EXHIBIT 10.6
LOAN AGREEMENT
April 7, 2004
Dotronix, Inc.
000 Xxxxx Xxxxxx XX
Xxx Xxxxxxxx, XX 00000-0000
Dear Ladies and Gentlemen:
The undersigned ("Lender") agrees to lend to Dotronix, Inc.
("Borrower") $450,000, as described in this Agreement.
Loan, Interest and Fees.
------------------------
The Loan. Subject to the terms and conditions of this Agreement, Lender will
make loans to the Borrower (collectively, the "Loan") from time to time from the
date hereof until April 7, 2005, during which period the Borrower may repay and
reborrow in accordance with the provisions hereof, provided, that the aggregate
unpaid principal amount of all outstanding loans under this Agreement shall not
exceed $450,000 at any time. Each time the Borrower desires to obtain a loan
advance pursuant to this agreement, such request by the Borrower shall be in
writing (which may be by facsimile), or by telephone promptly confirmed in
writing, and must be given so as to be received by the Lender not later than
11:00 a.m., Minneapolis time, on the date at least 2 business days prior to the
date of the requested advance. Each request for an advance shall specify (i) the
borrowing date (which shall be a business day), and (ii) the amount of such
advance. The Lender will make the amount of the requested advance available to
the Borrower, in immediately available funds not later than 5:00 p.m.,
Minneapolis time, within 2 business days after the date requested. If, at any
time, or for any reason, the principal amount outstanding under this agreement
exceeds $450,000, the Borrower shall immediately pay to the Lender, in cash, the
amount of such excess. Any requested advance that would increase the principal
outstanding amount of the Loan to an amount greater than $450,000 will be denied
by Lender.
The Note. The Loan shall be evidenced by a note (as hereafter amended, extended,
renewed or replaced, the "Note"). All unpaid principal and all interest accrued
on the Note shall be due and payable on April 7, 2005. The parties agree that
the Note shall replace the demand notes issued by Borrower to Lender in the
principal amount of $30,000 each dated September 4, 2003, November 19, 2003 and
January 7, 2004 for a total principal amount of $90,000 and the demand note
issued to Borrower to Lender in the principal amount of $45,000 dated January
21, 2004 (all such notes collectively referred to herein as the "Demand Notes").
Under the outstanding Demand Notes, an aggregate amount of $135,000 has been
advanced as of the date of this Agreement. The Lender acknowledges that no
interest payments are outstanding, due and payable under any of the Demand Notes
as of the date of this Agreement.
Interest. The principal balance of the Loan shall bear interest equal to five
percent (5%) per annum as set forth in the Note, payable as set forth in the
Note.
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Optional Prepayments. Borrower may prepay the Loan, in whole or in part, at any
time, without premium or penalty.
Payments. Payments of principal, interest, fees and expenses hereunder and under
the Note shall be made without set-off or counterclaim in immediately available
funds not later than 5:00 p.m., Minneapolis time, on the dates called for under
this Agreement at the address of Lender set forth in Section 6.3. Funds received
on any day after such time shall be deemed to have been received on the next
business day. Whenever any payment would be due on a day which is not a business
day, such payment shall be made on the next succeeding business day and such
extension of time shall be included in the computation of any interest or fees.
Collateral Security. As security for the prompt satisfaction of Borrower's
obligations under the Loan, Borrower grants to Lender a lien on, and a security
interest in, all personal property of Borrower whether now owned or existing or
hereafter acquired by the Borrower and wherever located, as more fully described
in the Security Agreement dated of even date herewithin (the " Security
Agreement").
1.7 Warrant. As additional consideration for the Loan, Borrower will
issue to Lender a warrant for the purchase of one hundred thousand (100,000)
shares of Borrower's common stock at an exercise price of $0.10 per share in the
form acceptable to the Lender (the "Warrant").
Conditions Precedent. The obligation of Lender to make any Loan advance
hereunder shall be subject to the satisfaction of the conditions precedent that
Lender shall have received all of the following, in form and substance
satisfactory to Lender, each duly executed (as hereafter amended, modified,
extended, renewed or replaced, the "Loan Documents"):
the Note, in exchange for which Lender shall return the Demand Notes to Borrower
for cancellation;
a Subordination Agreement given by the Estate of Xxxxxxx X. Xxxxxx (the
"Estate") in form acceptable to the Lender;
the Warrant;
(d) the Security Agreement;
(e) the Borrower shall amend its New Brighton lease in form
acceptable to Lender;
(f) an Option Agreement by and among the Lender, the Estate
and Minnesota River Aviation, Inc., and
(g) such other instruments, documents and agreement as Lender
shall reasonably require.
