Exhibit 10 (kk)
REDI LOAN XXXXXX 00-00-X
XXXXX XX XXXXX XXXXXX
BOARD OF ECONOMIC DEVELOPMENT
REVOLVING ECONOMIC DEVELOPMENT
AND INITIATIVE FUND (REDI)
LOAN AGREEMENT
LOAN AGREEMENT made and entered into this 19th day of December, 2002,
by and between the South Dakota Board of Economic Development, 000 Xxxxx Xxxxxx,
Xxxxxx, Xxxxx Xxxxxx 00000 (herein "BED"), and M-TRON INDUSTRIES, INC. OF 000
XXXXXXX XXXXXX, XXXXXXX, XXXXX XXXXXX 00000 (herein the "Borrower").
WHEREAS, the South Dakota Board of Economic Development is a board
created pursuant to SDCL 1-16G-1 for the purpose of promoting economic
development in South Dakota, and the South Dakota Governor's Office of Economic
Development, acting pursuant to ARSD 68:02:01:23, provides administrative
support to BED in the application, processing, monitoring, and servicing of
loans made by BED; and,
WHEREAS, the Borrower made an application (the "Application") dated
September 20, 2002, to BED for a loan from the Revolving Economic Development
and Initiative Fund (REDI), which Application was approved by BED pursuant to
SDCL Chapters 1-33 and 1-16G, as amended, and ARSD Article 68:02 (the "BED
Loan"); and,
WHEREAS, BED has by duly adopted resolution designated one of the
members of the Board of Economic Development to execute this Loan Agreement; has
designated the Commissioner, Governor's Office of Economic Development (the
"Commissioner"), and BankWest, Inc., a state chartered financial institution, of
Pierre, South Dakota (BankWest), as its representatives hereunder; has
authorized the Commissioner to act on its and the State's behalf hereunder; has
empowered the Commissioner to delegate his duties in connection herewith to
those persons under his supervision as he deems appropriate, has entered into a
Loan Servicing Agreement with BankWest, whereby BankWest will act as BED's agent
for purposes of closing, funding, receiving payment and servicing the BED Loan
with the Borrower: and has authorized BankWest to act on behalf of BED
consistent with the terms of the Loan Servicing Agreement and the Borrower's BED
Loan Documents;
NOW THEREFORE it is mutually agreed as follows:
1. In consideration of the Borrower's execution and delivery of a
Promissory Note dated the date hereof, and observance and performance of the
covenants, terms and conditions hereof, and in reliance on the Borrower's
representations made herein, BED, through its duly designated agent, agrees to
loan to Borrower, from the Revolving Economic Development and Initiative Fund
the principal sum of Two Hundred Ninety-Six Thousand and no/100 Dollars
($296,000), according to the terms and conditions set forth in this Loan
Agreement and the Promissory Note of even date herewith, which is incorporated
herein by reference.
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2. In consideration of BED's agreement to loan said funds to the
Borrower, the Borrower has made, executed and delivered to BED a Promissory Note
dated the date hereof, in the principal sum of Two Hundred Ninety-Six Thousand
and no/100 Dollars ($296,000), due and payable, together with interest thereon
at the rate of three percent (3%) per annum, simple interest, according to the
terms and conditions set forth therein and in this Loan Agreement.
3. As security for the repayment of the BED Loan above described, the
Borrower agrees as follows:
a. To mortgage to BED the real property, buildings, and improvements
owned by the Borrower as described with particularity in the
Mortgage of even date which is incorporated herein by reference;
4. Unless otherwise provided herein or in the Loan Servicing Agreement,
or unless a Lender disburses the funds pursuant to a Lender Agreement, the loan
proceeds will be kept in the state treasury, in the Revolving Economic
Development and Initiative Fund, and shall be disbursed to the Borrower based
upon the Borrower's request for disbursements. In order to obtain a
disbursement, the Borrower shall submit to BED a signed request for disbursement
on a form prescribed by BED, together with all attachments required by such
form. Disbursements may be obtained only for those Project costs which have been
legally incurred, and which are due and payable, or have been paid by the
Borrower. The Borrower will designate, by duly adopted resolution, an official
to certify on Borrower's behalf that the request submitted is correct and is a
valid expenditure for the Project. Unless BED specifically agrees otherwise, or
unless the Borrower has already paid the costs, disbursements shall be made
directly to the person to whom the Borrower owes such amount. First disbursement
of the BED Loan must be made not later than six months from the date hereof, and
no disbursement may be made later than twelve months from the date of BED's
original approval of Borrower's Application, unless such time is extended in
writing by BED.
