AMENDED & RESTATED LOAN AGREEMENT

 

 

AMENDED & RESTATED LOAN AGREEMENT

THIS AMENDED & RESTATED LOAN AGREEMENT (this “Agreement”) is dated as of the 18 ^th day of August, 2009 and is by and between M-TRON INDUSTRIES, INC., a Delaware corporation (“M-TRON”), and PIEZO TECHNOLOGY, INC., a Florida corporation (“Piezo” and with M-TRON each a “Borrower” and together, “Borrowers”), and FIRST NATIONAL BANK OF OMAHA, a national banking association established at Omaha, Nebraska (“Bank”).

WITNESSETH:

WHEREAS, Borrowers and Bank are parties to that certain Loan Agreement dated as of October 14, 2004, as amended by the First Amendment to Loan Agreement dated May 31, 2005, the Second Amendment to Loan Agreement dated June 30, 2006, the Third Amendment to Loan Agreement dated October 3, 2006, the Fourth Amendment to Loan Agreement dated June 30, 2007, the Fifth Amendment to the Loan Agreement dated June 30, 2008,  the Change in Terms Agreement dated as of June 30, 2009 and the Change in Terms Agreement dated as of July 31, 2009 (collectively, the “Existing Loan Agreement”); and

WHEREAS, Borrowers and Bank desire to amend and restate the Existing Loan Agreement in its entirety to inter alia reaffirm the Term Loan and modify the Revolving Loan 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):

“ Additional Costs ” shall have the meaning provided for in Section 2.13 of this Agreement.

“ Affiliate ” means any Person (a) which directly or indirectly controls, or is controlled by, or is under common control with, a Borrower or a Subsidiary of a Borrower; (b) which directly or indirectly beneficially owns or holds 5% or more of any class of voting stock of a Borrower or any Subsidiary of a Borrower; or (c) 5% or more of the voting stock of which is directly or indirectly beneficially owned or held by a Borrower or a Subsidiary of a Borrower.  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 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)

$4,000,000, less the amount of any letters of credit issued and outstanding on Borrowers’ account; or

(b)

On the date reported, the aggregate of (i) 80% of Borrowers’ current Eligible Accounts, plus (ii) 40% of Borrowers’ current Eligible Foreign Accounts up to $750,000.00, plus (iii) 50% of Borrowers’ Eligible Inventory;

“ Borrowing Base Certificate ” shall have the meaning provided for in Section 3.02(b).

“ 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 Bank receives this Agreement, executed by Borrowers, together with the Term 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 a Borrower within the meaning of Section 414(b) or 414(c) of the Code.

“ 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 IX, 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.

 

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“ Eligible Account ” means an account owing to a Borrower and arising in the ordinary course of such Borrower’s business which meets all of the following specifications at the time it came into existence and continues to meet the same until it is collected in full:

(a)

The account is due and payable and has been so not more than ninety (90) days after the invoice date stated in the applicable invoice or other writing evidencing such account;

(b)

The account is not owing by an account debtor who has failed to pay ten (10%) or more of the aggregate amount of its accounts owing to a Borrower within ninety (90) days after the invoice date stated in the applicable invoice or other writing evidencing such account;

(c)

The account is due and payable from an account debtor located in the continental United States which is not a Subsidiary or Affiliate of a Borrower;

(d)

The account is not an account due from an Affiliate of a Borrower and is not an inter-company account;

(e)

The account arose from a bona fide, outright sale of goods by a Borrower or from the performance of services by a Borrower and such Borrower has possession of and will deliver to Bank, if requested, shipping and delivery receipts evidencing shipment of the goods or inventory and, if representing services, receipts and/or invoices evidencing that the services have been fully performed for the respective account debtor;

(f)

The account is not subject to any assignment, claim, lien or security interest of any character created by a Borrower, or claimed under or through a Borrower, except the security interest of Bank, and Borrowers will not make any other assignment thereof or create any further security interest therein nor permit their rights therein to be reached by attachment, levy, garnishment or other judicial process;

(g)

