NORWEST BANK MINNESOTA SOUTH,
NATIONAL ASSOCIATION
TERM LOAN AND CREDIT AGREEMENT
THIS TERM LOAN AND CREDIT AGREEMENT (the "Agreement") dated as of July 31, 1998
(the "Effective Date") is between Norwest Bank Minnesota South, National
Association (the "Bank") and Xxxxxxx Electronics, Incorporated (the "Borrower").
BACKGROUND
The Borrower and the Bank entered into a Credit Agreement dated as of January
31, 1995 pursuant to which the Bank extended to the Borrower, among other
things, a conditional revolving line of credit (the "Line"), which Credit
Agreement was amended by First Amendment dated October 21, 1996, by Second
Amendment dated July 7, 1997 and by Third Amendment dated September 18, 1997 (as
amended, the "Agreement"). The Borrower's obligation to the Bank under the Line
is currently evidenced by a Revolving Note dated September 18, 1997 (the "1997
Revolving Note").
The Borrower has asked the Bank to renew the Line in the amount of
$3,500,000.00, and has asked the Bank to loan it an additional $115,000.00 as an
advance on its existing Term Loan dated April 29, 1996 in the original amount of
$57,725.00 (the "Term Loan").
The Bank is agreeable to meeting the Borrower's requests, provided that the
Borrower agrees to the terms and conditions of this Agreement.
For purposes of this Agreement, all promissory notes that evidence indebtedness
of the Borrower to the Bank and which are documented under this Agreement and
defined below shall collectively be referred to as the "Notes."
The Notes, this Agreement, and all "Security Documents" described in Exhibit B,
and any modifications, amendment or replacement to such promissory notes or
agreements shall be referred to collectively as the "Documents."
In consideration of the above premises, the Bank and the Borrower agree as
follows:
1. LINE OF CREDIT
1.1 Line of Credit Amount. During the Line Availability Period defined
below, the Bank agrees to provide a conditional revolving line of
credit (the "Line") to the Borrower. Outstanding amounts under the Line
shall not, at any one time, exceed the lesser of the Borrowing Base or
Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00).
The Borrowing Base is defined in Exhibit A-1 to this Agreement. This is
a conditional revolving line of credit and each advance under the Line,
if made, shall be at the sole discretion of the Bank.
1.2 Line of Availability Period. The "Line Availability Period" shall mean
the period of time from the Effective Date or the date on which all
conditions precedent described in this Agreement have been met,
whichever is later, to the Line Expiration Date of June 30, 1999.
1.3 The Revolving Note. The Borrower's obligation to repay advances under
the Line shall be evidenced by a single promissory note (the "Revolving
Note") dated as of the Effective Date, and in form and content
acceptable to the Bank, which shall replace, but not be deemed to
satisfy the 1997 Revolving Note. The initial balance of the Revolving
Note shall be the balance of the 1997 Revolving Note as of the date of
this Agreement. Reference is made to the Revolving Note for interest
rate and repayment terms.
1.4 Mandatory Prepayment. If at any time the principal outstanding under
the Revolving Note exceeds the lessor of the Borrowing Base or
$3,500,000.00, the Borrower must immediately prepay the Revolving Note
in an amount sufficient to eliminate the excess.
2. TERM LOAN
2.1 Term Loan Amount. The Bank and the Borrower entered into a term loan
agreement dated April 29, 1996, pursuant to which the Bank extended a
$57,725.00 term loan to the Borrower (the "Term Loan"), which is
evidenced by a term note of the same date in the amount (the "1996 Term
Note"). The Bank agrees to advance the Borrower the additional sum of
One Hundred Fifteen Thousand and 00/100 Dollars ($115,000.00) under the
Term Loan facility, provided that all conditions precedent described in
this Agreement have been met and that the Borrower is not otherwise in
default as of the date of disbursement. The Bank and the Borrower agree
that the unpaid principal amount of the Term Loan, following the
referenced advance, is $168,368.75.
2.2 Disbursements. The additional advance of loan proceeds under the Term
Loan is available in one disbursement on the Effective Date.
2.3 The Term Note. The Borrower will replace the 1996 Term Note by
executing and delivery to the Bank a new promissory note in form and
content acceptable to the Bank (the "Term Note"), which shall be dated
as of the Effective Date, and which shall replace, but not be deemed to
satisfy, the 1996 Term Note. The Term Note shall evidence the unpaid
amount due to the Bank under the 1996 Term Note as of the date of this
Agreement, plus the $115,000.00 advance provided for in this Agreement.
Reference is made to the Term Note for terms relating to interest rate,
repayment and other terms governing the Term Loan.