5. Borrower warrants and represents as follows:
a. The Borrower is duly organized and existing under the laws of the
State of South Dakota, or under the laws of another state or country
and is authorized to transact business in the State of South Dakota;
has taken all proper action, including the adoption of a resolution,
to authorize the execution, delivery and performance of its
obligations under this Loan Agreement, the Promissory Note, and any
other Loan Documents (hereinafter referred to jointly as the "Loan
Documents"), and the incurring of the debt represented by the
Promissory Note; and has the power and authority to enter into and
consummate all transactions contemplated by the Loan Documents, and
to carry out its obligations hereunder and thereunder.
b. There is no action, suit, proceeding, inquiry or investigation at
law or equity, by or before any judicial or administrative court,
agency or body, pending or threatened against the Borrower wherein
an unfavorable decision, ruling, or finding would materially and
adversely affect the validity or enforceability of any of the Loan
Documents.
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c. Neither the execution and delivery of the Loan Documents, the
consummation of the transactions contemplated thereby, nor the
fulfillment of, or compliance with the provisions of the Loan
Documents will conflict with or result in the breach of any
restriction, agreement or instrument to which the Borrower is a
party, or by which it is bound, or result in the creation or
imposition of any lien of any nature upon any of the property of the
Borrower under the terms of any such instrument or agreement, nor
will such action result in the violation of any provision of any
law, ordinance, governmental order to which the Borrower, its
property or operations are subject.
d. No event of default has occurred in any agreement or instrument as
to any outstanding indebtedness of the Borrower for money borrowed
and no condition, event or act exists which, with the lapse of time
or the giving of notice, would constitute an event of default under
any such agreement or instrument. The Borrower is not in violation
of any term of any restriction, agreement, indenture, ordinance,
resolution, charter, or other instrument to which it is a party or
which it or its property may be bound, which violation would
materially and adversely affect the transactions contemplated hereby
or the compliance by the Borrower with the terms of the Loan
Documents.
e. The Borrower has obtained or made all permits, filings and approvals
required to the date of this Loan Agreement by any governmental body
or officer for the making and performance by the Borrower of its
obligations under the Loan Documents or for the Project, the
financing thereof or the reimbursement of the Borrower for the costs
thereof No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority
(other than those, if any, already obtained) is required on the part
of the Borrower as a condition to entering into the Loan Documents
and the performance of the Borrower's obligations hereunder and
thereunder.
f. The Loan Documents to which the Borrower is a party are legal, valid
and binding obligations and agreements of the Borrower, enforceable
against the Borrower according to their terms, except as the
enforceability thereof may be limited by laws relating to
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and general principles of equity.
g. The Project consists of the facilities, improvements and activities
described in Exhibit A, attached hereto, and by this reference
incorporated herein, as such Exhibit may be amended from time to
time.
h. The funds provided pursuant to this Loan Agreement do not exceed 29
percent of the total Project cost as described in the Borrower's
Application.
i. There is no fact that the Borrower has not specifically disclosed in
writing to BED that materially and adversely affects or will
materially and adversely affect the properties, operations and
finances of the Borrower, its status as a legal entity in good
standing, or its ability to perform its obligations under the Loan
Documents, or to pledge any revenues or property to the repayment of
the BED Loan
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j. The Borrower certifies that there has been no material adverse
change since the date of the Borrower's Application in the financial
condition, organization, operation, business prospects, property, or
the personnel of the Borrower; and that the information contained in
the Application, and other information the Borrower provided to BED
does not contain any material misrepresentations or misstatements of
fact.
