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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is dated as of the 14th day of
October, 2004 and is by and between M-TRON INDUSTRIES, INC., a Delaware
corporation ("M-TRON"), and PIEZO TECHNOLOGY, INC., a Florida corporation
(collectively, the "Borrowers"), and FIRST NATIONAL BANK OF OMAHA (the "Bank"),
a national banking association established at Omaha, Nebraska.
W I T N E S S E T H :
WHEREAS, M-TRON has an existing term loan with the Bank evidenced by term
note number 2000001751-6 with a due date of April 30, 2007 pursuant to an
existing additional loan agreement with the Bank, which shall remain in full
force in accordance with its terms; and
WHEREAS, M-TRON has an existing revolving line of credit with the Bank
evidenced by revolving note number 2000001751-5 with a due date of April 30,
2005 pursuant to an existing additional loan agreement with the Bank, which
shall be paid in full from the proceeds of the Revolving Note; and
WHEREAS, the Borrowers have requested the Bank to lend to the Borrowers the
sum of up to $5,000,000 for the purpose of partially funding the cost of
acquiring 100% of the outstanding shares of Piezo Technology, Inc., a Florida
corporation ("Piezo"), in the form of two loans in the amounts of $2,000,000
(the "Term Loan") and $3,000,000 (the "Bridge Loan"), together with a $5,500,000
revolving line of credit (the "Revolving Loan") (collectively referred to as the
"Loans"); and
WHEREAS, the Bank is willing to provide such credit facilities to the
Borrowers upon the terms and conditions herein set forth.
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Affiliate" means any person (a) which directly or indirectly controls, or
is controlled by, or is under common control with, the Borrowers or a
Subsidiary; (b) which directly or indirectly beneficially owns or holds 5% or
more of any class of voting stock of the Borrowers or any Subsidiary; or (c) 5%
or more of the voting stock of which is directly or indirectly beneficially
owned or held by the Borrowers or a Subsidiary. The term "control" means the
possession, directly or indirectly, or the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
"Banking Day" means a day on which the Bank is open for substantially all
of its business.
"Borrower" or "Borrowers" shall mean M-TRON Industries, Inc., a Delaware
corporation and Piezo Technology, Inc., a Florida corporation as joint and
several borrowers under this Agreement.
"Borrowing Base" means the lesser of:
(a) $5,500,000, less the amount of any Letters of Credit in an amount
not to exceed $100,000, issued and outstanding on the Borrowers' account;
or
(b) The aggregate of (i) 80% of the Borrowers' current accounts
receivable on the date reported, plus (ii) 50% of the Borrowers' Inventory,
(up to a maximum amount of availability of $2,600,000) valued at the lower
of cost or market, and less any Accounts reasonably deemed ineligible by
the Bank.
"Bridge Loan" shall have the meaning set forth in Section 2.01.
"Bridge Loan Termination Date" shall mean the earliest to occur of the
following: (a) a date that is one year subsequent to the date of the Bridge
Note, (b) the date the Obligations are accelerated pursuant to this Agreement
and (c) the date the Bank has received (i) notice in writing from the Borrowers
of the Borrowers' election to termination this Agreement and (ii) indefeasible
payment in full of the Obligations.
"Bridge Note" shall have the meaning set forth in Section 2.02.
"Business Day" means a Banking Day on which commercial banks are open for
business in Omaha, Nebraska.
"Capital Leases" shall have the same meaning in this Agreement as those
terms are defined by GAAP.
"Closing" shall mean the date on which the Bank receives this Agreement,
executed by the Borrowers, together with the Term Note, the Bridge Note and the
Revolving Note.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations and published interpretations thereof.
"Collateral" means all Property which is subject or is to be subject to the
Lien granted by the Security Agreement.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Borrowers within the meaning of Section
414(b) or 414(c) of the Code.
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"Debt" means (a) all Indebtedness; (b) any liability for borrowed money;
(c) obligations evidenced by bonds, debentures, notes or other similar
instruments; (d) obligations for the deferred purchase price of Property or
services (including trade obligations); (e) obligations as lessee under Capital
Leases; (f) current liabilities in respect of unfunded vested benefits under
Plans covered by ERISA; (g) obligations under letters of credit; (h) obligations
under acceptance facilities; and (i) all guaranties, endorsements (other than
for collection or deposit in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any person or entity or otherwise to assure a creditor
against loss.
"Default" means any of the events specified in Article VIII, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization, all experienced during the applicable reporting period.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" has the meaning provided for in Article IX of this
Agreement.
"Excess Cash Flow" means EBITDA less: payments to the Bank; payments on
account of Subordinated Debt; and less allowable capital expenditures.
"Fixed Charge Coverage Ratio" means as of any day the ratio derived when
comparing EBITDA, less capital expenditures, dividends and taxes to the
Borrowers' payments on the principal and interest of the Obligations and
Subordinated Debt made during the applicable reporting period ending on that
day.
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with the accounting principles applied in the preparation of the
annual financial statements of the Borrowers referred to in Section 4.04 of this
Agreement. All accounting terms not otherwise defined in this Agreement have the
meaning assigned to them in accordance with GAAP.
"Guarantor" means ▇▇▇▇▇ Corporation, an Indiana corporation.
"Guaranty" means the Guaranty in substantially the form of Exhibit G to be
delivered by the Guarantor under the terms of this Agreement.
"Indebtedness" means, as to the Borrowers, all items of indebtedness,
obligation or liability, whether matured or unmatured, liquidated or
unliquidated, direct or contingent, joint or several including, but without
limitation:
(a) All indebtedness guaranteed, directly or indirectly, in any
manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse;
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(b) All indebtedness in effect guaranteed, directly or indirectly,
through agreements, contingent or otherwise (i) to purchase such
indebtedness; or (ii) to purchase, sell or lease (as lessee or lessor)
property, products, materials or supplies or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to insure the owner of the Indebtedness against loss;
(c) All indebtedness secured by (or for which the holder of such
Indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not
the liabilities secured thereby have been assumed; and
(d) All indebtedness incurred as the lessee of goods or services under
leases that, in accordance with GAAP, should not be reflected on the
lessee's balance sheet.
"Inventory" shall mean Borrower's merchandise, raw materials, and finished
and unfinished products which have not yet been sold.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security agreement or preferential
arrangement, charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction to evidence any of the foregoing).
"Loan Documents" means this Agreement and each document referred to in
Article II of this Agreement.
"Material Adverse Effect" means a material adverse effect on the financial
condition, properties or operations of either of the Borrowers.
"Mortgage" means the agreement between the Borrowers and the Bank creating
a first lien on the Property and a security interest in all of the personal
property located thereon as security for payment of the Obligations.
"National Prime Rate" shall mean the Prime Rate published by The Wall
Street Journal.
"Note" or "Notes" means any promissory note delivered by the Borrowers to
the Bank.
"Obligations" means the obligation of the Borrowers:
(a) to pay the principal of and interest on the Notes 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;
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(b) to repay to the Bank all amounts advanced by the Bank hereunder or
otherwise on behalf of the Borrowers, including, but without limitation,
advances for principal or interest payments to prior secured parties,
mortgagees or licensers, or taxes, levies, insurance, rent or repairs to,
or maintenance or storage of, any of the real or personal property securing
the Borrowers' payment and performance of this Agreement; and
(c) to reimburse the Bank, on demand, for the Bank's reasonable and
necessary out-of-pocket 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 Loan Documents required hereunder, including, without limitation,
any proceeding brought or threatened to enforce payment of any of the
Obligations referred to in the foregoing subparagraphs (a) and (b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" or "Permits" means any license or permit, and all licenses or
permits, required under any environmental law or regulation required to operate
the facilities of the Borrowers.
"Property" or "Properties" shall mean the real property set forth in
Exhibit A which is subject to the Mortgage.
"Revolving Loan" shall have the meaning set forth in Section 2.09.