The account is the valid and legally enforceable obligation of the account debtor thereunder and is not subject to any claim for credit, set-off, allowance or adjustment by the account debtor or any counterclaim, and the account debtor has not returned any of the goods from the sale of which the account arose, nor has any partial payment been made thereon;

(h)

The account arose in the ordinary course of a Borrower’s business, and no notice of bankruptcy, insolvency or adverse change in the financial condition of the account debtor has been received;

(i)

The account is not owing by an account debtor for which a Borrower has received or have knowledge of the death or dissolution of the account debtor, the insolvency, termination of existence, business failure or disappearance of the account debtor, the appointment of a receiver for any part of the property of the account debtor or an assignment for the benefit of creditors or the filing by or against the account debtor of a petition under the commencement of any proceeding under any bankruptcy code or process;

 

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(j)

The account is not evidenced by a judgment, an instrument or chattel paper; and

(k)

The account debtor is not an employee of a Borrower.

An account which is at any time an Eligible Account but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be an Eligible Account.

“ Eligible Foreign Account ” means an account that is due and payable from an account debtor located outside of the continental United States which is not a Subsidiary or Affiliate of a Borrower and meets the criteria as stated under Eligible Account (except Section (c) in the definition of Eligible Account).

“ Eligible Inventory ” shall mean Borrowers’ inventory which is in good and merchantable condition, is new and not used, is not obsolete, discontinued or, in the opinion of Bank, is not otherwise unmerchantable, and is not slow moving inventory (slow moving inventory is inventory which has not sold in 360 days after acquisition and is reserved 50% plus that which has not sold for 720 days and is reserved 100%), in transit inventory, consigned goods, inventory located outside of the United States or covered by and subject to a seller’s right to repurchase or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) in favor of any party other than Bank.  Eligible Inventory shall be valued at the lesser of cost or present value, determined in accordance with GAAP in effect at the time of determination.  Any inventory which is at any time Eligible Inventory but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible Inventory.

“ 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 (a) payments to Bank; (b) payments on account of Subordinated Debt; and (c) allowable capital expenditures.

“ Financial Statements ” has the meaning provided for in Section 4.04 of this Agreement.

“ Fixed Charge Coverage Ratio ” means as of the end of any quarter measured from April 1, 2009 until March 31, 2010 the ratio derived when comparing a rolling 12 month EBITDA, plus payments made by Guarantor in the form of Subordinated Debt directly to a Borrower, less unfinanced capital expenditures, dividends and taxes divided by annualized debt and interest payments by a Borrower on account of any Indebtedness of such Borrower.  Additional Subordinated Debt will be included in the Fixed Charge Coverage Ratio if made within a 45 day period after a quarter end date and additional Subordinated Debt made within a 120 day period after Borrowers’ year-end will be included in the Fixed Charge Coverage Ratio if made in connection with the reconciliation of Borrowers’ internally prepared year-end financial statements with Borrowers’ year-end financial statements prepared by independent accountants.

 

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“ GAAP ” means generally accepted accounting principles, applied on a basis consistent with the accounting principles applied in the preparation of the Financial Statements.  All accounting terms not otherwise defined in this Agreement have the meaning assigned to them in accordance with GAAP.

“ Guarantor ” means The LGL Group, Inc., a Delaware corporation, successor to Lynch Corporation, an Indiana corporation.

“ Guaranty ” means the Guaranty to be executed and delivered by Guarantor to Bank in connection with this Agreement and securing the Obligations.

“ Indebtedness ” means, as to a Borrower, 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;

(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 Borrowers’ 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, each document referred to in Article IV of this Agreement and/or the Existing Loan Agreement, the SWAP Agreements and any other document, instrument or agreement executed by a Borrower or Guarantor in connection with any

 

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of the foregoing (as amended, supplemented, modified or amended and restated from time to time).

“ Material Adverse Effect ” means a material adverse effect on the financial condition, properties or operations of Borrowers.

“ Note ” or “ Notes ” means the Revolving Note, the Term Note and any other promissory note delivered by Borrowers to Bank, or any notes given in exchange, renewal or substitution thereof.