k. The Borrower further warrants and represents that it:
(1) has not received any notice or otherwise learned of
any environmental liability which would individually
or in the aggregate constitute a Material Adverse
Occurrence arising in connection with (i) any
non-compliance with or violation of the requirements
of any Environmental Law as defined in Section 13 or
(ii) the release or threatened release of any toxic
or hazardous waste, contaminant, constituent or other
substance into the environment;
(2) does not have any knowledge of any threatened or
actual liability in connection with the release or
threatened release of any toxic or hazardous waste,
contaminant, constituent, or other substance in the
environment which would individually or in the
aggregate constitute a Material Adverse Occurrence;
and
(3) has not received any notice or otherwise learned of
any federal or state investigation evaluating whether
any remedial action is needed to respond to a
material release or threatened release on any toxic
or hazardous waste, contaminant, constituent or other
substance into the environment for which the Borrower
is or may be liable. The Borrower is in substantial
compliance with all Environmental Laws in the
respective jurisdictions where it is presently doing
business or conducting operations.
Material Adverse Occurrence shall mean any occurrence of
whatsoever nature (including, without limitation, any adverse
determination in any litigation, arbitration or governmental
investigation or proceeding) which the BED shall reasonably
determine materially adversely affects: (i) the then present
or prospective financial condition or operations of any party
to the Loan; (ii) the ability of any such Party to perform its
obligations under any of the Loan Documents; or (iii) the
value of the Collateral securing the Loan.
6. To further induce BED to make this BED Loan, Borrower agrees to the
following conditions:
a. Borrower will execute the Loan Documents and any supplements or
additions thereto, and such other documents in connection with this
BED Loan as BED may from time to time request which are reasonably
necessary to effectuate to the fullest extent possible the terms of
this Loan Agreement and the Loan Documents.
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b. Borrower will, on demand, reimburse BED for any and all expenses,
including reasonable attorney fees, incurred, or which may be
hereafter incurred, by BED or its agents from time to time in
connection with or by reason of Borrower's Application for, and the
making and administration, of the BED Loan.
c. Borrower will at all times keep proper books of account in a manner
satisfactory to BED. Borrower authorizes BED to make or cause to be
made, during regular business hours, at Borrower's expense and in
such manner and at such times as BED may require, (i) inspections
and audits of any books, records and papers in the custody or
control of Borrower or others, relating to Borrower's financial or
business conditions, including the making of copies thereof and
extracts therefrom, and (ii) inspections and appraisals of any of
Borrower's assets. Borrower will furnish to BED quarterly financial
statements within 60 days of quarter-end and an annual report within
90 days of the fiscal year end. The annual report must contain, at a
minimum, the Borrower's unaudited financial statements (including a
balance sheet, income statements and cash flow statement), and upon
request of BED will include Borrower's federal tax returns. Borrower
hereby authorizes all federal, state and municipal authorities to
furnish reports, examination, records, and other information
relating to the conditions and affairs of Borrower and any desired
information from such reports, returns, files, and records of such
authorities upon request therefor by BED.
d. Borrower agrees to comply with those federal, state and local laws,
regulations, ordinances and permits applicable to the Project, as
well as the provisions of SDCL Chapter 1-16G, SDCL Chapter 1-33, and
ARSD Chapter 68:02, and shall furnish to BED such reports and
information and provide such access required by those statutes and
rules.
e. Borrower agrees to pay in a timely manner the principal and interest
on the Promissory Note, and on any other indebtedness now or
hereafter at any time due to BED or any other Lender.
f. The Borrower will promptly pay all taxes, charges, liens,
assessments and encumbrances which now affect, or which may in the
future affect, the Project or the security for the payment of the
Promissory Note as herein provided, or BED's interest therein for
which it is legally liable.
g. Borrower agrees to indemnify and hold BED, its officers, agents and
employees, harmless from and against any and all actions, suits,
damages, liability or other proceedings (including costs and
attorney's fees) arising from or connected with the Borrower's
Project funded herein. This section does not require the Borrower to
be responsible for or defend against claims or damages arising
solely from errors or omissions of BED, its officers, agents or
employees.