3. FEES AND EXPENSES
3.1 Documentation Expense. The Borrower agrees to reimburse the Bank for
its reasonable expenses relating to the preparation of the Documents
and any possible future amendments to the Documents, which
reimbursement may include, but shall not be limited to, reimbursement
of reasonable attorneys' fees, including the allocated costs of the
Bank's in-house counsel. Despite such reimbursement the Borrower
acknowledges that the Bank's counsel is engaged solely to represent the
Bank and does not represent the Borrower.
3.2 Collection Expenses. In the event the Borrower fails to comply with any
covenant or condition of this Agreement or the Documents, or fails to
pay the Bank any amounts due under this Agreement or under the
Documents, the Borrower shall pay all costs of workout and collection,
including reasonable attorneys' fees and legal expenses incurred by the
Bank.
3.3 Miscellaneous Expense. The Borrower agrees to reimburse the Bank for
its expenses incurred in perfecting any security interest in property
granted by the Borrower to the Bank.
4. PAYMENTS
4.1 Payments. All principal, interest and fees due under the Documents
shall be paid in immediately available funds as contracted in this
Agreement, and no later than the payment due date set forth in the
statement mailed to the Borrower by the Bank. If a due date does not
fail on a day on which the Bank is open for substantially all of its
business (a "Banking Day", except as otherwise provided), the Bank
shall debit the account on the next Banking Day, and interest shall
continue to accrue during the extended period. If there are
insufficient funds in the amount on the day the Bank enters any debit
authorized by this Agreement, the debit will be reversed and the
payment shall be due immediately without necessity of demand by direct
remittance of immediately available funds. For amounts bearing interest
at the LIBOR Rate (if any), a Banking Day is a day on which the Bank is
open for business and on which dealings in U.S. dollar deposits are
carried on in the London Interbank Market.
4.2 Performance Based Interest Rate Pricing. Following its review of the
Borrower's Interim financial statements, the Bank shall change the
margin applicable under the Revolving Note to the Base Rate based on
the following performance criteria:
(a) For each calendar quarter in which the Borrower's Debt Service Coverage
Ratio, as defined in Section 8.2, is determined by the Bank to be 3.50
to 1.0 or higher, the interest rate applicable to the Revolving Note
shall automatically be changed, as of the date set forth in Subsection
4.3, to a rate equal to the Bank's Base Rate as defined in the
Revolving Note plus a margin of 1.00%, floating.
(b) For each calendar quarter in which the Borrower's Debt Service Coverage
Ratio is determined by the Bank to be between 3.00 to 1.0 and 3.49 to
1.0, the interest rate applicable to the Revolving Note shall
automatically be changed, as of the date set forth in Subsection 4.3,
to a rate equal to the Bank's Base Rate as defined in the Revolving
Note plus a margin of 0.75%, floating.
(c) For each calendar quarter in which the Borrower's Debt Service Coverage
Ratio is determined by the Bank to be between 2.75 to 1.0 and 2.99 to
1.0, the interest rate applicable to the Revolving Note shall
automatically be changed, as of the date set forth in Subsection 4.3,
to a rate equal to the Bank's Base Rate as defined in the Revolving
Note plus a margin of 0.50%, floating.
(d) For each calendar quarter in which the Borrower's Debt Service Coverage
Ratio is determined by the Bank to be between 2.25 to 1.00 and 2.74 to
1.0, the Interest rate applicable to the Revolving Note shall
automatically be changed, as of the date set forth in Subsection 4.3,
to a rate equal to the Bank's Base Rate as defined in the Revolving
Note plus a margin of 0.25%, floating.
(e) For each calendar quarter in which the Borrower's Debt Service Coverage
Ratio, as defined in Section 8.2, is determined by the Bank to be less
than 2.25 to 1.0, the interest rate applicable to the Revolving Note
shall automatically be changed, as of the date set forth in Subsection
4.3, to a rate equal to the Bank's Base Rate as defined in the
Revolving Note, floating.
4.3 Effective Date of Performance Based Pricing Changes. Any margin change
described above shall become effective on the first day of the month
following the month of the Bank's receipt of the Borrower's March,
June, September and December interim financial statements, as provided
in Section 9.1(a) and (b) of this Agreement. Following any event of
default defined described in Section 0 of this Agreement, and
regardless of whether or not the Revolving Note has been accelerated,
the Revolving Note shall accrue interest at the rate described in
Section 4.2(a) above.
5. SECURITY
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in Writing all amounts due
under this Agreement and the Documents shall be secured at all times as
provided in Exhibit B. The Borrower also hereby grants the Bank a
security interest (independent of the Bank's right of set-off) in its
deposit accounts at the Bank and in any other debt obligations of the
Bank to the Borrower.