"Revolving Loan Termination Date" means the earliest to occur of the
following: (a) May 31, 2005, (b) the date the Obligations are accelerated
pursuant to this Agreement and (c) the date the Bank has received (i) notice in
writing from the Borrowers of the Borrowers' election to terminate this
Agreement and (ii) indefeasible payment in full of the Obligations.
"Revolving Note" shall have the meaning set forth in Section 2.10.
"Security Agreement" means the agreement between the Borrowers, as debtor,
and the Bank, as secured party, creating a first security interest in all the
Borrowers' assets, including general intangibles, securing the Obligations.
"Subordinated Debt" means Indebtedness of the Borrowers to entities other
than the Bank that has been subordinated, in form acceptable to the Bank, to the
Obligations.
"Tangible Net Worth" means total assets less total liabilities (but
excluding Subordinated Debt existing on the Closing Date, in an amount not
exceeding $2,500,000) and less the following types of assets: (a) receivables
and other investments in or amounts due from any shareholder, employee or other
person or entity related to or affiliated with the Borrowers; (b) goodwill,
patents, copyrights, mailing lists, trade names, trademarks, servicing rights,
organizational and franchise costs, bond underwriting costs and other like
assets properly classified as intangible; and (c) treasury stock. Tangible Net
Worth shall not include any debt due to the Borrowers not acceptable to the Bank
in the exercise of its reasonable discretion.
"Term Loan" shall have the meaning set forth in Section 2.05.
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"Term Loan Termination Date" means the earliest to occur of the following:
(a) a date which is three years subsequent to the date of the Term Note, (b) the
date the Obligations are accelerated pursuant to this Agreement and (c) the date
the Bank has received (i) notice in writing from the Borrowers of the Borrowers'
election to terminate this Agreement and (ii) indefeasible payment in full of
the Obligations.
"Term Note" shall have the meaning set forth in Section 2.06.
"Working Capital" means current assets, less investments in or other
amounts due from any member, employee or any person or entity related to or
affiliated with the Borrowers and less prepayments, less current liabilities
(less any portion of such current liabilities that constitute debt that is
expressly subordinated to the Bank in a writing acceptable to the Bank, in the
exercise of its reasonable discretion).
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. BRIDGE LOAN. The Bank agrees, on the terms and conditions set
forth in this Agreement, to make a loan (the "Bridge Loan") to the Borrowers on
the Closing Date in a principal amount up to but not exceeding $3,000,000. The
Bridge Loan shall have a term of one year from the date of the Bridge Note. The
Borrowers shall have the right at any time and from time to time to prepay the
Bridge Loan in whole or in part without premium or penalty but with interest
accrued on the amount prepaid to the date of payment.
SECTION 2.02. BRIDGE NOTE. The obligation of the Borrowers to repay the
Bridge Loan shall be evidenced by a note (the "Bridge Note") in the form
attached hereto as Exhibit B. The Bridge Note interest shall be payable at the
rate provided herein and pursuant to the terms of this Agreement.
SECTION 2.03. INTEREST ON BRIDGE NOTE. Interest on the Bridge Note shall
accrue at the greater of the floating National Prime Rate or 4.5% prior to
acceleration or maturity, and 6% in excess of the floating National Prime Rate
in effect from time to time after maturity, whether by acceleration or
otherwise.
SECTION 2.04. REPAYMENT OF BRIDGE NOTE. Interest only shall be payable
monthly on the Bridge Note. All outstanding principal and accrued but unpaid
interest shall be payable on the Bridge Loan Termination Date.
SECTION 2.05. TERM LOAN. The Bank agrees, on the terms and conditions set
forth in this Agreement, to make a loan (the "Term Loan") to the Borrowers on
the Closing Date in a principal amount up to but not exceeding $2,000,000. The
Term Loan shall have a term of three years from the date of the Term Note. The
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Borrowers shall have the right at any time and from time to time to prepay the
Term Loan in whole or in part without premium or penalty but with interest
accrued on the amount prepaid to the date of payment.
SECTION 2.06. TERM NOTE. The obligation of the Borrowers to repay the Term
Loan shall be evidenced by a note (the "Term Note") in the form attached hereto
as Exhibit C. The Term Note interest shall be payable at the rate provided
herein and pursuant to the terms of this Agreement.
SECTION 2.07. INTEREST ON TERM NOTE. Interest on the Term Note shall accrue
at a variable rate equal to the greater of the floating National Prime Rate,
plus 50 basis points or 4.5% prior to acceleration or maturity and 6% in excess
of the floating National Prime Rate in effect from time to time after maturity,
whether by acceleration or otherwise.
SECTION 2.08. REPAYMENT OF TERM NOTE. The Term Note shall be due and
payable in full on the third anniversary date of the Term Note. The Term Note
shall be amortized over a five-year period. The Borrowers agrees to pay to the
Lender on a monthly basis principal and accrued interest on the Term Note during
the first three years of the Term Note and shall pay all amounts of principal
and accrued interest which remain on the Term Note on the third anniversary of
the Term Note.
SECTION 2.09. REVOLVING LOAN. The Bank agrees, on the terms and subject to
the conditions set forth in this Agreement, to lend up to $5,500,000 to the
Borrowers on the terms and conditions of this Agreement (the "Revolving Loan").
The Bank will credit proceeds of the Revolving Loan to the Borrowers' deposit
accounts with the Bank, bearing number ▇▇▇▇▇▇▇▇, as requested by the Borrowers.
Subject to the terms hereof, the Bank will lend the Borrowers, from time to time
until the Revolving Loan Termination Date such sums in integral multiples of
$10,000 as the Borrowers 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 $5,500,000,
less the aggregate amounts of any issued and outstanding letters of credit
issued by the Bank at the request of and on the account of the Borrowers (the
"Loan Commitment"). The Borrowers may borrow, repay without penalty or premium
and reborrow hereunder, from the date of this Agreement until the Revolving Loan
Termination Date, either the full amount of the Loan Commitment or any lesser
sum which is $10,000 or an integral multiple thereof. It is the intention of the
parties that the outstanding balance of the Revolving Loan shall not exceed the
Borrowing Base as determined in the Borrowing Base Certificate, and if at any
time said balance exceeds the Borrowing Base, the Borrowers shall forthwith pay
the Bank sufficient funds to reduce the balance of the Revolving Loan until it
is in compliance with this requirement.
SECTION 2.10. REVOLVING NOTE. The Revolving Loan shall be evidenced by a
Promissory Note (the "Revolving Note") having stated maturity on the Revolving
Loan Termination Date, in the form attached hereto as Exhibit D.
SECTION 2.11. INTEREST ON REVOLVING NOTE. Interest on the Revolving Note
shall accrue at the greater of the floating National Prime Rate or 4.5% prior to
acceleration or maturity, and 6% in excess of the floating National Prime Rate
in effect from time to time after maturity, whether by acceleration or
otherwise.
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SECTION 2.12. REPAYMENT OF REVOLVING NOTE. The Revolving Note shall be due
and payable on May 31, 2005. Interest only shall be payable monthly on the
Revolving Note. All outstanding principal and interest shall be due and payable
on May 31, 2005.
SECTION 2.13. PAYMENTS. All principal, interest and fees due under this
Agreement, the Notes and the Loan 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 periodic statements mailed to the Borrowers by the
Bank. Should a payment come due on a day other than a Banking Day, the payment
shall be made no later than the next Banking Day and interest shall continue to
accrue during the extended period.
SECTION 2.14. FEES AND COST OF LOANS.
(a) At the Closing, the Borrowers shall pay to the Bank a commitment
fee of $37,500, which fee the Borrowers agrees and acknowledges has been
earned by the Bank.
(b) The Borrowers shall pay all costs associated with the Closing of
the Loans, including, but not limited to, title, survey, environmental and
appraisal reports, mortgage fees and taxes and the Bank's legal fees.