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h. Borrower agrees that it will notify BED in writing within 30 days of
the occurrence of any of the following: (i) if Borrower is an
individual, a change in the place of Borrower's principal residence;
(ii) if Borrower is an organization, a change in Borrower's place of
business, the opening of any new place of business or the closing of
any existing place of business; (iii) if Borrower is an
organization, a change in the location of its chief executive
office; (iv) any other change in the Borrower's "location" as that
term is defined and used in Article 9 of the Uniform Commercial Code
as adopted in South Dakota and as amended from time to time. Failure
to do so shall constitute a material default upon the terms of this
Loan Agreement.
7. On or prior to the disbursement of funds pursuant to this Loan
Agreement, the Borrower shall submit to BankWest all documents required by the
Commitment Letter, the Loan Documents and the applicable statutes and
regulations. In addition, the Borrower shall submit the following items:
a. the executed Promissory Note, Mortgage and Parity Agreement;
b. an executed counterpart of this Loan Agreement;
c. an executed Employment Agreement with BED agreeing to create and
retain not less than 32 full time employee positions, as set forth
in the Borrower's Application dated September 20, 2002.
d. a certified resolution of the Borrower's governing body approving
the BED Loan, this Loan Agreement, the Promissory Note, and the Loan
Documents;
e. any certificate of insurance required by the Loan Agreement or the
Loan Documents, including, if applicable, a title insurance policy;
f such other certificates, documents and other information as BED may
require.
Once the documents listed above have been executed and delivered, the
BED Loan will be deemed closed.
8. In the event Borrower fails to make any payment or any part thereof
as provided in the Promissory Note described herein, within fifteen (15) days of
the due date thereof, or in the event that the Borrower fails or refuses to
perform any covenants or agreements hereunder on the Borrower's part made and
entered into, or under any agreement between the Borrower and the BED made in
connection with the BED Loan, or in the event of failure of the Borrower to
promptly pay, when due, any taxes, charges, liens, assessments, or encumbrances,
or in the event of the insolvency of the Borrower, BED may at its option declare
this Agreement and the Promissory note to be in default and the total
indebtedness owed by the Borrower to BED, including principal and interest,
shall at the option of BED immediately become due and payable, upon twenty (20)
days' written notice to the Borrower. Anything in the foregoing or in any of the
other Loan Documents to the contrary
Page 6 of 11
notwithstanding, BED may in the event of a default not capable of cure
immediately declare a default and immediately take action to realize upon the
Collateral by whatever means allowed by law.
a. In the event of any default by Borrower upon the terms of this Loan
Agreement or the Promissory Note, then the entire outstanding
principal balance of the Loan shall thereafter bear interest until
paid or until the default is cured to BED's satisfaction at a fixed
rate three percentage points higher than the prime rate of interest
published weekly in the Wall Street Journal, as published at the
time of the default.
b. In the event that Borrower defaults in providing the financial
information required by Section 6(c), the reports required under
Section 6(d), or proof of the insurance required by Section 12 of
this Loan Agreement, then the Borrower shall pay to BED the sum of
$200 for each such default. This sum is intended by the parties and
shall be considered and treated as liquidated damages due to BED,
and not as a penalty. The parties specifically agree that due to the
nature of the BED Loan made to the Borrower it is impracticable or
extremely difficult to fix the actual damages resulting from the
Borrower's breach of those provisions of this Loan Agreement because
failure to provide the information in a timely manner prevents BED
from having complete and accurate data concerning the status of its
economic development program for the purpose of preparing its annual
report, assessing the success of its economic development strategies
and developing future strategies; from assessing the financial
strength of the businesses BED assists, and the success of its
assistance efforts; and it makes it difficult for BED to protect the
continued viability of its revolving loan program.
9. If an event of default occurs, BED, at its sole option, has the
right, but not the duty, to incur and pay any reasonable expenses, for the
account of the Borrower, for the payment of any taxes, charges, liens,
assessments and encumbrances with relation to the Project, and add any amounts
so paid to the principal sum due hereunder. Borrower agrees that if an event of
default occurs, in addition to any other amounts that may be due from the
Borrower, it will pay BED an amount equal to the costs and expenses, including
reasonable expert and attorneys fees, incurred by BED in enforcing its rights
under this Loan Agreement or the other Loan Documents.