6. CONDITIONS PRECEDENT
The Borrower must deliver to the Bank the documents described in
Exhibit B, properly executed and in form and content acceptable to the
Bank, prior to the Bank's initial advance or disbursement under this
Agreement. The Borrower must also deliver to the Bank, prior to the
initial advance and any subsequent line advances under this Agreement,
a Borrowing Base Certificate in the form of Exhibit A-2, at the
intervals provided in Section 8.
7. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower, to the
best of its knowledge and upon due inquiry, makes the representations
and warranties contained in Exhibit C. Each request for an advance or a
disbursement under this Agreement following the Effective Date
constitutes a reaffirmation of these representations and warranties.
8. COVENANTS
8.1 Financial Information and Reporting
Except as otherwise stated in this Agreement, all financial information
provided to the Bank shall be compiled using generally accepted
accounting principles consistently applied.
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to:
(a) Annual Financial Statements. Provide the Bank within 120 days of the
Borrower's fiscal year end, the Borrower's annual financial statements.
The statements must be audited with an unqualified opinion by a
certified public accountant acceptable to the Bank.
(b) Interim Financial Statements. Provide the Bank within 45 days of each
month end, the Borrower's interim financial statements for the interim
period then ending. The statements must be current through the end of
that period and must be certified as correct by an officer of the
Borrower in form acceptable to the Bank.
(c) Borrowing Base Certificate. Provide the Bank within 30 days of each
month end, a Borrowing Base Certificate in the form of Exhibit A-2,
current through the end of that period and certified as correct by an
officer of the Borrower acceptable to the Bank.
At the time of each request for an advance under this Agreement
following the Effective Date, the Borrower shall deliver to the Bank a
new Borrowing Base Certificate, unless the Bank is in possession of a
Borrowing Base Certificate current within 30 days of the requested
advance.
(d) Accounts Receivable Aging. Provide the Bank within 45 days of each
quarter end, an accounts receivable aging report in form acceptable to
the Bank and certified as correct by an officer of the Borrower
acceptable to the Bank.
(e) Notices. Provide the Bank prompt written notice of (1) any event of
default or any event which would, after the lapse of time or the giving
of notice, or both, constitute an event of default under the Agreement
or any of the Documents; or (2) any future event that would cause the
representations and warranties contained in this Agreement to be untrue
when applied to the Borrower's circumstances as of the date of such
event.
(f) Additional Information. Provide the Bank with such other information as
it may reasonably request, and permit the Bank to visit and inspect its
properties and examine its books and records.
8.2 Financial Covenants
During the time period that credit is available under this Agreement, and
afterward until all amounts due under the Documents are paid in full, unless the
Bank shall otherwise agree in writing, the Borrower agrees to comply with the
financial covenants described below, which shall be calculated using generally
accepted accounting principles consistently applied, except as they may be
otherwise modified by the following capitalized definitions:
"Current Assets" means current assets less receivables and investments in or
other amounts due from any shareholder, director, officer, employee or any
person or entity related to or affiliated with the Borrower.
"Current Liabilities" means current liabilities less any portion of such current
liabilities that constitute Subordinated Debt.
"Current Maturities or Long Term Debt" means that portion of the Borrower's long
term debt and capital leases payable within 12 months of the determination date.
"Tangible Net Worth" means total assets less total liabilities and less the
following types of assets: (1) leasehold improvements; (2) receivables and other
investments in or amounts due from any shareholder, director, officer, employee
or other person or entity related to or affiliated with the Borrower; and (3)
goodwill, patents, copyrights, mailing lists, trade names, trademarks, servicing
rights, organizational and franchise costs, bond underwriting costs and other
like assets property classified as intangible.
"Traditional Cash Flow" means the aggregate amount of the following: (1) net
income after taxes; (2) amortization expense; (3) depreciation and depletion
expenses; (4) deferred tax expense; and (5) similar non-cash charges against
income which the Bank determines in its discretion to be appropriate
"add-backs".
(a) Debt Service Coverage Ratio. Maintain a ratio of Traditional Cash Flow
to Current Maturities of Long Term Debt of a least 1.2 to 1.0 as of the
fiscal year ending December 31, 1998.
(b) Tangible Net Worth. Maintain a minimum Tangible Net Worth of at least
$2,800,000.00 as of the fiscal year ending December 31, 1998.
(c) Total Liabilities to Tangible Net Worth Ratio. Maintain a ration of
total liabilities to Tangible Net Worth of less than 3.0 to 1.0 as of
the end of fiscal year ending December 31, 1998.
(d) Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities of at least 1.2 to 1.0 as of the end of the fiscal year
ending December 31, 1998.