SECTION 2.15. USE OF PROCEEDS. The proceeds of the Loans hereunder shall be
used by the Borrowers to acquire all of the issued and outstanding shares of
Piezo, to provide a working line of credit to support accounts receivable and
inventory of Piezo after such acquisition and to refinance certain existing
mortgage and equipment indebtedness of Piezo. The Borrowers will not, directly
or indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any person for
the purpose of purchasing or carrying any such margin stock, or for any purpose
which violates, or is inconsistent with, Regulation X of such Board of
Governors.
SECTION 2.16. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if the Bank determines that any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall make it unlawful or
impossible for the Bank to maintain its commitment, then upon notice to the
Borrowers by the Bank the commitment of the Bank shall terminate. In no event
shall interest payable hereunder be in excess of the maximum rate of interest
permitted under applicable law. The Borrower hereby agrees to give the Bank
written notice in the event that the Borrower has actual knowledge that any
interest payment made to the Bank with respect to any Loan will cause the total
interest payments collected in connection with this Note in any one year to be
usurious under applicable law, and the Bank hereby agrees not to collect
knowingly any interest from the Borrower in the form of fees or otherwise which
will render this Note or the Loans usurious. In the event that such interest
would be usurious in the Bank's opinion, the Bank reserves the right to reduce
the interest payable by the Borrower. Additionally, at the option of the
Borrowers, any interest which may have been paid which exceeds the maximum rate
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permitted by law shall be applied to the principal or returned to the Borrower.
This provision shall survive the closing of this Note and the repayment of the
Loans.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the Bank
to make all Loans to the Borrowers is subject to the conditions precedent that
the Bank shall have received on or before the Closing each of the following, in
form and substance satisfactory to the Bank and its counsel:
(a) NOTE. Each respective Note duly executed by each of the Borrowers;
(b) SECURITY AGREEMENT. A Security Agreement duly executed by each of
the Borrowers together with the Financing Statements (Form UCC-1) to be
duly filed under the Uniform Commercial Code of all jurisdictions necessary
or, in the opinion of the Bank, desirable to perfect the security interest
created by the Security Agreement;
(c) EVIDENCE OF ALL CORPORATE ACTION BY BORROWERS. Certified (as of
the date of this Agreement) copies of all corporate action taken by each of
the Borrowers, including resolutions of their Boards of Directors,
authorizing the execution, delivery and performance of the Loan Documents
to which they are parties and each other document to be delivered by them
pursuant to this Agreement;
(d) INCUMBENCY AND SIGNATURE CERTIFICATE OF BORROWERS. A certificate
(dated as of the date of this Agreement) of the Secretaries of each of the
Borrowers certifying the names and true signatures of the officers of the
Borrowers authorized to sign the Loan Documents to which they are parties
and the other documents to be delivered by the Borrowers under this
Agreement;
(e) OPINION OF COUNSEL FOR BORROWERS. A favorable opinion of counsel
for each of the Borrowers, in substantially the form of Exhibit E;
(f) GUARANTY. A Guaranty duly executed by the Guarantor;
(g) EVIDENCE OF ALL CORPORATE ACTION BY GUARANTOR. Certified (as of
the date of this Agreement) copies of all corporate action taken by the
Guarantor, including resolutions of its Board of Directors, authorizing the
execution, delivery and performance of the Guaranty;
(h) INCUMBENCY AND SIGNATURE CERTIFICATE OF GUARANTOR. A certificate
(dated as of the date of this Agreement) of the Secretary of the Guarantor
certifying the names and true signatures of the officers of the Guarantor
authorized to sign the Guaranty;
(i) OPINION OF COUNSEL FOR GUARANTOR. A favorable opinion of counsel
for the Guarantor, in substantially the form of Exhibit F;
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(j) SUBORDINATED DEBT. Proof, to the reasonable satisfaction of Bank,
that ▇▇▇▇▇ Corporation, an Indiana corporation, has advanced an amount of
at least $1,800,000 which at all times shall be subordinated to all
Obligations to the Bank;
(k) LOCKBOX AGREEMENT. A lockbox agreement duly executed by Piezo in a
form satisfactory to the Bank; and
(l) MORTGAGE. A mortgage creating a security interest in the real
property of Piezo set forth in Exhibit A, duly executed by each of the
Borrowers to be duly filed in the appropriate jurisdictions.
(m) PATENT SECURITY AGREEMENT. A patent security agreement
substantially in the form of Exhibit I securing the intellectual property
set forth therein.
(n) OFFICER'S CERTIFICATE, ETC. The following statements shall be true
and the Bank shall have received a certificate signed by a duly authorized
officer of each of the Borrowers dated the date of the Term Loan and Bridge
Loan stating that:
(i) the representations and warranties contained in Articles IV
and V of this Agreement, in the Security Agreement and in the Guaranty
are correct on and as of the date of the Term Loan and Bridge Loan as
though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is
continuing or would result from the Term Loan or Bridge Loan; and
(o) ADDITIONAL DOCUMENTATION. The Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO REVOLVING LOAN. The obligation of the
Bank to make subsequent advances under the Revolving Loan shall be subject to
the further conditions precedent that on the date of such Revolving Loan:
(a) The following statements shall be true and the Bank shall have
received a certificate signed by a duly authorized officer of each of the
Borrowers dated the date of such Revolving Loan stating that:
(i) the representation and warranties contained in Articles IV
and V of this Agreement, in the Security Agreement and in the Guaranty
are correct on and as of the date of such Revolving Loan as though
made on and as of such date; and
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such loan.
(b) The Bank shall have received a borrowing base certificate in the
form of Exhibit H (the "Borrowing Base Certificate").
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(c) The Bank shall have received such other approvals, opinions or
documents as the Bank may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF M-TRON INDUSTRIES, INC.
To induce the Bank to enter into this Agreement, M-TRON Industries, Inc.
("M-TRON") makes the following representations and warranties:
SECTION 4.01. EXISTENCE AND POWER. M-TRON is a corporation duly formed and
in good standing under the laws of the State of Delaware. M-TRON has
accomplished all necessary actions required by a corporate entity under
applicable law to own all Collateral, and shares in Piezo, and to execute and
deliver, and to perform all of its obligations under, the Loan Documents to
which it is a party.
SECTION 4.02. AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR OTHER
AGREEMENTS. The execution, delivery and performance by M-TRON of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate actions of M-TRON and do not and will not
(a) require any material consent or approval, or authorization, by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, other than those obtained and in full force and effect, (b)
violate, in any material respect, any provision of any law, rule or regulation
or of any order, writ, injunction or decree presently in effect having
applicability to M-TRON, or violate any provision of the Certificate of
Incorporation or By-laws of M-TRON, (c) result in a breach of or constitute a
default beyond any applicable cure period under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which M-TRON
is a party or by which it or its properties may be bound or affected, or (d)
result in, or require, the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature to or with any other creditor of M-TRON, in the aggregate exceeding
$100,000, upon or with respect to any of the properties now owned or hereafter
acquired by M-TRON.
SECTION 4.03. LEGAL AGREEMENTS. The Loan Documents to which it is a party
constitute the legal, valid and binding obligations of M-TRON enforceable
against M-TRON in accordance with their respective terms, and as to the Loan
Documents to which M-TRON is not a party, M-TRON believes such documents
constitute the legal, valid and binding obligations of the parties thereto,
enforceable against such parties in accordance with their respective terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (b) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
SECTION 4.04. FINANCIAL CONDITION. M-TRON has furnished to the Bank its
financial statements as of December 31, 2003 and for the eight months ending in
August 31, 2004 (the "Financial Statements"). The Financial Statements fairly
present the financial condition of M-TRON on the dates thereof and were prepared
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in accordance with GAAP. There has been no material adverse change in the
operations, properties or condition (financial or otherwise) of M-TRON since the
date of the Financial Statements, and no additional borrowings have been made by
M-TRON other than the borrowing contemplated hereby or approved by the Bank. No
certificate or statement furnished to the Bank by or on behalf of M-TRON in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.
