the Borrower agrees to devote adequate resources
toward, diligently pursue, and take all actions necessary to complete
such plan and become Year 2000 Compliant by January 1,
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2000; and (c) to the best of the B6rrower's knowledge, all of the
Borrower's material suppliers and customers will be Year 2000 Compliant
by January 1, 2000; and (d) the Borrower agrees to deliver to the Bank
such information regarding the plans and progress of the Borrower
and the Borrower's material suppliers and customers toward becoming
Year 2000 Compliant as the Bank may reasonably request from time to
time,including but not limited to any assessment by a third party of
the Borrower's efforts to become Year 2000 Compliant; (e) at the
Banks request from time to time,the Borrower shall order, obtain, and
deliver to the Bank a copy of audits of the Borrower's plans and
progress to become Year 2000 Compliant by January 1, 2000, and the
Borrower shall permit the Bank and the Bank's representatives to
conduct audits of the Borrower's operations for such purpose, and (f)
the Borrower shall substantially complete implementation of the
Borrower's plan and remediation of material Year 2000 problems by
September 30, 1999. Breach of any representation, warranty or agreement
in this paragraph, or failure of the Borrower or a significant portion
of the Borrower's material suppliers and customers to become Year 2000
Compliant by January 1, 2000 shall constitute an Event of Default
hereunder.
5. In this letter agreement:
a. "Borrowing Base" means the sum of (i) 80% of Eligible
Accounts Receivable, plus (ii) the lesser of 50% of Eligible Inventory
or $1,375,000.
b. "Capital Expenditures" means all expenditures for any
assets, or for improvements, replacements, substitutions or additions
therefor or thereto, which are capitalized on the balance sheet and
which, in accordance with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset
account reflected in such balance sheet, and shall include without
limitation capitalized lease obligations.
c. "Debt" means (i) all items of indebtedness or liability of
the Borrower which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of the
Borrower's balance sheet on the date as of which Debt is to be
determined, plus (ii) indebtedness secured by any mortgage, pledge, hen
or security interest on property of the Borrower, whether or not the
indebtedness secured thereby shall have been assumed, plus (iii)
guaranties, endorsements (other than for purposes of collection in the
ordinary course of business) and other contingent obligations of the
Borrower in respect of, or to purchase or otherwise acquire
indebtedness of others.
d. "EBITDA" means for any period of determination, the net
income of the Borrower for such period plus (i.) deductions for
Interest Expense, income taxes, depreciation and amortization for such
period, minus (ii) extraordinary income and gains (losses) on sales of
assets during such period, all as determined in accordance with GAAP.
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e. "Eligible Accounts Receivable" means only such accounts
receivable of the Borrower as the Bank, in its sole discretion, shall
deem eligible. Without limiting the discretion of the Bank to consider
any account receivable not to be an Eligible Account Receivable, and by
way of example only of the types of accounts receivable that the Bank
will consider not to be Eligible Accounts Receivable, notwithstanding
any earlier classification of eligibility, the following accounts
receivable shall not be considered Eligible Accounts Receivable: (i)
any account receivable which is not paid in full within 90 days after
it is created; (ii) any account receivable as to which any warranty is
breached; (iii) any account receivable as to which the account debtor
or other obligor disputes liability or makes any claim; (iv) any
account receivable owed by any officer, director or shareholder of the
Borrower or any of their relatives or any partnership, corporation,
association, joint venture or other business entity wholly or partly
owned or controlled directly or indirectly by the Borrower or any of
them or any of their relatives; (v) any account receivable owed by any
person as to whom a petition in bankruptcy or other application for
relief is filed under any bankruptcy, reorganization, receivership,
moratorium, insolvency or s law; (vi) any account receivable owed by
any person who makes an assignment for the benefit of creditors,
becomes insolvent, fails, suspends business, or goes out of business;
(vii) any account receivable owed by the United States government or
any agency of the United States government; (viii) any account
receivable owed by any person if 10% or more in amount of the accounts
receivable owed by such person to the Borrower are considered
ineligible; (ix) consignment receivables; (x) bonded receivables; (xi)
any account receivable constituting a retainage; (xii) any account
receivable for goods which have not been shipped or work which has not
been fully performed; (xiii) any account receivable owed by any person
outside the United States of America, except account debtors approved
in writing by the Bank (approved foreign account debtors are described
on Exhibit B) ; (xiv) any account receivable owed by any person with
whose creditworthiness the Bank becomes dissatisfied; and (xv) any
account receivable in which the Bank does not have a perfected security
interest constituting a first hen. In the event the Borrower owes any
amount to any person that owes an account receivable to the Borrower,
such amount owed by the Borrower shall be deducted from that portion of
the account receivable which would otherwise qualify as an Eligible
Account Receivable and only the difference thereof shall be considered
an Eligible Account Receivable. No account receivable which does not
qualify as an Eligible Account Receivable shall be considered an
Eligible Account Receivable unless the Bank, upon the written request
of the Borrower, states in writing that such account receivable is to
be considered an Eligible Account Receivable.