8.3 Other Covenants
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to:
(a) Additional Borrowing. Refrain from incurring any indebtedness except:
(1) Trade credit incurred in the ordinary course of business.
(2) Indebtedness expressly subordinated to the Bank in a writing
acceptable to the Bank.
(3) Indebtedness in existence on the date of this Agreement and
disclosed in advance to the Bank in writing.
(4) Purchase money indebtedness (including capitalized leases) for
the acquisition of fixed assets, provided that the total
principal amount outstanding at any one time does not exceed
$30,000.00
(b) Other Liens. Refrain from allowing any security interest on property it
owns now or in the future, except:
(1) Liens in favor of the Bank,
(2) Liens for taxes not delinquent or which the Borrower is
contesting in good faith.
(3) Liens outstanding on the date of this Agreement and disclosed
in advance to the Bank in writing.
(4) Liens which secure purchase money indebtedness allowed under
this Agreement.
(c) Insurance. Cause its properties to be adequately insured by a reputable
insurance company against loss or damage and to carry such other
insurance (including business interruption, flood, or environmental
risk insurance) as is usually carried by persons engaged in the same or
similar business. Such insurance must, with respect to the Bank's
collateral security, include a lender's loss payable endorsement in
favor of and in form acceptable to the Bank.
(d) Nature of Business. Refrain from engaging in any line of business
materially different from that presently engaged in by the Borrower.
(e) Deposit Accounts. Maintain its principal deposit accounts with the
Bank.
(f) Form of Organization and Mergers. Refrain from changing the legal form
of organization, or consolidating, merging, pooling, syndicating or
otherwise combining with any other entity.
(g) Maintenance of Properties. Make all repairs, renewals or replacements
necessary to keep its plant, properties and equipment in good working
condition.
(h) Books and Records. Maintain adequate books and records, refrain from
making any material changes in its accounting procedures for tax or
other purposes, and permit the Bank to inspect same upon reasonable
notice.
(i) Compliance with Laws. Comply in all material respects with all laws
applicable to its form of organization, business, and the ownership of
its property.
(j) Preservation of Rights. Maintain and preserve all permits, licenses,
rights, privileges, charters and franchises that it now owns.
These covenants were negotiated by the Bank and Borrower based on
information provided to the Bank by the Borrower. A breach of a
covenant is an indication that the risk of the transaction has
increased. As consideration for any waiver or modification of these
covenants, the Bank may require: additional collateral, guaranties or
other credit support; higher fees or interest rates; and possible
modifications to the Documents and the monitoring of the Agreement. The
waiver or modification of any covenant that has been violated by the
Borrower shall be made at the sole discretion of the Bank. These
options do not limit the Bank's right to exercise its rights under
Section 9 of this Agreement.
9. EVENTS OF DEFAULT AND REMEDIES
9.1 Default
The Revolving Line is a conditional line of credit, which means that
the Bank is not obligated to make advances under the Line even if the
Borrower is in compliance with the terms of this Agreement, and the
Revolving Note evidencing borrowings under the Line shall be payable by
the Borrower upon demand by the Bank. Despite this reservation of
rights, upon the occurrence of any one or more of the following events
of default, or at any time afterward unless the default has been cured,
the Bank may declare the Line to be terminated and in its discretion
accelerate and declare the unpaid principal, accrued interest and all
other amounts payable under the Notes and the Documents to be
immediately due and payable:
(a) Failure by the Borrower to make any payment of principal or interest
due under any of the Notes which continues for ten (10) days after its
due date.
(b) Default by the Borrower in the observance or performance of any
covenant or agreement contained in this Agreement, and continuance for
more than fifteen (15) days.
(c) Default by the Borrower in the observance or performance of any
covenant or agreement contained in any of the Documents (excepting
defaults under this Agreement, which are addressed in the preceding
paragraph), after giving effect to applicable grace periods, if any.
(d) Default by the Borrower with respect to any indebtedness or obligation
owed to the Bank, which is unrelated to any loan or facility subject to
the terms of this Agreement, or to any third party creditor, which
would allow the maturity of any such indebtedness or obligation to be
accelerated.
(e) Any representation or warranty made by the Borrower to the Bank in this
Agreement, or any financial statement or report submitted to the Bank
by or on behalf of the Borrower before or after the Effective Date is
untrue or misleading in any material respect.
(f) A garnishment, levy or writ of attachment, or any local, state, or
federal notice of tax lien or levy is made or issues against the
Borrower, or any post judgment process or procedure is commenced or any
supplementary remedy for the enforcement of a judgment is employed
against the Borrower or the Borrower's property.
(g) A material adverse change occurs in the Borrower's financial condition
or ability to repay its obligations to the Bank.