10. The rights and remedies herein conferred upon BED shall be
cumulative and not alternative and shall be in addition and not in substitution
of or in derogation of rights and remedies conferred by the Loan Documents or
any other agreements between the parties hereto or by any applicable law. The
failure of BED to enforce strict performance of any covenant, promise, or
condition herein contained, including timely payments due hereunder, shall not
operate as a waiver of the right of BED thereafter to require that the terms
hereof be strictly performed according to the tenor thereof.
11. If BED participates in this loan with a bank, credit union, savings
and loan, a federal or state agency, or other lender ("the Lender"), the
Borrower agrees to cooperate and abide by all terms and conditions of any and
all loan documents involving any loan from the Lender to the Borrower for the
Project, including the Lender Agreement. A default in any provision of any such
loan documents with the Lender shall constitute a default under this Loan
Agreement and the Promissory Note.
Page 7 of 11
Borrower further agrees to cooperate with BankWest as closing agent and loan
servicing agent, to facilitate the performance of the duties of BankWest
pursuant to the Loan Servicing Agreement.
12. The Borrower shall at all times during the term of this Loan
Agreement, and while the Promissory Note is outstanding, keep and maintain, or
provide evidence acceptable to BED that it has obtained, property and casualty
insurance, workers compensation, and liability insurance with insurers licensed
to do business in the State, against such risks and in such amounts as are
customary in the State for entities of the same or similar size and type as the
Borrower, and similarly situated with facilities of the Project's type, and
provide proof of such coverage to BED. Each policy (except workers' compensation
insurance) shall be lender loss payable, and name BED as an additional insured
or loss payee, as its interests may appear. Any policy provided pursuant to this
section must provide that it cannot be canceled without 30 days prior written
notice of cancellation to BED. In the event of cancellation the Borrower will
promptly obtain replacement insurance with the same or substantially similar
coverage and provide proof of such coverage to BED. In the event of renewal,
replacement, or changes in coverage, the Borrower will promptly provide written
notice of such changes to BED.
13. The Borrower covenants and agrees to comply with all present and
future environmental laws, ordinances, permits, rules and regulations. Borrower
shall not permit the generation, creation, treatment, incorporation, discharge,
disposal, escape, release or threat of release of any contaminant above, upon,
under, within, or from the Project site which is not in compliance with any
applicable laws, ordinances, permits, rules and regulations. Borrower represents
that there are no underground storage tanks containing any contaminant located
on the Project site, or property assigned as Collateral for this BED Loan, and
that no new tanks will be located on such property unless the Borrower complies
with any applicable laws, ordinances, rules and regulations, and obtains all
necessary permits.
a. For purposes of this Loan Agreement, "contaminant" is a "Petroleum
Product" as described in SDCL 37-2-5; "Asbestos" as described in
SDCL 34-44-1(2); a "Regulated Substance" as described in SDCL 34
A-12-1(8); substances regulated under and defined in the provisions
of 15 U.S.C. 2601-2671, 33 U.S.C. 1251-1387, 42 U.S.C. 6901-6999(I),
or 42 U.S.C. 7401-7642; or any corresponding federal or state
regulations promulgated under the above federal or state statutes,
as well as any amendments, deletions, or corrections to any such
laws, ordinances, rules and regulations, including any laws,
ordinances, rules and regulations which may be enacted or adopted
subsequent to the date of, and which become effective during the
term of, and while the Premises remains subject to the terms and
conditions of this Loan Agreement.
b. Borrower agrees to indemnify and hold BED, its officers, agents,
employees, assigns and successors in interest harmless from any and
all claims, demands, judgments, penalties, costs, damages, expenses
or liability of any kind or character whatsoever, including costs
and reasonable attorneys' fees, arising or resulting from or
connected with a breach of the foregoing covenant, it being the
intent of BED and the Borrower that BED shall have no liability for
damage to the environment or natural resources, for abatement,
removal, or cleanup of, or otherwise with respect to, any
contaminants either by virtue of any interest
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of BED in the property, or created as a result of BED's exercise of
any of its rights or remedies under this Loan Agreement or any of
the Loan Documents.
c. Borrower shall, for the purposes of this Loan Agreement, be
designated the "Owner" or "Operator" of the property.