f. "Eligible Inventory" means the lesser of cost or fair
market value of only such raw materials inventory and finished goods
inventory of the Borrower as the Bank, in its sole discretion, shall
deem eligible. Without limiting the discretion of the Bank to consider
any inventory not to be Eligible Inventory, notwithstanding any earlier
classification of eligibility, the following inventory shall not be
considered Eligible Inventory: (i) any inventory which does not
constitute finished goods, or which does not constitute raw materials
that are to be used or consumed by the Borrower in the normal course of
its business in the processing of such raw materials into finished
goods which, upon completion, will constitute Eligible Inventory; (ii)
any inventory which does not
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meet all standards imposed by any governmental agency; (iii) any
inventory which is not located in the United States of America; (iv)
any inventory which is obsolete, or which is not usable by the
Borrower in the normal course of its business; (v) any inventory
which is on consignment to or from any other person, or which has been
sold or otherwise delivered, transferred or conveyed to any other
person, or which is subject to any bailment or lease; (vi) any finished
goods inventory which is not held for sale by the Borrower in the
normal course of its business, or which is not saleable by the Borrower
in the normal course of its business; and (vii) any inventory in which
the Bank does not have a perfected security interest constituting a
first lien.
g. "Event of Default" means any default or event of default
under any existing or future note or other agreement of the Borrower
with the Bank.
h. "GAAP" means generally accepted accounting principles
consistently applied. Except as otherwise approved by the Bank in
writing, all financial reporting, financial record keeping, and
financial calculations in connection with this letter agreement shall
be made on the basis of accounting principles, methods, elections and
estimates that are consistent and that are consistent with the
accounting principles, methods, elections and estimates used in the
last annual financial statements of the Borrower delivered by tie
Borrower to the Bank before or upon the execution of this letter
agreement, and that fairly present the financial condition or results
of operations for the period then ended.
i. "Tangible Net Worth" means the difference of:
(i) the tangible assets of the Borrower which, in
accordance with GAAP, are tangible assets, after
deducting adequate reserves in each case where, in
accordance with GAAP, a reserve is proper, minus
(ii) all Debt of the Borrower;
provided, that (A) inventory shall be taken into account on the basis of the
cost or current market value, whichever is lower, (B) in no event shall there be
included as such tangible assets patents, trademarks, tradenames, copyrights,
licenses, good will, memberships, or treasury stock or any securities or debt of
the Borrower, or any officer, director, employee, agent, shareholder or
affiliate of the Borrower, or any officer, director, employee, agent,
shareholder or affiliate of any shareholder or affiliate of the Borrower, or any
other debt or securities unless the same are readily marketable in the United
States of America, (C) securities included as such tangible assets shall be
taken into account at their current market price or cost, whichever is lower,
and (D) any write-up in the book value of any assets shall not be taken into
account.
6. In addition to all other defaults and events of default, each of the
following events shall constitute a default and an event of default under each
of the Borrower's existing and future notes and other agreements with the Bank:
The Borrower's failure to comply with any provision of this letter agreement;
Xxxx O'Dell is no longer the President of the Borrower and a collateral
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survey prepared by an outside firm and acceptable to the Bank has not been
completed prior to December 31, 1999 at the Borrower's expense.
7. The Borrower consents to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy relating in any way to this letter agreement or to any
transaction or matter relating to this letter agreement, waives any argument
that venue in such forums is not convenient, and agrees that any litigation
initiated by the Borrower against the Bank relating in any way to this letter
agreement or to any transaction or matter relating to this letter agreement
shall be venued in either the Minnesota District Court of the county where
the Bank is located, or the United States District Court, District of
Minnesota.
8. No provision of this letter agreement can be amended, modified,
waived or terminated, except by a writing executed by the Borrower and the
Bank. The Borrower shall pay to the Bank on demand all of the Bank's costs
and expenses, including but not limited to reasonable attorneys' fees and
legal expenses, in connection with this letter agreement, the writings
executed herewith, and the transactions described herein and therein. This
letter agreement shall bind and benefit the parties and their respective
successors and assigns; provided, the Borrower shall not assign any of its
rights or obligations under this letter agreement without the prior written
consent of the Bank, and any assignment in violation of this sentence shall
be null and void. This letter agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
9. This letter agreement supersedes and replaces all prior commitment
letters, proposal letters, term sheets, and other statements of loan terms
issued by the Bank to the Borrower, and all such letters and term sheets are
terminated.
Sincerely,
MARQUETTE CAPITAL BANK, N.A.
By___________________________
Xxxx XxXxxxxx
Title: Vice President
The Borrower agrees to this letter agreement.