9.2 Immediate Default
If, with or without the Borrower's consent, a custodian, trustee or
receiver is appointed for any of the Borrower's properties, or if a
petition is filed by or against the Borrower under the United States
Bankruptcy Code, or the Borrower is dissolved, liquidated, or winds up
its business then the Line shall immediately terminate without notice,
and the unpaid principal, accrued interest, and all other amounts
payable under the Notes and the Documents shall become immediately due
and payable without notice or demand.
9.3 Supplementary Cross Default of Other Promissory Notes
The Borrower agrees that each promissory note evidencing indebtedness
of the Borrower to the Bank which is not otherwise documented in this
Agreement, and regardless of whether delivered before or after the
Effective Date, shall hereby be amended on a supplementary basis to
provide that each such promissory note may be accelerated by the Bank
in its discretion following the occurrence of any event of default
described in Section 9, or shall be accelerated and become immediately
due and payable without notice by the Bank following the occurrence of
any event of default described in Section 9, which events of default
and rights of acceleration are in addition to, and not exclusive of,
any events of default and rights of acceleration agreed to in the
promissory note itself.
10. MISCELLANEOUS
(a) No Waiver; Cumulative Remedies. No failure or delay by the Bank in
exercising any rights under this Agreement shall be deemed a waiver of
those rights. The remedies provided for in this Agreement and the
Documents are cumulative and not exclusive of any remedies provided by
law.
(b) Amendments or Modifications. Any amendment or modification of this
Agreement must be in writing and signed by the Bank and Borrower. Any
waiver of any provision in this Agreement must be in writing and signed
by the Bank.
(c) Binding Effect Assignment. This Agreement and the Documents are binding
on the successors and assigns of the Borrower and Bank. The Borrower
may not assign its rights under this Agreement and the Documents
without the Bank's prior written consent. The Bank may sell
participations in or assign this Agreement and the Documents and
exchange financial information about the Borrower with actual or
potential participants or assignees.
(d) Minnesota Law. This Agreement and the Documents shall be governed by
the substantive laws (other than conflict of laws) of the State of
Minnesota, and the Bank and Borrower consent to the personal
jurisdiction of the state and federal courts located in the State of
Minnesota.
(e) Severability of Provisions. If any part of this Agreement or the
Documents are unenforceable, the rest of this Agreement or the
Documents may still be enforced.
(f) Integration. This Agreement and the Documents describe the entire
understanding and agreement of the parties and supersedes all prior
agreements between the Bank and the Borrower relating to each credit
facility subject to this Agreement, whether verbal or in writing, and
may be executed in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument. In the event of any inconsistency between the Agreement and
the Documents, inconsistent terms shall, where possible, be construed
as conferring cumulative rights and remedies upon the Bank, and, to the
extent that such construction is not possible, the terms of this
Agreement shall govern.
Address for notices to Bank: Address for notices to Borrower:
Norwest Bank Minnesota South, Xxxxxxx Electronics, Incorporated
National Association 0000 Xxxxx Xxxxx
Second and Xxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxx 00000
Xxxxxxx, XX 00000-0000 Attention: W. Xxxx Xxxxxxx, Xx.,
Attention: Xxxxx X. Xxxxxx, President
Vice President
NORWEST BANK MINNESOTA SOUTH, XXXXXXX ELECTRONICS, INCORPORATED
NATIONAL ASSOCIATION
By: /s/ Xxxxx Xxxxxx By: /s/ X. X. Xxxxxxx
Its: Vice President Its: President
EXHIBIT A-1
BORROWING BASE DEFINITION
"Borrowing Base" means the sum of 80% of Eligible Accounts Receivable (as
defined below) plus 60% of Eligible Inventory (as defined below).
Eligible Accounts Receivable means all accounts receivable except those which
are:
1) Greater than 90 days past the invoice date.
2) Due from an account debtor, 10% or more of whose accounts owed to
the Borrower are more than 90 days past the invoice date.
3) Subject to offset or dispute.
4) Due from an account debtor who is subject to any bankruptcy
proceeding.
5) Owed by a shareholder, subsidiary, affiliate, officer or employee of
the Borrower.
6) Not subject to a perfected first lien security interest in favor of
the Bank.
7) Due from an account debtor located outside the United States and not
supported by a standby letter of credit acceptable to the Bank.
8) Due from a unit of government, whether foreign or domestic.
9) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
Eligible Inventory means all inventory of the Borrower, at the lower of cost or
market as determined by generally accepted accounting principals, except
inventory which is:
1) In transit; or located at any warehouse not approved by the Bank.
2) Covered by a warehouse receipt, xxxx of lading or other document of
title.
3) On consignment to or from any other person or subject to any
bailment.