14. Any required or permitted notice or other communication under this
Agreement shall be in writing and addressed as follows:
If to BED: State of South Dakota
Board of Economic Development
c/o Governors Office of Economic Development
000 Xxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Copy to: BankWest, Inc.
X.X. Xxx 000
Xxxxxx, X.X. 00000
If to Borrower: M-tron Industries, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Notices required or permitted under this Loan Agreement shall be given by and to
the Commissioner, Governor's Office of Economic Development and Xxxxx Xxxxxx,
Senior Vice President of Bankwest on behalf of BED, and the Borrower
or__________________on behalf of the Borrower, or such authorized designees as
either party may from time to time designate in writing. Any such notice or
other communication, if mailed, shall be sent by registered or certified mail,
return receipt requested. Notices or communications to or between the parties
shall be deemed to have been delivered when mailed by registered or certified
mail or, if personally delivered, when received by such party.
15. Time is of the essence in the performance of the covenants, terms
and conditions contained in this BED Loan Agreement. This Loan Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors and assigns except that the Borrower may not
assign or transfer it rights under the Loan Documents without prior written
consent of BED.
16. All other prior discussions, communications and representations
concerning the subject matter of the Loan Documents are superseded by the terms
of the Loan Documents, and except as specifically provided herein, the Loan
Documents constitute the entire agreement with respect to the subject matter
hereof.
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17. This Agreement shall be governed by and construed in accordance
with the laws of the State of South Dakota. Any lawsuit pertaining to or
affecting this Loan Agreement shall be venued in Circuit Court, Sixth Judicial
Circuit, Xxxxxx County, South Dakota.
18. All representations contained in the Borrower's Application, and
all representations, terms, conditions and covenants contained in the Commitment
Letter executed in conjunction with this Loan Agreement are hereby incorporated
by reference herein. To the extent there is a conflict between the terms of the
Application or Commitment Letter and this Loan Agreement, the terms of this Loan
Agreement shall prevail.
19. This Loan Agreement and the Loan Documents may not be amended
except in writing, which writing shall be expressly identified as a part hereof
or thereof, and which writing will be signed by an authorized representative of
each of the parties. No provision stated herein shall be waived without the
prior written consent of BED.
20. In the event that any provision of this Loan Agreement shall be
held unenforceable or invalid by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.
IN WITNESS WHEREOF the parties hereto have set their hands and seals
effective the day and year above first written.
SOUTH DAKOTA BOARD OF
ECONOMIC DEVELOPMENT
BY: [ILLEGIBLE]
--------------------------
(SEAL)
ITS: TREASURER
M-TRON INDUSTRIES, INC.
(SEAL) BY: /s/ Xxxxxx X. Xxxxxxx
---------------------
ITS: President & CEO
ATTEST:
BY: /s/ Xxxxx X. Xxxx
-----------------------
ITS: Secretary
NOTE: Corporate Borrowers must execute Loan Agreement, in corporate name, by
duly authorized officer, and seal must be affixed and duly attested.
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EXHIBIT A
TO
LOAN AGREEMENT
PROJECT DESCRIPTION
REDI loan proceeds will be used expand the Yankton facility by funding the
purchase of inventory and equipment from Champion Technology, A competitor being
liquidated.
SOURCES USES
------- ----
REDI $ 350,000 Equipment $ 350,000
ABC $ 100,000 Inventory $ 500,000
YAPG $ 250,000 Acquisition Costs $ 170,000
FNB-Omaha $ 120,000
Equity-Xxxxx Corp, $ 200,000
----------- ------------
TOTAL $ 1,020,000 TOTAL $ 1,020,000
----------- ------------
ACKNOWLEDGMENT OF EXHIBIT A
TO LOAN AGREEMENT
M-TRON INDUSTRIES, INC.
BY: /s/ Xxxxx X. Xxxx
-----------------------
ITS: VP & CFO
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