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THE BORROWER REPRESENTS AND WARRANTS TO THE BANK AND AGREES THAT THE
BORROWER HAS READ ALL OF THIS LETTER AGREEMENT AND UNDERSTANDS ALL OF THE
PROVISIONS OF THIS LETTER AGREEMENT.
Executed as of November 4, 1999.
By_________________________________
Xxx X. Xxxxx
Title: Chief Financial Officer
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EXHIBIT A
BORROWER: AUGUST TECHNOLOGY CORPORATION
BORROWER BASE AND COVENANT COMPLIANCE CERTIFICATE
I,____________________the___________________________ of August
Technology Corporation, a corporation (the "Borrower"), pursuant to the
letter agreement dated November 4, 1999 (the "Agreement"), hereby certify to
Marquette Capital Bank, N.A. (the "Bank") as follows:
BORROWING BASE
As of the close of business on______________ , the Borrowing Base
and the unpaid principal balance of the Revolving Note were as follows:
1. Accounts Receivable $__________________(1)
2. Less: Ineligibles
Over 90 days $___________
10% Rule $___________
Other Ineligibles $___________
Total Ineligibles $___________ $__________________(2)
3. Eligible Accounts Receivable (1 minus 2) $__________________(3)
4. 80% of Line 3 $__________________(4)
5. Eligible Inventory $__________________(5)
6. Lesser of 50% of Line 5 or $1,375,000 $__________________(6)
7. Borrowing Base (4 plus 6) $__________________(7)
8. Credit Limit (lesser of $2,750,000 $__________________(8)
or Line 7)
9. Unpaid Principal Balance of $__________________(9)
Revolving Note
10. Outstanding Amount of Letters of Credit $__________________(10)
11. Availability or (Shortfall) (8 minus 9 minus 10) $__________________(11)
FINANCIAL COVENANTS
As of the dose of business on_________________, the following amounts and
ratios were true and correct:
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1. CAPITAL EXPENDITURES IN FISCAL YEAR ENDING
a. Actual Capital Expenditures $____________________
b. Maximum Amount $ 750,000
2. TANGIBLE NET WORTH
a. Actual Tangible Net Worth $____________________
b. Minimum Tangible Net Worth $ 2,750,000
3. RATIO OF DEBT TO TANGIBLE NET WORTH
a. Debt $____________________
b. Tangible Net Worth $____________________
c. Actual Ratio of Debt to Tangible Net Worth _________to 1
d. Maximum Ratio 1.50 to 1
4. MINIMUM EBITDA:
a. Actual EBITDA 12/31/98 - 9/30/99 $____________________
Minimum EBITDA required $ 250,000
b. Actual EBITDA 12/31/98 - 12/31/99 $____________________
Minimum EBITDA required $ 350,000
c. Actual EBITDA 12/31/99 - 3/31/00 $____________________
Minimum EBITDA required $ 150,000
AS OF THE DATE OF THIS CERTIFICATE, NO EVENT HAS OCCURRED WHICH
CONSTITUTES AN EVENT OF DEFAULT AS DEFINED IN THE AGREEMENT.
Date of Certificate:___________________________________
_________________________
Signature
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EXHIBIT B
BORROWER: AUGUST TECHNOLOGY CORPORATION
APPROVED FOREIGN ACCOUNT DEBTORS
MARUBENI CORPORATION
METRON TECHNOLOGY LTD
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[LOGO] MARQUETTE CAPITAL BANK -- AMENDMENT TO
LETTER AGREEMENT
This Agreement is made as of this 10 day of March 2000, by and between
Marquette Capital Bank, N.A., a national banking association, having its
office at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, XX (the "Bank") and August
Technology Corporation, a corporation, (the "Borrower").
RECITALS
A. The Borrower executed and delivered to the Bank that certain promissory
Note, dated November 4, 1999, in the original principal amount of
2,750,000.00 (the "Note").
B. The Borrower further executed and delivered to the Bank that certain
Letter Agreement, dated November 4, 1999, (the "Letter Agreement")
pursuant to which additional agreements were made between the Borrower and
the Bank regarding advances under the Note.
C. The Borrower has requested and the Bank is willing to amend the Minimum
EBITDA covenant as it appears in the Letter Agreement.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
The Borrower will not be required to obtain a Minimum EBITDA for the period
between 1/1/99 to 03/31/00.
The Letter Agreement is amended only to the extent necessary to reflect the
changes set forth herein.
IN WITNESS WHEREOF, the parties hereto have each duly executed this Amendment
effective as of the day and year first above written.
MARQUETTE CAPITAL BANK, N.A. AUGUST TECHNOLOGY CORPORATION
By /s/ Xx XxXxxxxx By /s/ [ILLEGIBLE]
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Its VP Its CFO
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