SECTION 4.05. LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of M-TRON, threatened against or affecting M-TRON
or the properties of M-TRON before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to M-TRON, would have a Material Adverse Effect.
SECTION 4.06. TAXES. M-TRON has filed all federal, state and local tax
returns which to the knowledge of M-TRON are required to be filed, and M-TRON
has paid or caused to be paid to the respective taxing authorities all taxes as
shown on said returns or on any assessment received by it to the extent such
taxes have become due except those which M-TRON is contesting in good faith and
with respect to which adequate reserves have been set aside.
SECTION 4.07. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of M-TRON or any Subsidiary or the Guarantor has been subject to any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance) having a Material Adverse Effect
on M-TRON or such Subsidiary or the Guarantor.
SECTION 4.08. OTHER AGREEMENTS. Neither M-TRON nor any Subsidiary nor the
Guarantor is a party to any indenture, loan or credit agreement, or to any lease
or other agreement or instrument, or subject to any charter or corporate
restriction which would reasonably be anticipated to have a Material Adverse
Effect on M-TRON or any Subsidiary or the Guarantor, or the ability of M-TRON or
the Guarantor to carry out its obligations under the Loan Documents to which it
is a party. Neither M-TRON nor any Subsidiary nor the Guarantor is in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
SECTION 4.09. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. M-TRON and its
Subsidiaries and the Guarantor have satisfied all judgments, and neither M-TRON
nor any Subsidiary nor the Guarantor is in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court or arbitrator, or
federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
SECTION 4.10. OWNERSHIP AND LIENS. M-TRON and each Subsidiary have title
to, or valid leasehold interests in, all of their material properties and
assets, real and personal, including the properties and assets and leasehold
interest reflected in the Financial Statements referred to in Section 4.04
(other than any properties or assets disposed of in the ordinary course of
12
business), and none of the properties and assets owned by M-TRON or any
Subsidiary and none of their leasehold interests are subject to any Lien, except
such as may be permitted pursuant to Section 7.01 of this Agreement.
SECTION 4.11. SUBSIDIARIES AND OWNERSHIP OF STOCK. Set forth in Schedule
4.11 is a complete and accurate list of the Subsidiaries of M-TRON (which shall
include Piezo), showing the jurisdiction of incorporation of each and showing
the percentage of M-TRON's ownership of the outstanding stock of each
Subsidiary. All of the outstanding capital stock of each such Subsidiary has
been validly issued, is fully paid and nonassessable and is owned by M-TRON free
and clear of all Liens.
SECTION 4.12. ERISA. M-TRON and each Subsidiary are in compliance in all
material respects with all applicable provisions of ERISA. Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with respect
to any Plan; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstances exist which constitute grounds entitling
the PBGC to institute proceedings to terminate, or appoint a trustee to
administer, a Plan; nor has the PBGC instituted any such proceedings; neither
M-TRON nor any Commonly Controlled Entity has completely or partially withdrawn
from a Multiemployer Plan; M-TRON and each Commonly Controlled Entity have met
their minimum funding requirements under ERISA with respect to all of their
Plans and the present value of all vested benefits under each Plan does not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA; and neither M-TRON nor any Commonly Controlled Entity
has incurred any liability to the PBGC under ERISA.
SECTION 4.13. OPERATION OF BUSINESS. M-TRON and its Subsidiaries and the
Guarantor possess all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and M-TRON and its Subsidiaries and the Guarantor are not in
violation of any valid rights of others with respect to any of the foregoing.
SECTION 4.14. DEBT. Schedule 4.14 is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital Leases
and other investments, agreements and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which M-TRON or any Subsidiary is in any manner directly or contingently
obligated; the maximum principal or face amounts of the credit in question,
outstanding or to be outstanding, are correctly stated, and all Liens of any
nature given or agreed to be given as security therefor are correctly described
or indicated in such Schedule.
SECTION 4.15. ENVIRONMENT. M-TRON and each Subsidiary have duly complied
with, and their businesses, operations, assets, equipment, Property, leaseholds
or other facilities are in compliance with, the provisions of all federal, state
and local environmental, health and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder, the failure of compliance with
which would reasonably be anticipated to result in a Material Adverse Effect.
M-TRON and each Subsidiary have been issued and will maintain all required
federal, state and local permits, licenses, certificates and approvals relating
to (a) air emissions; (b) discharges to surface water or groundwater; (c) noise
emissions; (d) solid or liquid waste disposal; (e) the use, generation, storage,
13
transportation or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such materials listed in any
federal, state or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (f) other
environmental, health or safety matters. A true, accurate and complete list of
all such permits, licenses, certificates and approvals is attached hereto as
Schedule 4.15. Neither M-TRON nor any Subsidiary has received notice of, or
knows of facts which constitute any violations of, any federal, state or local
environmental, health or safety laws, codes or ordinances and any rules or
regulations promulgated thereunder with respect to its businesses, operations,
assets, equipment, Property, leaseholds or other facilities. Except in
accordance with a valid governmental permit, license, certificate or approval
listed in Schedule 4.15, there has been no emission, spill, release or discharge
into or upon (a) the air; (b) soils, or any improvements located thereon; (c)
surface water or groundwater; or (d) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises of any toxic or
hazardous substances or wastes at or from the premises; and accordingly except
for inventory of raw materials, supplies, work in progress and finished goods
listed in Schedule 4.15 that is to be used or sold in the ordinary course of
business the premises of M-TRON and its Subsidiaries are free of all such toxic
or hazardous substances or wastes. There has been no complaint, order,
directive, claim, citation or notice by any governmental authority or any person
or entity with respect to (a) air emissions; (b) spills, releases or discharges
to soils or improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal systems servicing
the premises; (c) noise emissions; (d) solid or liquid waste disposal; (e) the
use, generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (f) other environmental, health or safety matters
affecting M-TRON or its business, operations, assets, equipment, Property,
leaseholds or other facilities. Neither M-TRON nor its Subsidiaries have any
indebtedness, obligation or liability, absolute or contingent, matured or not
matured, with respect to the storage, treatment, cleanup or disposal of any
solid wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation or liability with respect
to any current regulation, law or statute regarding such storage, treatment,
cleanup or disposal) which is not shown on Schedule 4.15. Set forth in Schedule
4.15 is a list of all real property owned or leased by M-TRON and its
Subsidiaries at any time since December 31, 1998, wherever located, and a brief
description of the business conducted at such location.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PIEZO TECHNOLOGY, INC.
To induce the Bank to enter into this Agreement, Piezo Technology, Inc.
("Piezo") makes the following representations and warranties:
SECTION 5.01. EXISTENCE AND POWER. Piezo is a corporation duly formed and
in good standing under the laws of the State of Florida. Piezo has accomplished
all necessary actions required by a corporate entity under applicable law to own
the Property and Collateral, and to execute and deliver, and to perform all of
its obligations under, the Loan Documents to which it is a party.
14
SECTION 5.02. AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR OTHER
AGREEMENTS. The execution, delivery and performance by Piezo of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate actions of Piezo and do not and will not
(a) require any material consent or approval, or authorization, by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, other than those obtained and in full force and effect, (b)
violate, in any material respect, any provision of any law, rule or regulation
or of any order, writ, injunction or decree presently in effect having
applicability to Piezo, or violate any provision of the Articles of
Incorporation or By-laws of Piezo, (c) result in a breach of or constitute a
default beyond any applicable cure period under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which Piezo is
a party or by which it or its properties may be bound or affected, or (d) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature to
or with any other creditor of Piezo, in the aggregate exceeding $100,000, upon
or with respect to any of the properties now owned or hereafter acquired by
Piezo.