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Representations and Warranties. To induce Lender to enter into this Agreement,
and to make Loan advances hereunder, Borrower represents and warrants to Lender:
Validity. The Loan Documents constitute the legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their terms.
No Conflict; No Default. The execution, delivery and performance by Borrower of
the Loan Documents will not result in a breach of or constitute a default under
any indenture, loan or credit agreement or any other agreement, lease or
instrument to which Borrower is a party or by which it or any of its properties
may be bound.
Financial Statements and Condition. Borrower has made available to the Lender,
in the form filed with the SEC (excluding any exhibits thereto), (i) its Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2003, and (ii) its
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003, (the
forms, reports, and other documents referred to in clauses (i) and (ii) above
being referred to herein, collectively, as the "Borrower SEC Reports"). To the
best of Borrower's knowledge, the Borrower SEC Reports (i) were or will be
prepared in accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were or are made, not misleading.
Litigation and Contingent Liabilities. There are no material actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower before any court, arbitrator, governmental department or
other instrumentality and Borrower has no material contingent liabilities.
Covenants. Borrower covenants and agrees with Lender that for so long as there
is any amount remaining unpaid on the Note, or Lender has any obligation to make
any Loan hereunder, Borrower will comply with the following:
Financial Statements. Furnish to Lender such financial information with respect
to Borrower as Lender may reasonably request from time to time.
Access to Records. Permit Lender to discuss Borrower's affairs, finances and
accounts with officers of Borrower, all at such reasonable times and as often as
Lender may reasonably request.
Reimbursement of Expenses. Promptly reimburse Lender for any and all expenses of
collection of the Loan, including reasonable attorneys' fees.
Representation of Lender. Lender represents that he is an "Accredited Investor"
as defined in Rule 501(a) of Regulation D under the Act based upon the Lender
being an individual with total assets in excess of $1,000,000. Furthermore,
Lender acknowledges and represents that:
He has received and reviewed the Borrower SEC Reports;
He is able to bear the economic risk of the transaction described in this
Agreement;
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He understands the risk of investment in Borrower;
Neither the Note nor the Warrant have been registered under the Securities Act
of 1933, as amended (the "Act") or state securities laws; and
The Note and Warrant are being purchased by the Lender for his own account and
for investment and without the intention of reselling or redistributing the
same, and that if Lender should determine to dispose or transfer the Note or
Warrant, he will not do so without (1) obtaining an opinion of counsel
satisfactory to Borrower that such proposed disposition or transfer may lawfully
be made without registration under the Act, or (2) such registrations are in
effect.
Miscellaneous.
Binding Effect. The parties hereto agree that this Agreement shall be binding
upon and inure to the benefit of their respective heirs, successors in interest
and assigns.
Governing Law. This Agreement and the rights and obligations of the parties
hereunder and under the Note and any other documents delivered herewith shall be
construed in accordance with and governed by the substantive laws (but not the
laws of conflict) of the State of Minnesota. Borrower hereby consents to the
jurisdiction of the courts of the State of Minnesota and federal courts located
in the State of Minnesota for any actions brought hereon or on the Note.
Notices. Any notices required or contemplated hereunder shall be effective upon
the placing thereof in the United States mails, certified mail and with return
receipt requested, postage prepaid, and addressed as follows:
If to Borrower: Dotronix, Inc.
000 Xxxxx Xxxxxx XX
Xxx Xxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx, CFO
If to Lender: Xxxxx X. Xxxxx
0000 Xxxxx 000xx Xxxxxx
Xxxxxxxxxx, XX 00000
Copy to:
Xxxxxx X. Xxxxxxxx
0 Xxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
No Waivers. No failure or delay on the part of Lender in exercising any right,
power or privilege hereunder and no course of dealing between Borrower and
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
Accounting Terms. All accounting terms not otherwise specifically defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied.
[Signatures on following page]
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LENDER:
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
Accepted and agreed to as of the date above.
DOTRONIX, INC.
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Its: Chief Financial Officer
ACCEPTANCE AND ACKNOWLEDGMENT
-----------------------------
The undersigned hereby consents to the foregoing Loan Agreement and
acknowledges that all contingencies and conditions precedent to the
effectiveness of the Agreement to Extend and Amend Loan and Security Agreement
among the undersigned and Borrower dated November 5, 2003 have been fully
satisfied.
The Estate of Xxxxxxx X. Xxxxxx
By its Personal Representatives
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
/S/ XXXX X. XXXXXX
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
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