LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT ("AGREEMENT") is made to be effective as
of the 29th day of December 2004, by and between BRANCH BANKING AND TRUST
COMPANY ("LENDER"), LMIC MANUFACTURING, INC, formerly Linsang Manufacturing,
Inc., a Delaware corporation (the "BORROWER") and KWOK-LEUNG LI (collectively,
R.1. The LENDER has extended a term loan ("LOAN") to the BORROWER
evidenced by a Promissory Note dated May 31, 2001 in the original stated
principal amount of $5,000,000.00 ("NOTE").
R.2. The terms of the LOAN are governed by a Loan Agreement dated May 31,
2001, which was amended by an Amendment to Loan Agreement dated April 3, 2002
(collectively the "LOAN AGREEMENT").
R.3. The BORROWER'S repayment obligations under the NOTE are secured by
its equipment, accounts, inventory, documents, general intangibles and
instruments pursuant to the terms of a Security Agreement dated May 31, 2001
R.4. A proper financing statement under the name Linsang Manufacturing,
Inc. was filed by the LENDER with the Delaware Secretary of State on March 12,
2001. Subsequent to a merger wherein Linsang Manufacturing, Inc. was the
surviving corporate entity, Linsang Manufacturing, Inc. changed its name to LMIC
Manufacturing, Inc., effective October 15, 2003. A proper amendment to financing
statement, noting a name change to LMIC Manufacturing, Inc., was filed by the
LENDER in the records of the Delaware Secretary of State on November 3, 2003,
which operated to continue the LENDER'S perfected security interests.
R.5. Several Note Modification Agreements were executed by the BORROWER
and the LENDER deferring principal payments due in November and December 2002,
April through December 2003 and June through August 2004 (the "NOTE
R.6. The BORROWER'S repayment obligations under the NOTES are guaranteed
by Kwok-Leung Li pursuant to the terms of a Guaranty Agreement dated May 31,
2001, as amended by an Amendment to Guaranty Agreement dated April 3, 2002,
pursuant to which Kwok Li agreed to pledge personal collateral owned by him and
his wife to secure his guaranty (collectively, the "GUARANTY").
R.7. Kwok-Leung Li and Felice Li executed a Security Agreement dated April
3, 2002 ("PERSONAL PLEDGE AGREEMENT") pledging certain personally owned assets
to secure the obligations of Kwok-Leung Li under the GUARANTY.
R.8. The BORROWER is in default under the terms of the NOTE in that it has
failed to make the required principal payments due thereunder for September
through December 2004 (the "EXISTING DEFAULT").
R.9. The BORROWER has requested that the LENDER agree to permit the
deferral of principal payments from September 2004 through January 2005 in order
to improve the cash flow of the BORROWER and to better enable the BORROWER to
acquire a firm commitment from another lender or other financial institution to
refinance the indebtedness of the BORROWER to the LENDER on or before March 30,
R.10. The LENDER is willing to consent to the request if the OBLIGORS
agree to the acceleration of the maturity of the LOAN to March 31, 2005 from
June 1, 2005, execute and deliver this AGREEMENT and comply with the terms and
conditions set forth herein.
R.11. All of the documents relating to the NOTE, the NOTE MODIFICATIONS,
the LOAN AGREEMENT, the GUARANTY, the SECURITY AGREEMENT, the PERSONAL PLEDGE
AGREEMENT and all documentation relating thereto are hereinafter referred to as
the "LOAN DOCUMENTS."
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the LENDER and the OBLIGORS hereby agree as follows:
Section 1. Recitals. The LENDER and the OBLIGORS acknowledge that the
Recitals set forth above are true and accurate. Each of the Recitals is
incorporated into this AGREEMENT by reference and made a part hereof.
Section 2. Acknowledgment Of Obligations. The OBLIGORS acknowledge that:
(a) the LOAN DOCUMENTS are the valid and binding obligations of the OBLIGORS,
and are fully enforceable in accordance with their stated terms; (b) the LENDER
but for this AGREEMENT would have the right to exercise its default rights and
remedies; and (c) the duties of the OBLIGORS to pay and perform its obligations
to the LENDER in accordance with the LOAN DOCUMENTS are not subject to any
set-offs, defenses or counterclaims.
Section 3. Acknowledgment of Amounts Due Under LOAN DOCUMENTS. The
OBLIGORS acknowledge and agree that the principal amount which is outstanding
under the NOTE as of December 28, 2004 is $2,365,734.47.