SECTION 5.03. LEGAL AGREEMENTS. The Loan Documents to which it is a party
constitute the legal, valid and binding obligations of Piezo enforceable against
Piezo in accordance with their respective terms, and as to the Loan Documents to
which Piezo is not a party, Piezo believes such documents constitute the legal,
valid and binding obligations of the parties thereto, enforceable against such
parties in accordance with their respective terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and (b)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
SECTION 5.04. FINANCIAL CONDITION. Piezo has furnished to the Bank its
financial statements as of September 30, 2003 and for the eleven months ending
on August 28, 2004 (the "Financial Statements"). The Financial Statements fairly
present the financial condition of Piezo on the dates thereof and were prepared
in accordance with GAAP. Except as set forth in Schedule 5.04, there has been no
material adverse change in the operations, properties or condition (financial or
otherwise) of Piezo since the date of the Financial Statements, and no
additional borrowings have been made by Piezo other than the borrowing
contemplated hereby or approved by the Bank. No certificate or statement
furnished to the Bank by or on behalf of Piezo in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
SECTION 5.05. LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of Piezo, threatened against or affecting Piezo or
the properties of Piezo before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to Piezo, would have a Material Adverse Effect.
SECTION 5.06. TAXES. Piezo has filed all federal, state and local tax
returns which to the knowledge of Piezo are required to be filed, and Piezo has
paid or caused to be paid to the respective taxing authorities all taxes as
15
shown on said returns or on any assessment received by it to the extent such
taxes have become due except those which Piezo is contesting in good faith and
with respect to which adequate reserves have been set aside.
SECTION 5.07. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of Piezo or any Subsidiary have been subject to any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), having a Material Adverse Effect on Piezo
or such Subsidiary.
SECTION 5.08. OTHER AGREEMENTS. Neither Piezo nor any Subsidiary is a party
to any indenture, loan or credit agreement, or to any lease or other agreement
or instrument, or subject to any charter or corporate restriction that would
reasonably be anticipated to have a Material Adverse Effect on Piezo or any
Subsidiary, or the ability of Piezo to carry out its obligations under the Loan
Documents to which it is a party. Neither Piezo nor any Subsidiary is in default
in any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
SECTION 5.09. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. Piezo and its
Subsidiaries have satisfied all judgments, and neither Piezo nor any Subsidiary
is in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or arbitrator, or federal, state, municipal or other
governmental authority, commission, board, bureau, agency or instrumentality,
domestic or foreign.
SECTION 5.10. OWNERSHIP AND LIENS. Piezo and each Subsidiary have title to,
or valid leasehold interests in, all of their material properties and assets,
real and personal, including the properties and assets and leasehold interest
reflected in the Financial Statements referred to in Section 5.04 (other than
any properties or assets disposed of in the ordinary course of business), and
none of the properties and assets owned by Piezo or any Subsidiary and none of
their leasehold interests are subject to any Lien, except such as may be
permitted pursuant to Section 7.11 of this Agreement.
SECTION 5.11. SUBSIDIARIES AND OWNERSHIP OF STOCK. Set forth in Schedule
5.11 is a complete and accurate list of the Subsidiaries of Piezo (which shall
include Piezo), showing the jurisdiction of incorporation of each and showing
the percentage of Piezo's ownership of the outstanding stock of each Subsidiary.
All of the outstanding capital stock of each such Subsidiary has been validly
issued, is fully paid and nonassessable and is owned by Piezo free and clear of
all Liens.
SECTION 5.12. ERISA. Except as set forth in Schedule 5.12, Piezo and each
Subsidiary are in compliance in all material respects with all applicable
provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has
occurred and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan; nor has
the PBGC instituted any such proceedings; neither Piezo nor any Commonly
16
Controlled Entity has completely or partially withdrawn from a Multiemployer
Plan; Piezo and each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans and the present
value of all vested benefits under each Plan does not exceed the fair market
value of all Plan assets allocable to such benefits, as determined on the most
recent valuation date of the Plan and in accordance with the provisions of
ERISA; and neither Piezo nor any Commonly Controlled Entity has incurred any
liability to the PBGC under ERISA.
SECTION 5.13. OPERATION OF BUSINESS. Piezo and its Subsidiaries possess all
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
or rights thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted, and Piezo and its
Subsidiaries are not in violation of any valid rights of others with respect to
any of the foregoing.
SECTION 5.14. DEBT. Schedule 5.14 is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital Leases
and other investments, agreements and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which Piezo or any Subsidiary is in any manner directly or contingently
obligated; the maximum principal or face amounts of the credit in question,
outstanding or to be outstanding, are correctly stated, and all Liens of any
nature given or agreed to be given as security therefor are correctly described
or indicated in such Schedule.
SECTION 5.15. ENVIRONMENT. Piezo and each Subsidiary have duly complied
with, and their businesses, operations, assets, equipment, Property, leaseholds
or other facilities are in compliance with, the provisions of all federal, state
and local environmental, health and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder, the failure of compliance with
which would reasonably be anticipated to result in a Material Adverse Effect.
Piezo and each Subsidiary have been issued and will maintain all required
federal, state and local permits, licenses, certificates and approvals relating
to (a) air emissions; (b) discharges to surface water or groundwater; (c) noise
emissions; (d) solid or liquid waste disposal; (e) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such materials listed in any
federal, state or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (f) other
environmental, health or safety matters. A true, accurate and complete list of
all such permits, licenses, certificates and approvals is attached hereto as
Schedule 5.15. Neither Piezo nor any Subsidiary has received notice of, or knows
of facts which constitute any violations of, any federal, state or local
environmental, health or safety laws, codes or ordinances and any rules or
regulations promulgated thereunder with respect to its businesses, operations,
assets, equipment, Property, leaseholds or other facilities. Except in
accordance with a valid governmental permit, license, certificate or approval
listed in Schedule 5.15, there has been no emission, spill, release or discharge
into or upon (a) the air; (b) soils, or any improvements located thereon; (c)
surface water or groundwater; or (d) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises of any toxic or
hazardous substances or wastes at or from the premises; and accordingly except
for inventory of raw materials, supplies, work in progress and finished goods
listed in Schedule 5.15 that is to be used or sold in the ordinary course of
business the premises of Piezo and its Subsidiaries are free of all such toxic
or hazardous substances or wastes. There has been no complaint, order,
17
directive, claim, citation or notice by any governmental authority or any person
or entity with respect to (a) air emissions; (b) spills, releases or discharges
to soils or improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal systems servicing
the premises; (c) noise emissions; (d) solid or liquid waste disposal; (e) the
use, generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (f) other environmental, health or safety matters
affecting Piezo or its business, operations, assets, equipment, Property,
leaseholds or other facilities. Neither Piezo nor its Subsidiaries have any
indebtedness, obligation or liability, absolute or contingent, matured or not
matured, with respect to the storage, treatment, cleanup or disposal of any
solid wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation or liability with respect
to any current regulation, law or statute regarding such storage, treatment,
cleanup or disposal) which is not shown on Schedule 5.15. Set forth in Schedule
5.15 is a list of all real property owned or leased by Piezo and its
Subsidiaries at any time since December 31, 1998, wherever located, and a brief
description of the business conducted at such location.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers will:
SECTION 6.01. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause
each Subsidiary to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
required.
SECTION 6.02. MAINTENANCE OF RECORDS. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Borrowers and its Subsidiaries.
SECTION 6.03. MAINTENANCE AND PROPERTIES. Maintain, keep and preserve, and
cause each Subsidiary to maintain, keep and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
SECTION 6.04. CONDUCT OF BUSINESS. Continue, and cause each Subsidiary to
continue, to operate its business in the ordinary course.
SECTION 6.05. MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
to maintain, insurance with financially sound and reputable insurance companies
or associations in such amounts and covering such risks as are usually carried
by companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
18
SECTION 6.06. COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, in all respects with all applicable laws, rules, regulations and orders,
the failure of compliance with which would reasonably be anticipated to result
in a Material Adverse Effect.
SECTION 6.07. RIGHT OF INSPECTION. At any reasonable time and from time to
time, upon reasonable advance notice, permit the Bank or any agent or
representative thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrowers and
any Subsidiary, and to discuss the affairs, finances and accounts of the
Borrowers and any Subsidiary with any of their respective officers and directors
and the Borrowers' independent accountants.