“ Obligations ” means the obligation of Borrowers:

(a)

to pay the principal of and interest on the Notes in accordance with the terms thereof and to satisfy all of their other liabilities to Bank, whether hereunder or otherwise, whether now existing or hereafter incurred, including any extensions, modifications, renewals thereof and substitutions therefor and including, but not limited to, any obligations under letter of credit agreements, loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of any Borrower and any present or future judgments against any Borrower; and whether any such indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether a Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the indebtedness may be or may become barred or unenforceable against a Borrower for any reason whatsoever; and whether the indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise;

(b)

to repay to Bank all amounts advanced by Bank hereunder or otherwise on behalf of a Borrower 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 Borrowers’ payment and performance of this Agreement; and

(c)

to reimburse Bank, on demand, for 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).

“ OFAC ” has the meaning specified in Section 4.16 of this Agreement.

“ 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 a Borrower.

 

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“ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“ Prohibited Person ” has the meaning provided for in Section 4.16 of this Agreement.

“ Revolving Loan ” shall mean the Revolving Loan as described and defined in the Existing Loan Agreement, but as further modified in this Agreement.

“ Revolving Loan Commitment Amount ” means the lesser of (a) $4,000,000 or (b) the Borrowing Base.

“ Revolving Loan Termination Date ” means the earliest to occur of the following: (a) June 30, 2010, (b) the date the Obligations are accelerated pursuant to this Agreement, or (c) the date Bank has received (i) notice in writing from a Borrower of such Borrower’s election to terminate this Agreement; and (ii) indefeasible payment in full of the Obligations.

“ Revolving Note ” means the restated version of the preexisting revolving note previously executed by Borrowers in favor of Bank in connection with the Existing Loan Agreement and which is given in exchange thereof, but not constituting a cancellation of the principal amount (or unpaid accrued interest) of such note.

“ Security Agreements ” means the separate agreements between M-TRON, as debtor, and Bank, as secured party, and Piezo as debtor, and Bank, as secured party, executed in connection with this Agreement and creating a first priority security interest in all Borrowers’ assets (including general intangibles, but excluding real estate) and securing the Obligations.

“ Subordinated Debt ” means Indebtedness of a Borrower to entities other than Bank that has been subordinated, in form acceptable to Bank, to the Obligations.

“ Subsidiary ” means any entity with respect to which a Person directly or indirectly owns 50% or more of the voting stock, units, or membership interests, or otherwise has the power to vote or direct the voting of sufficient securities to elect at least half of the entity directors or managers, as the case may be.

“ SWAP Agreements ” means the International Swap Dealers Association, Inc. Master Agreement, dated as of January 23, 2008, by and between Bank and Borrowers and any schedules executed in connection therewith (as amended, supplemented, modified or amended and restated from time to time) and any other International SWAP Dealer Association, Inc. Master Agreement by and between Bank and Borrowers and any schedules executed in connection therewith (as amended, supplemented, modified or amended and restated from time to time).

“ Tangible Net Worth ” means total assets (plus, in the case of Borrowers, Subordinated Debt existing on the date of Closing or subsequently approved in writing by Bank) less total liabilities and less the following types of assets:  (a) receivables and other investments in or amounts due from any shareholder, employee, or Affiliate; (b) goodwill, patents, copyrights, mailing lists, trade names, trademarks, servicing rights, organizational and franchise costs, bond

 

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underwriting costs and other like assets properly classified as intangible; and (c) treasury stock.  In the case of Borrowers, additional Subordinated Debt will be included in the determination of Tangible Net Worth if made with in 45 day period after a quarter end date and additional Subordinated Debt made with a 120 day period after Borrowers’ year end will be included in the determination of Tangible Net Worth in connection with the reconciliation of Borrowers’ internally prepared year-end financial statements with Borrowers’ year-end financial statements prepared by independent accountants.  The Tangible Net Worth of a Person shall not include any Debt due to such Person not acceptable to Bank in the exercise of its reasonable discretion.

“ Term Loan ” shall mean the Term Loan as described and defined in the Existing Loan Agreement, but as further modified in this Agreement.

“ Term Loan Termination Date ” means the earliest to occur of the following: (a) January 24, 2013, (b) the date the Obligations are accelerated pursuant to this Agreement, or (c) the date Bank has received (i) notice in writing from a Borrower of such Borrower’s election to terminate this Agreement and (ii) indefeasible payment in full of the Obligations.