4) Damaged, obsolete or not salable in the Borrower's ordinary course
of business.
5) Subject to a perfected first lien security interest in favor of any
third party.
6) Supplies or parts inventory.
7) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
EXHIBIT B
CONDITIONS PRECEDENT AND SECURITY
Please Note: This Exhibit describes each Note, Security Document,
Authorizations, Organizational Documents, and all miscellaneous documents,
reports, certificates and other information required as a condition to each
advance or disbursement under the Agreement, whether or not they have previously
been delivered to the Bank. Please refer to the Closing Checklist for a complete
description of which of the following documents remain to be delivered to the
Bank.
Note
The Revolving Note
The Term Note
Security Documents
Each Security Document described below must continue in full force and effect at
all times in accordance with its terms during the time period that credit is
available under this Agreement, and afterward until all amounts due under the
Documents are paid in full. The failure of any Security Document to meet these
requirements may result in an event of default under the Agreement and the
acceleration of all of the Borrower's obligations to the Bank evidenced by the
Documents.
Security Agreement of Xxxxxxx Electronics, Incorporated. A Security Agreement
dated January 31, 1996 signed by the Borrower, granting the Bank a first lien
security interest in the Borrower's accounts, inventory, equipment and general
intangibles, described in that Agreement, together with one or more UCC-1
Financing Statements sufficient to perfect the security interest granted to the
Bank in each jurisdiction where such property is located.
Mortgage of Xxxxxxx Electronics, Incorporated. A Mortgage dated May 7, 1996,
signed by the Borrower as mortgagor, granting the Bank a second lien on certain
real property owned by the mortgagor and located in Blue Earth, Minnesota in the
sum of $57,725.00.
Mortgage Modification Agreement of Xxxxxxx Electronics, Incorporated. A Mortgage
Modification Agreement in favor of the Bank signed by the Borrower, as
mortgagor, modifying the above-described mortgage to secure the additional
$115,000.00 advance of the Term Loan proceeds to the Borrower.
Authorization
Certificate of Authority of Borrower. A Certificate of Authority executed by
such person or persons authorized by the Borrower's organizational documents
and/or agreements to do so, certifying the incumbency and signatures of the
officers or other persons authorized to execute the Documents, and authorizing
the execution of the Documents and performance in accordance with their terms.
Organization
Articles of Incorporation and By-Laws. A recently certified copy of the
Borrower's Articles of Incorporation and By-laws, and any amendments, if
applicable.
Certificate of Good Standing. A recently certified copy of the Borrower's
Certificate of Good Standing.
Other
Arbitration Agreement. The Bank's standard form of Arbitration Agreement dated
January 31, 1996, signed by the Bank and Borrower, subjecting potential
controversies between them to binding arbitration, including but not limited to
those relating to the Documents and this Agreement.
Flood Hazard Determination Form. A Flood Hazard Determination for each parcel of
real property subject to a mortgage given to the Bank under the Agreement,
confirming whether or not the parcel is in a flood hazard area and whether or
not flood insurance must be obtained.
Evidence of Insurance. Evidence that the Borrower has obtained all insurance
coverage required by this Agreement, and that the Bank has been named as the
beneficiary of such policy or policies of insurance.
Agreement to Provide Property/Flood Insurance. An Agreement to Provide
Property/Flood Insurance signed by the Borrower, pursuant to which the Borrower
agrees to purchase and maintain property and/or flood insurance coverage on any
real property given as security under this Agreement.
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
Organizational Status. The Borrower is a duly formed and in good standing under
the laws of the State of Minnesota.
Authorization. The execution and delivery of the Documents is within the
Borrower's powers, has been duly authorized by the Borrower and does not
conflict with any of the Borrower's organizational documents or any other
agreement by which the Borrower is bound, and has been signed by all persons
authorized and required to do so under its organizational documents.
Financial Reports. The Borrower has provided the Bank with its annual audited
financial statement dated December 31, 1997 and its unaudited interim financial
statement dated June 30, 1998, and these statements fairly represent the
financial condition of the Borrower as of their respective dates and were
prepared in accordance with generally accepted accounting principles
consistently applied.
Litigation. There is no litigation or governmental proceeding pending or
threatened against the Borrower which could have a material adverse effect on
the Borrower's financial condition or business.
Taxes. The Borrower has paid when due all federal, state and local taxes.
No Default. There is no event which is, or with notice or the lapse of time or
would be, an event of default under this Agreement.
ERISA. The Borrower is in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended, and has received no notice
to the contrary from the Internal Revenue Service, the Department of Labor, the
Pension Benefit Guaranty Corporation or any other government entity or notice of
any claims or pending claims under ERISA.