SECTION 6.08. REPORTING REQUIREMENTS. Furnish to the Bank:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available and in any
event within 25 days after the end of each month, consolidated and
consolidating balance sheets of the Borrowers and their Subsidiaries as of
the end of such quarter, consolidated and consolidating statements of
income, retained earnings, aging of all accounts receivables and a
Borrowing Base Certificate (in a form approved by the Bank) of the
Borrowers and their Subsidiaries for the period commencing at the end of
the previous month and ending with the end of such month, and consolidated
and consolidating statements of cash flows for the portion of the fiscal
year ended with the last day of such month, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the previous fiscal year and all prepared in accordance
with GAAP consistently applied and certified by the chief financial officer
of the Borrowers (subject to year-end adjustments);
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
within 120 days after the end of each fiscal year of the Borrowers,
consolidated and consolidating balance sheets of the Borrowers and their
Subsidiaries as of the end of such fiscal year, and consolidated and
consolidating statements of income and retained earnings of the Borrowers
and their Subsidiaries for such fiscal year, and consolidated and
consolidating statements of changes in cash flows of the Borrowers and
their Subsidiaries for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the prior fiscal year and all prepared in accordance
with GAAP consistently applied and as to the consolidated statements
accompanied by an opinion thereon acceptable to the Bank by independent
accountants of recognized standing selected by the Borrowers and acceptable
to the Bank;
(c) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrowers or any Subsidiary by independent
certified public accountants in connection with examination of the
financial statements of the Borrowers or any Subsidiary made by such
accountants;
(d) CERTIFICATE OF NO DEFAULT. Within 25 days after the end of each
month of each fiscal year of the Borrowers, a certificate of the chief
financial officer of the Borrowers (i) certifying that to the best of his
19
knowledge no Default or Event of Default has occurred and is continuing or,
if a Default or Event or Default has occurred and is continuing, a
statement as to the nature thereof and the action which is proposed to be
taken with respect thereto; and (ii) with computations demonstrating
compliance with the covenants contained in Article VII;
(e) ACCOUNTANTS' REPORT. Simultaneously with the delivery of the
annual financial statements referred to in Section 6.08(b), a certificate
of the independent public accountants who audited such statements to the
effect that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default or, if such accountants shall
have obtained knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have knowledge and
the nature or status thereof;
(f) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrowers or any
Subsidiary which, if determined adversely to the Borrowers or such
Subsidiary, would reasonably be anticipated to have a Material Adverse
Effect;
(g) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as practicable
and in any event within five days after the occurrence of each Default or
Event of Default, a written notice setting forth the details of such
Default or Event of Default and the action which is proposed to be taken by
the Borrowers with respect thereto;
(h) ERISA REPORTS. As soon as practicable, and in any event within 30
days after the Borrowers know or have reason to know that any circumstances
exist that constitute grounds entitling the PBGC to institute proceedings
to terminate a Plan subject to ERISA with respect to the Borrowers or any
Commonly Controlled Entity, and promptly but in any event within two
Business Days of receipt by the Borrowers or any Commonly Controlled Entity
of notice that the PBGC intends to terminate a Plan or appoint a trustee to
administer the same, and promptly but in any event within five Business
Days of the receipt of notice concerning the imposition of withdrawal
liability with respect to the Borrowers or any Commonly Controlled Entity,
the Borrowers will deliver to the Bank a certificate of the chief financial
officer of the Borrowers setting forth all relevant details and the action
which the Borrowers proposes to take with respect thereto;
(i) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof,
copies of any statement or report furnished to any party pursuant to the
terms of any indenture, loan, credit or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause of this
Section 6.08;
(j) PROXY STATEMENTS, ETC. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
which the Borrowers or any Subsidiary sends to their stockholders, and
copies of all regular, periodic and special reports, and all registration
20
statements which the Borrowers or any Subsidiary files with the Securities
and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange; and
(k) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers or any
Subsidiary as the Bank may from time to time reasonably request.
SECTION 6.09. ENVIRONMENT. Be and remain, and cause each Subsidiary to be
and remain, in compliance with the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances, and all rules and
regulations issued thereunder, the failure of compliance with which would
reasonably be anticipated to result in a Material Adverse Effect; notify the
Bank immediately of any notice of a hazardous discharge or environmental
complaint received from any governmental agency or any other party; notify the
Bank immediately of any hazardous discharge from or affecting its premises;
immediately contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty assessed in connection therewith; permit the
Bank to inspect the premises, to conduct tests thereon and to inspect all books,
correspondence and records pertaining thereto; and at the Bank's request, and at
the Borrowers' expense, provide a report of a qualified environmental engineer,
satisfactory in scope, form and content to the Bank, and such other and further
assurances reasonably satisfactory to the Bank that the condition has been
corrected.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers will not, without the written
consent of the Bank, in the Bank's sole discretion:
SECTION 7.01. LIENS. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any Lien, upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(a) Liens in favor of the Bank;
(b) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(c) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are
not past due for more than 60 days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have
been established;
(d) Liens under workers' compensation, unemployment insurance, Social
Security or similar legislation;
21
(e) Liens, deposits or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of
business;
(f) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(g) Easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by the Borrowers or any Subsidiary of the
Property or assets encumbered thereby in the normal course of its business
or materially impair the value of the Property subject thereto;
(h) Liens securing obligations of a Subsidiary to the Borrowers or
another Subsidiary;
(i) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on Property existing at the time of such acquisition
(and not created in contemplation of such acquisition), or a Lien incurred
in connection with any conditional sale or other title retention agreement
or a Capital Lease, provided that:
(i) any property subject to any of the foregoing is acquired by
the Borrowers or any Subsidiary in the ordinary course of its
respective business and the Lien on any such property attaches to such
asset concurrently or within 90 days after the acquisition thereof;
(ii) the obligation secured by any Lien so created, assumed or
existing shall not exceed 90% of the lesser of the cost or the fair
market value as of the time of acquisition of the property covered
thereby to the Borrowers or Subsidiary acquiring the same;
(iii) each such Lien shall attach only to the property so
acquired and fixed improvements thereon;
(iv) the Debt secured by all such Liens shall not exceed $100,000
at any time outstanding in the aggregate; and
(v) the Debt secured by such Lien is permitted by the provisions
of Section 7.02, and the related expenditure is permitted under the
terms of this Agreement; and
(j) As to Borrower M-Tron, Liens existing on the date hereof and
identified in Schedule 7.01.
22
SECTION 7.02. DEBT. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Debt, except:
(a) Debt of the Borrowers under this Agreement or the Note;
(b) Debt described in Schedule 7.02(b), but no voluntary prepayment,
renewals, extensions or refinancing thereof;
(c) Debt of the Borrowers subordinated on terms satisfactory to the
Bank to the Borrowers' obligations under this Agreement and the Note;
(d) Debt of the Borrowers to any Subsidiary or of any Subsidiary to
the Borrowers or another Subsidiary;
(e) Accounts payable to trade creditors for goods or services which
are not aged more than 90 days from the billing date and current operating
liabilities (other than for borrowed money) which are not more than 90 days
past due, in each case incurred in the ordinary course of business, as
presently conducted, and paid within the specified time, unless contested
in good faith and by appropriate proceedings;
(f) Debt in respect of letters of credit issued for the account of the
Borrowers or any Subsidiary in an aggregate outstanding face amount at any
time of up to $100,000;
(g) Debt incurred in connection with acceptances of the Borrowers or
any Subsidiary in an aggregate amount outstanding at any one time of up to
$50,000; and
(h) Debt of the Borrowers or any Subsidiary secured by purchase-money
Liens permitted by Section 7.02.
(i) Debt existing on the date hereof and identified in Schedule
7.02(i).