In addition, there is also due and owing from the BORROWER to the LENDER,
under the LOAN DOCUMENTS, all actual costs, expenses, fees, including, but not
limited to, attorneys' fees which the LENDER has incurred and may incur in the
future in connection with the LOAN DOCUMENTS, including, but not limited to, all
costs, expenses and attorneys' fees which the LENDER has incurred and may incur
in the future in preparing, negotiating and consummating this AGREEMENT and in
preparing, negotiating, consummating and/or recording any and all other
documents provided for in and/or contemplated by this AGREEMENT.
Section 4. Representations. To induce the LENDER to enter into this
AGREEMENT and to provide the OBLIGORS with the accommodations described herein,
the OBLIGORS make the representations and warranties set forth below and
acknowledge the LENDER'S justifiable right to rely upon these representations
a. No Litigation. There is no material action, suit, investigation,
or proceeding pending or, in the knowledge of the OBLIGORS, threatened against
either of the OBLIGORS, nor is there any action, suit, investigation, or
proceeding pending which may affect the ability of the OBLIGORS to provide any
of the security acquired by the LENDER. In the event that, subsequent to the
execution and delivery of this AGREEMENT, either of the OBLIGORS receives notice
of, or otherwise acquires knowledge of, any such suit, investigation, or
proceeding, it shall immediately disclose the same to the LENDER in writing.
b. Organization; Good Standing; Authorization. The BORROWER: (i) has
the power to enter into this AGREEMENT and all other LOAN DOCUMENTS required to
be executed and has the power to perform all of its obligations hereunder and
thereunder; (ii) has duly authorized the entry into and performance of this
AGREEMENT and all other LOAN DOCUMENTS required to be executed by it; and (iii)
is in good standing in the state of its organization, and is in good standing
and qualified in all other states in which such qualification is required or is
in the process of obtaining such required qualification. Luis Negrete, president
of the BORROWER, is authorized to execute this AGREEMENT on behalf of the
BORROWER based on the Certificate of Corporate Resolutions and Authorization to
Borrow, dated April 26, 2001, previously delivered to the LENDER.
c. Valid, Binding and Enforceable. Each of the LOAN DOCUMENTS to
which each of the OBLIGORS is a party is the valid and binding obligation of
each OBLIGOR which is a party thereto, and is fully enforceable in accordance
with all stated terms.
d. No Violation. The OBLIGORS' entry into this AGREEMENT will not
violate any agreements to which they are a party or by which any of their
property is bound.
e. No Other Defaults. The OBLIGORS represent that there are no
defaults under the LOAN DOCUMENTS other than the EXISTING DEFAULT.
f. Corporate Documents. The OBLIGORS confirm that there have been no
changes or amendments to the BORROWER'S organizational documents last delivered
to the LENDER.
g. Lease. There are currently no defaults under the lease with
Ammendale Commerce Center Limited Partnership
Section 5. Payments. The BORROWER shall make principal payments in the
amount of $122,368.53 on February 1, 2005 and March 1, 2005, and then make a
final payment of all indebtedness owed under the NOTE on or before March 31,
Section 6. New Maturity. All amounts due under the NOTE and the LOAN
DOCUMENTS shall be fully due and payable on or before March 31, 2005.
Section 7. Deferral Fee. The BORROWER shall pay to the LENDER a $15,000.00
deferral fee, which shall immediately be deemed to have been fully earned upon
execution of this AGREEMENT, and shall be paid by the BORROWER on or before
January 17, 2005.
Section 8. Waiver of Existing Default. The LENDER waives the EXISTING
DEFAULT and the requirement for principal payments from September 1, 2004
through January 1, 2005.
Section 9. Events of Default. The following shall constitute events of
default ("EVENTS OF DEFAULT") under this AGREEMENT: (a) any breach by either of
the OBLIGORS of their respective duties and obligations set forth in this
AGREEMENT; (b) if any misrepresentation has been made herein; or (c) the
occurrence of an event of default under any of the LOAN DOCUMENTS.
Section 10. Remedies. If there is an EVENT OF DEFAULT under this
AGREEMENT, the LENDER shall be entitled to exercise all of its rights and
remedies under the LOAN DOCUMENTS and applicable law, including, but not limited
to, accelerating the indebtedness owed under each of the NOTES and drawing