“ Term Note ” means the restated version of the preexisting term note previously executed by Borrowers in favor of Bank in connection with the Existing Loan Agreement and which is given in exchange thereof, but not constituting a cancellation of the principal amount (or unpaid accrued interest) of such note.

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, 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.  Term Loan .  Bank has made the Term Loan to Borrowers and the outstanding principal amount payable as of the date hereof is $1,058,219.44.  

Section 2.02.  Term Note .  The obligation of Borrowers to repay the Term Loan shall be evidenced by the Term Note in the form attached hereto as Exhibit A.  

Section 2.03.  Interest on Term Note .  Interest shall accrue on the outstanding and unpaid principal balance of the Term Loan as provided in the Term Note.

Section 2.04.  Repayment of Term Note.   The Term Note shall be due and payable as provided in the Term Note.  

Section 2.05.  Revolving Loan .   Bank agrees, on the terms and subject to the conditions set forth in this Agreement, to lend up to the Revolving Loan Commitment Amount to Borrowers on the terms and conditions of this Agreement.  Bank will credit proceeds of the Revolving Loan to Borrowers’ deposit account with Bank, bearing number 26712880, as requested by Borrowers.  Subject to the terms hereof, Bank will lend Borrowers, from time to time until the Revolving Loan Termination Date, such sums as Borrowers may request by reasonable same-day notice to

 

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Bank, received by Bank not later than 3:00 p.m. of such day, but which shall not exceed the Revolving Loan Commitment Amount.  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 Revolving Loan Commitment Amount or any lesser sum.  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, Borrowers shall forthwith pay Bank sufficient funds to reduce the balance of the Revolving Loan until it is in compliance with this requirement.  An annual unused commitment fee of 0.50% shall be due and payable to Bank each calendar quarter, which fee shall be calculated based on the difference between the Revolving Loan Commitment Amount and the average outstanding loan amount under the Revolving Loan over the applicable quarter.

Section 2.06.  Revolving Note .  The obligation of Borrowers to repay the Revolving Loan shall be evidenced by the Revolving Note in the form attached hereto as Exhibit B.

Section 2.07.  Interest on Revolving Note .  Interest shall accrue on the outstanding and unpaid principal balance of the Revolving Loan as provided in the Revolving Note.

Section 2.08.  Repayment of Revolving Note .  The Revolving Note shall be due and payable as provided in the Revolving Note.

Section 2.09.  Payments and Prepayments .  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.  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 2.10.  Fees and Cost of Loans .  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 Bank’s reasonable legal fees.

Section 2.11.  Use of Proceeds .  The proceeds of the Loans have been and shall continue to be used by Borrowers for working capital purposes and for no other purpose.  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.  Borrowers further agree that the proceeds of the Loans have not been and shall continue not to be used to purchase any stock or equity in any form or invest in or loan any funds to any entity except as previously used by M-TRON to purchase the outstanding shares of Piezo.

Section 2.12.  Illegality .  Notwithstanding any other provision in this Agreement, if 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 or regulatory authority, central bank or comparable agency charged with the interpretation or administration

 

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thereof, or compliance by Bank with any request or directive (whether or not having the force of law and whether in effect on the date of this Agreement or thereafter) of any such authority, central bank or comparable agency shall make it unlawful or impossible for Bank to make or maintain its commitment, then upon notice to Borrowers by Bank the commitment of Bank shall terminate.

Section 2.13.  Additional Costs .  Borrowers shall pay to Bank the additional costs provided for in this Section.

(a)

Borrowers shall pay directly to Bank from time to time on demand such amounts as Bank may determine to be necessary to compensate Bank for any documented costs incurred by Bank in making or maintaining any advances or the Loans, its obligation to make advances hereunder, or any reduction in any amount receivable by Bank in respect of any advances or the Loans (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), resulting from any regulatory change which (i) changes the basis of taxation of any amounts payable to Bank under the Loan Documents in respect of any advances or the Loans (other than taxes imposed on the overall net income of  Bank), (ii) imposes or modifies any reserve, special deposit, deposit insurance or assessment, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of Bank (including any of such advances), or (iii) imposes any other condition affecting any Loan Document (or of any such extensions of credit or liabilities).  Bank agrees to give Borrowers notice prior to the imposition of any such Additional Costs, provided that the imposition of such costs on Bank is not effected immediately.