SECTION 7.03. MERGERS, ETC. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any person, or acquire all or substantially all
of the assets or the business of any person, or permit any Subsidiary to do so,
except that (a) any Subsidiary may merge into or transfer assets to the
Borrowers and (b) any Subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary. Notwithstanding the foregoing, the Borrowers
shall be permitted, at any time, to sell the Property which is the subject of
the mortgage referred to in Section 3.01(l) so long as (a) the sales price of
such Property is equal to or greater than the amount of the outstanding
principal and interest of the Bridge Loan at the time of such sale and (b) the
proceeds of the sale are immediately applied to the Bridge Loan.
SECTION 7.04. LEASES. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any obligation as
lessee for the rental or hire of any real or personal property, except (a)
Capital Leases permitted by Section 7.01(i); (b) leases existing on the date of
this Agreement and any extensions or renewals thereof; (c) leases (other than
23
Capital Leases) which do not in the aggregate require the Borrowers and their
Subsidiaries on a consolidated basis to make payments (including taxes,
insurance, maintenance and similar expenses which the Borrowers or any
Subsidiary is required to pay under the terms of any lease) in any fiscal year
of the Borrowers in excess of $50,000; and (d) leases between the Borrowers and
any Subsidiary or between any Subsidiaries.
SECTION 7.05. SALE AND LEASEBACK. Sell, transfer or otherwise dispose of,
or permit any Subsidiary to sell, transfer or otherwise dispose of, any real or
personal property to any person and thereafter directly or indirectly lease back
the same or similar property. Notwithstanding the foregoing, the Borrowers shall
be permitted, at any time, to sell the Property so long as (a) the sales price
of such Property is equal to or greater than the amount of the outstanding
principal and interest of the Bridge Loan at the time of such sale and (b) the
proceeds of the sale are immediately applied to the Bridge Loan .
SECTION 7.06. DIVIDENDS. As to Borrower M-TRON, declare or pay any
dividends in excess of fifty percent (50%) of M-TRON's prior year earnings, but
only so long as M-TRON is in compliance with all other terms of this Agreement;
or purchase, redeem, retire or otherwise acquire for value any of its capital
stock now or hereafter outstanding; or make any distribution of assets to its
stockholders as such whether in cash, assets or obligations of the Borrowers; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of,
its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any of its
Subsidiaries to purchase or otherwise acquire for value any stock of the
Borrowers or another Subsidiary, except that the Borrowers (a) may declare and
deliver dividends and make distributions payable solely in common stock of the
Borrowers; and (b) may purchase or otherwise acquire shares of its capital stock
by exchange for or out of the proceeds received from a substantially concurrent
issue of new shares of its capital stock.
SECTION 7.07. SALE OF ASSETS. Sell, lease, assign, transfer or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer or
otherwise dispose of, any of its owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
receivables and leasehold interests), except (a) inventory disposed of in the
ordinary course of business; (b) the sale or other disposition of assets no
longer used or useful in the conduct of its business; and (c) that any
Subsidiary may sell, lease, assign or otherwise transfer its assets to the
Borrowers.
SECTION 7.08. INVESTMENTS. Make, or permit any Subsidiary to make, any loan
or advance to any person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in, any person, or participate as a
partner or joint venture with any other person, except (a) direct obligations of
the United States or any agency thereof with maturities of one year or less from
the date of acquisition; (b) commercial paper of a domestic issuer rated at
least "A-1" by Standard & Poor's Corporation or "P-1" by ▇▇▇▇▇'▇ Investors
Service, Inc.; (c) certificates of deposit with maturities of one year or less
from the date of acquisition issued by any commercial bank having capital and
surplus in excess of $50,000,000; (d) stock, obligations or securities received
in settlement of debts (created in the ordinary course of business) owing to the
Borrowers or any Subsidiary; and (e) loans and advances to employees of
24
Borrowers in respect of business-related expenses incurred in the ordinary
course of business and for such employees to purchase computer and other
equipment in an aggregate amount not exceeding $50,000.
SECTION 7.09. GUARANTIES, ETC. Assume, guaranty, endorse or otherwise be or
become directly or contingently responsible or liable, or permit any Subsidiary
to assume, guaranty, endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services, or an agreement to maintain or cause such
person to maintain a minimum working capital or Tangible Net Worth, or to
otherwise assure the creditors of any person against loss), for obligations of
any person, except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
SECTION 7.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, or permit any Subsidiary to enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of the
Borrowers' or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrowers or such Subsidiary than would obtain in a
comparable arm's-length transaction with a person not an Affiliate.
SECTION 7.11. INTEREST PAYMENTS ON ▇▇▇▇▇ CORPORATION SUBORDINATED DEBT. As
to Borrower M-TRON, pay any interest on any Subordinated Debt owed by M-TRON to
▇▇▇▇▇ Corporation, an Indiana corporation, unless (a) the Borrowers are in full
compliance with the terms of this Agreement and (b) such amount to be paid as
interest on such Subordinated Debt does not, in any year, exceed the total
amount of 5% of the then outstanding principal of such obligation.
SECTION 7.12. PAYMENT OF OTHER INDEBTEDNESS IN THE EVENT OF DEFAULT. In the
event that Borrowers are in Default under the terms of this Agreement, pay any
Indebtedness to any party other than the Bank, until such time as such default
has been cured.
ARTICLE VIII
FINANCIAL COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, Borrower M-TRON agrees to fully comply with the
following:
SECTION 8.01. MINIMUM WORKING CAPITAL. The Borrower M-TRON will maintain at
all times an excess of current assets over current liabilities of not less than
$950,000.
SECTION 8.02. MINIMUM TANGIBLE NET WORTH. The Borrower M-TRON will maintain
at all times a tangible net worth of not less than $4,200,000.
SECTION 8.03. CAPITAL EXPENDITURES. The Borrower M-TRON will not make any
expenditures for fixed or capital assets if, after giving effect thereto, the
25
aggregate of all such expenditures made by the Borrowers would exceed $850,000
during any fiscal year of the Borrowers.
SECTION 8.04. CURRENT RATIO. For the period beginning with the date of this
Agreement through March 31, 2005, the Borrower M-TRON will maintain at all times
a ratio of current assets to current liabilities of not less than 1 to 1. At all
times after March 31, 2005, the Borrower will maintain a ratio of current assets
to current liabilities of not less than 1.1 to 1.
SECTION 8.05. LEVERAGE RATIO. The Borrower M-TRON will maintain at all
times a ratio of total liabilities (excluding Subordinated Debt in an amount not
exceeding $2,500,000) to tangible net worth of not greater than 4 to 1.
SECTION 8.06. FIXED CHARGE COVERAGE RATIO. Beginning on December 31, 2004,
the Borrower M-TRON will maintain a Fixed Charge Coverage Ratio of 1.2 to 1,
tested at the end of each calendar quarter. The parties acknowledge and agree at
such time that the Bridge Loan becomes due and payable that the maturity of the
principal balance of the Bridge Loan shall not in and of itself cause a default
under this section.
ARTICLE IX
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall be an Event of
Default and give the Bank the right to exercise its remedies under this
Agreement:
(a) the Borrowers shall fail to pay when due, or within a 5 day period
thereafter, any Obligations or any other installment of principal or
interest or fee payable to the Bank;
(b) the Borrowers shall fail to timely, or within a 15 day period
thereafter, provide reports to the Bank as provided in Article VI;
(c) the Borrowers shall fail to observe or perform any other
obligation to be observed or performed by it hereunder or under any of the
Loan Documents. Upon Borrower's knowledge of any such failure, the Borrower
shall immediately notify the Bank of the same and the Borrower shall cure
such failure within 15 days thereafter. Without creating or imposing any
obligation or duty on the Bank to inquire, investigate or monitor, in the
event that the Bank becomes aware of any such failure to observe or perform
any obligation to be observed or performed by the Borrowers hereunder or
under any Loan Document, the Bank shall notify the Borrowers of such
failure and the Borrower shall cure such failure within 15 days thereafter.