Environmental Matters. 1) The Borrower is in compliance in all material respects
with all health and environmental laws applicable to the Borrower and its
operations and knows of no conditions or circumstances that could interfere with
such compliance in the future; 2) the Borrower has obtained all environmental
permits and approvals required by law for the operation of its business; and 3)
the Borrower has not identified any "recognized environmental conditions", as
that term is defined by the American Society for Testing and Materials in its
standards for environmental due diligence, which could subject the Borrower to
enforcement action if brought to the attention of appropriate governmental
authorities.
NORWEST BANK MINNESOTA SOUTH,
NATIONAL ASSOCIATION
FIRST AMENDMENT
This First Amendment (the "First Amendment") dated as of October 23, 1998 is
between Norwest Bank Minnesota South, National Association (the "Bank") and
Xxxxxxx Electronics, Incorporated (the "Borrower").
BACKGROUND
The Borrower and the Bank entered into a term loan and credit agreement (the
"Agreement") dated as of July 31, 1998, pursuant to which the Bank extended to
the Borrower 1) a $3,500,000.00 revolving line of credit (the "Line") and 2) a
$168,368.75 term loan (the "Term Loan"). Borrowings under the Line are evidenced
by a revolving note (the "July 31, 1998 Revolving Note") dated the same date as
the Agreement. The Borrower's obligation to the Bank under the Term Loan is
evidenced by a Term Note dated the same date as the Agreement.
Following the Bank's review of the Borrower's interim financial statements, the
Borrower has requested that the Bank change the margin applicable under the July
31, 1998 Revolving Note. The Bank is willing to grant this request subject to
the terms and conditions of this First Amendment. Capitalized terms not
otherwise defined in this First Amendment shall have the meaning given them in
the Agreement.
In consideration of the premises, the Bank and the Borrower agree that the
Agreement is hereby amended as follows:
1. Sections 4.2 and 4.3 of the Agreement are hereby deleted in their
entirety.
2. Simultaneously with the execution of this First Amendment, the
Borrower shall execute and deliver to the Bank a revolving note the "Revolving
Note") in form and content acceptable to the Bank, which shall replace, but not
be deemed to satisfy, the July 31, 1998 Revolving Note. The initial balance of
the Revolving Note shall be the balance of the July 31, 1998 Revolving Note as
of the date of this First Amendment. Each reference in the Agreement to the
Revolving Note shall be deemed to refer to the Revolving Note dated as of the
date of this First Amendment.
3. The Borrower hereby represents and warrants to the Bank as follows:
A. The Agreement as amended by this First Amendment remains in
full force and effect.
B. The Borrower has no knowledge of any default under the
terms of the Agreement or any note evidencing any of the obligations of
the Borrower that are documented in the Agreement, or of any event that
with notice or the lapse of time or both would constitute a default
under the Agreement or any such notes.
C. The execution, delivery and performance of this First
Amendment and the Revolving Note are within its corporate powers, have
been duly authorized and are not in contravention of law or the terms
of the Borrower's articles of incorporation or by-laws, or of any
undertaking to which the Borrower is a party or by which it is bound.
D. The resolutions set forth in the Corporate Certificate of
Authority dated March 26, 1997, and delivered by the Borrower to the
Bank have not been amended or rescinded, and remain in full force and
effect.
4. Except as modified by this First Amendment, the Agreement remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, the Bank and Borrower have executed this First Amendment as
of the date and year first above written.
NORWEST BANK MINNESOTA SOUTH, XXXXXXX ELECTRONICS,
NATIONAL ASSOCIATION INCORPORATED
By: /s/ Xxxxx Xxxxxx By: /s/ X. X. Xxxxxxx
Its: Vice President Its: President
NORWEST BANK MINNESOTA SOUTH,
NATIONAL ASSOCIATION
SECOND AMENDMENT
THIS SECOND AMENDMENT (the "Second Amendment") dated to be effective as of
September 29, 1999 is between Norwest Bank Minnesota South, National Association
(the "Bank") and Xxxxxxx Electronics, Incorporated (the "Borrower").
BACKGROUND
The Borrower and the Bank entered into a Term Loan and Credit Agreement dated as
of July 31, 1998, which agreement was amended by First Amendment dated October
23, 1998 (as amended, the "Agreement"), pursuant to which the Bank extended to
the Borrower 1) a $3,500,000.00 revolving line of credit (the "Line") and 2) a
$168,368.75 term loan (the "Term Loan"). Borrowings under the Line are currently
evidenced by a revolving note dated October 23, 1998 (the "1998 Revolving
Note"). The Borrower's obligation to the Bank under the Term Loan is evidenced
by a Term Note dated July 31, 1998 (the "1998 Term Note").