The failure of the Borrower to so cure such failure within such 15 day
period shall constitute an Event of Default under this Subsection. The
Parties agree that the delay of the Bank to so notify the Borrowers as
provided in this Subsection shall not constitute a waiver of any provision
of this Agreement but shall only require that the Bank notify the Borrowers
and the Borrowers be granted such right to cure such failure with such
period prior to the exercise of the Banks rights pursuant to this Section;
26
(d) the Borrowers shall fail to pay any Indebtedness in an aggregate
principal amount in excess of $100,000 due any third persons and such
failure shall continue beyond any applicable grace period, or the Borrowers
shall default under any material agreement binding the Borrowers and such
default shall continue beyond any applicable grace period;
(e) any financial statement, representation, warranty or certificate
made or furnished by or with respect to the Borrowers 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;
(f) either Borrower shall admit its inability to pay its debts as they
mature or shall make an assignment for the benefit of themselves or any of
their creditors;
(g) proceedings in bankruptcy, or for reorganization of the Borrowers,
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 Borrowers and, except with respect to any such
proceedings instituted by the Borrowers, shall not be discharged or stayed
within 60 days of their commencement;
(h) a receiver or trustee shall be appointed for the Borrowers 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
Borrowers, and except with respect to any such appointments requested or
instituted by the Borrowers such receiver or trustee shall not be
discharged within 60 days of his appointment, and except with respect to
any such proceedings instituted by the Borrowers such proceedings shall not
be discharged within 60 days of their commencement, or the Borrowers shall
discontinue business or materially change the nature of its business;
(i) the Borrowers shall suffer final judgments for payment of money
aggregating in excess of $100,000 which are not covered, without
reservation, by insurance and shall not discharge the same within a period
of 30 days unless, pending further proceedings, execution has not been
commenced or, if commenced, has been effectively stayed; or
(j) the letter agreement between ▇▇▇▇▇ Corporation, the parent of
M-TRON, and the Bank dated October 18, 2002 ceasing to be effective or
enforceable,
(k) ▇▇▇▇▇ Corporation, the parent of M-TRON shall, at any time have a
Tangible Net Worth of less than $7,500,000,
(l) a judgment creditor of the Borrowers shall obtain possession of
any of the Bank's Collateral by any means, including (without implied
limitation) levy, distraint, replevin or self-help.
27
SECTION 9.02. RIGHTS AND REMEDIES. If an Event of Default shall have
occurred and be continuing, the Bank may refrain from making any further
disbursements hereunder (but the Bank may make disbursements after the
occurrence of such an Event of Default without thereby waiving its rights and
remedies hereunder), and the Bank may exercise any or all of the following
rights and remedies:
(a) the Bank may exercise and enforce its rights and remedies under
any or all of the Loan Documents;
(b) the Bank may enter upon the Property, if allowed under applicable
law, and take possession thereof; or
(c) The Bank may exercise any other rights and remedies available to
it by law or agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of the Bank in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
SECTION 10.02. AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any of the Loan Documents or consent to any departure
by the Borrowers therefrom shall be effective unless the same shall be in
writing and signed by the Bank and the Borrowers, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in similar
or other circumstances.
SECTION 10.03. ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and sent by mail or
telecopy (if by telecopy with a confirmation mailed within two Business Days
thereafter), to the applicable party at its address indicated below:
If to Borrower M-TRON: M-TRON Industries, Inc.
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
28
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ &
Wolosky LLP
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower Piezo: Piezo Technology, Inc.
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ &
Wolosky LLP
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Bank: First National Bank of Omaha
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices, requests, demands and other communications,
when mailed, shall be effective when deposited in the mails, addressed as
aforesaid, or, when telecopied, shall be effective when confirmation of receipt
is received, except that notices or requests to the Bank pursuant to any of the
provisions hereunder shall not be effective until received by the Bank.
SECTION 10.04. TIME OF ESSENCE. Time is of the essence in the performance
of this Agreement.
SECTION 10.05. EXECUTION IN COUNTERPARTS. The Loan Documents may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts of
each instrument or agreement, taken together, shall constitute but one and the
same instrument.
SECTION 10.06. BINDING EFFECT, ASSIGNMENT. The Loan Documents to which they
are parties shall be binding upon and inure to the benefit of the Borrowers and
29
the Bank and their respective successors and assigns, except that the Borrowers
shall not have the right to assign its rights thereunder or any interest therein
without the prior written consent of the Bank.
SECTION 10.07. GOVERNING LAW; CHOICE OF FORUM. The Loan Documents, to the
extent they do not otherwise provide, shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
that body of law relating to choice of laws. The parties agree that, in the
event any action is commenced by any party, the sole venue for such action shall
be in the ▇▇▇▇▇▇▇ County District Court for the State of Nebraska or the United
States District Court for the District of Nebraska.
SECTION 10.08. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
SECTION 10.09. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 10.10. INTEGRATION. Except with regard to the existing loan
agreement and the note related thereto as note number 2000001751-6, this
Agreement supersedes, replaces and terminates any prior oral offers,
negotiations, understandings or agreements and any commitment letters or similar
writings relating to any of the matters contemplated herein.
SECTION 10.11. COSTS, EXPENSES AND TAXES. The Borrowers agrees to pay on
demand all costs and expenses incurred by the Bank in connection with the
preparation, execution, delivery, filing and administration of the Loan
Documents, and of any amendment, modification or supplement to the Loan
Documents, including, without limitation, the fees and out-of-pocket expenses of
counsel for the Bank, incurred in connection with advising the Bank as to its
rights and responsibilities hereunder. The Borrowers also agree to pay all such
costs and expenses, including court costs, incurred in connection with
enforcement of the Loan Documents, or any amendment, modification or supplement
thereto, whether by negotiation, legal proceedings or otherwise. In addition,
the Borrowers shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of any of the Loan Documents and the other documents to be delivered
under any such Loan Documents, and agrees to hold the Bank harmless from and
against any and all liabilities with respect to any delay in paying or omission
to pay such taxes and fees. This provision shall survive termination of this
Agreement.
SECTION 10.12. INDEMNITY. The Borrowers hereby agrees to defend, indemnify
and hold the Bank harmless from and against any and all claims, damages,
judgments, penalties, costs and expenses (including attorney fees and court
costs now or hereafter arising from the aforesaid enforcement of this clause)
arising directly or indirectly from the activities of the Borrowers and its
Subsidiaries, its predecessors in interest or third parties with whom it has a
contractual relationship, or arising directly or indirectly from the violation
of any environmental protection, health or safety law, whether such claims are
asserted by any governmental agency or any other person. This indemnity shall
survive termination of this Agreement.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
M-TRON INDUSTRIES, INC., a Delaware
corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name ▇▇▇▇▇ ▇. ▇▇▇▇
Title Vice President
PIEZO TECHNOLOGY, INC., a Florida
corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name ▇▇▇▇▇ ▇. ▇▇▇▇
Title Vice President
FIRST NATIONAL BANK OF OMAHA
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Name ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title Vice President
STATE OF SOUTH DAKOTA )
) ss.
COUNTY OF YANKTON )
On this 14th day of October, 2004, before me, the undersigned, a Notary
Public, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇, on behalf of said entity as VICE
PRESIDENT of M-TRON Industries, Inc. , a Delaware corporation, who executed the
foregoing instrument, and acknowledged that he executed the same as his
voluntary act and deed, as well as that of the corporation.
/s/ ▇▇▇▇▇ Sejnola
-----------------------------------
Notary Public
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ )
) ss.
COUNTY OF YANKTON )
On this 14th day of October, 2004, before me, the undersigned, a Notary
Public, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇, on behalf of said entity as VICE
PRESIDENT of Piezo Technology, Inc., a Florida corporation, who executed the
foregoing instrument, and acknowledged that he executed the same as his
voluntary act and deed, as well as that of the corporation.
/s/ ▇▇▇▇▇ Sejnola
-----------------------------------
Notary Public
32