The Borrower has requested that the Bank extend the Line Expiration Date to
August 31, 2000 and has further requested that the Bank loan it an additional
$363,726.00 on a term loan basis. The Bank is willing to grant these requests
subject to the terms and conditions of this Second Amendment. Capitalized terms
not otherwise defined in this Second Amendment shall have the meaning given them
in the Agreement.
In consideration of the above premises, the Bank and the Borrower agree that the
Agreement is hereby amended as of the date of this Second Amendment as follows:
1. Section 1.2 of the Agreement is hereby deleted in its entirety and restated
as follows:
"1.2 Line Availability Period. The "Line Availability Period" will
mean the period of time from the Effective Date or the date on
which all conditions precedent described in this Agreement
have been met, whichever is later, to the Line Expiration Date
of August 31, 2000."
2. Section 2.1 of the Agreement is hereby deleted in its entirety and restated
as follows:
"2.1 Term Loan Amount. In addition to the Term Loan as defined
above, the Bank agrees to advance to the Borrower the
additional sum of Three Hundred Sixty-Three Thousand Seven
Hundred Twenty-Six and 00/100 Dollars ($363,726.00) under the
Term Loan facility, provided that all conditions precedent in
this Agreement have been met and that the Borrower is not
otherwise in default as of the date of disbursement. The Bank
and the Borrower agree that the unpaid principal amount of the
Term Loan, following the additional advance, is $530,052.64."
3. To reflect the changes to the Line, the Borrower will replace the existing
promissory note by executing and delivering to the Bank a new promissory note in
form and content acceptable to the Bank (the "Revolving Note"), which shall
replace, but not be deemed to satisfy, the 1998 Revolving Note, and which shall
further reflect the same unpaid loan amount as the 1998 Revolving Note as of the
date of this Second Amendment. Each reference in the Agreement to the Revolving
Note shall be deemed to refer to the Revolving Note dated as of the date of this
Second Amendment.
4. To reflect the changes to the Term Loan and Mortgage, the Borrower will
execute a note and mortgage modification agreement which shall: (1) reflect the
same unpaid loan amount as the 1998 Term Note as of the date of this Second
Amendment, plus the $363,726.00 advance provided for in this Agreement; and (b)
modify the mortgage granting the Bank a second lien on real property owned by
the mortgagor and located in Blue Earth, Minnesota, to secure the additional
$363,726.00 advance of the Term Loan proceeds to the Borrower. Each reference in
the Agreement to the Term Note shall be deemed to refer to the 1998 Term Note as
modified by the Note and Mortgage Modification Agreement as of the date of this
Second Amendment.
5. Section 2.3 of the Agreement is hereby amended to reflect the additional
advance of $363,726.00 under the Term Loan facility.
6. Sections 8.2(b), 8.2(c), and 8.2(d) are hereby deleted and restated as
follows:
"(b) Tangible Net Worth. Maintain a minimum Tangible Net Worth of
at least $3,800,000.00 as of the end of fiscal year ending
December 31, 1999.
(c) Total Liabilities to Tangible Net Worth Ratio. Maintain a
ratio of total liabilities to Tangible Net Worth of less than
2.75 to 1.0 as of the end of fiscal year ending December 31,
1999.
(d) Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities of at least 1.2 to 1.0 as of the end of fiscal
year ending December 31, 1999."
7. The Borrower hereby represents and warrants to the Bank as follows:
A. The Agreement as amended by this Second Amendment remains
in full force and effect.
B. The Borrower has no knowledge of any default under the
terms of the Agreement or any note evidencing any of the obligations of
the Borrower that are documented in the Agreement, or of any event that
with notice or the lapse of time or both would constitute a default
under the Agreement or any such notes.
C. The execution, delivery and performance of this Second
Amendment and all related documentation described in this Second
Amendment are within its corporate powers, have been duly authorized
and are not in contravention of law or the terms of the Borrower's
articles of incorporation or by-laws, or of any undertaking to which
the Borrower is a party or by which it is bound.
D. The resolutions set forth in the Corporate Certificate of
Authority dated March 26, 1997and delivered by the Borrower to the Bank
have not been amended or rescinded, and remain in full force and
effect.
8. Except as modified by this Second Amendment, the Agreement remains unchanged
and in full force and effect.
IN WITNESS WHEREOF, the Bank and Borrower have executed this Second Amendment as
of the date and year first above written.
NORWEST BANK MINNESOTA SOUTH, XXXXXXX ELECTRONICS,
NATIONAL ASSOCIATION INCORPORATED
By: /s/ Xxxxx Xxxxxx By: /s/ X. X. Xxxxxxx
Its: VP Its: CEO