(b)

Without limiting the effect of the foregoing Section 2.13(a) (but without duplication), Borrowers shall pay directly to Bank from time to time on request such amounts as Bank may determine to be necessary to compensate Bank for any costs which it determines are attributable to the maintenance of capital by it or any of its Affiliates pursuant to any law, regulation, interpretation, directive or request of any jurisdiction or any interpretation, directive or request (whether or not having the force of law and whether in effect on the date of this Agreement or thereafter) of any court or governmental or regulatory authority in respect of any advances or the Loans or its obligation to make advances hereunder (such compensation to include, without limitation, an amount equal to any reduction in return on assets or equity of Bank to a level below that which it could have achieved but for such law, regulation, interpretation, directive or request).  Bank agrees to give Borrowers prior notice regarding payment of costs described in this Section 2.13(b), provided that the imposition of such costs on Bank is not effected immediately.

(c)

Determinations and allocations by Bank for purposes of this Section 2.13 shall be conclusive, absent manifest error.

 

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ARTICLE III
CONDITIONS OF LENDING

Section 3.01.  Conditions Precedent to All Loans .  The obligation of Bank to extend the Revolving Loan to Borrowers and maintain the Term Loan is subject to the conditions precedent that Bank shall have received each of the following, in form and substance satisfactory to Bank and its counsel:

(a)

Loan Agreement .  This Agreement duly executed by each of Borrowers;

(b)

Notes .  The Notes duly executed by each of Borrowers;

(c)

Security Agreements .  The Security Agreements duly executed by each of Borrowers, in form and substance acceptable to Bank;

(d)

Evidence of All Corporate Action by Borrowers, Organization Documents, Incumbency and Signature Certificate of Borrowers .  Certificates of Borrowers’ respective Secretaries as to (i) resolutions of their boards of directors then in full force and effect authorizing the execution, delivery and performance of the Loan Documents to be executed by Borrowers; (ii) the incumbency and signatures of Borrowers’ respective officers authorized to act with respect to the Loan Documents to be executed by Borrowers (upon which certificate Bank may conclusively rely until it shall have received a further certificate from authorized officers of Borrowers cancelling or amending such prior certificate, which further certificate shall be reasonably satisfactory to Bank); and (iii) copies of Borrowers’ respective Articles of Incorporation (or Certificate of Incorporation, as applicable), certified by the Secretary of State of Borrowers’ State of incorporation on a date reasonably acceptable to Bank, and of Borrowers’ respective Bylaws (or By-Laws, as applicable);

(e)

Patent Security Agreement .  A patent security agreement duly executed by Borrowers securing the intellectual property set forth therein, in form and substance acceptable to Bank;

(f)

Intentionally Deleted.

(g)

Opinion of Counsel for Borrowers .  A favorable opinion of counsel for each of Borrowers, in substantially the form of Exhibit C;

(h)

Guaranty .  A Guaranty duly executed by Guarantor, in  form and substance acceptable to Bank;

(i)

Evidence of All Corporate Action by Guarantor, Organization Documents, Incumbency and Signature Certificate of Guarantor .  A Certificate of Guarantor’s Secretary as to (i) resolutions of its board of directors then in full force and effect authorizing the execution, delivery and performance of the Loan Documents to be executed by Guarantor; (ii) the incumbency and signatures of Guarantor’s officers authorized to act with respect to the Loan Documents to be executed by Guarantor (upon which certificate Bank may conclusively rely until it shall have received a further

 

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certificate from an authorized officer of Guarantor cancelling or amending such prior certificate, which further certificate shall be reasonably satisfactory to Bank); and (iii) copies of Guarantor’s Articles of Incorporation, certified by the Secretary of State of Guarantor’s State of incorporation on a date reasonably acceptable to Bank, and of Guarantor’s bylaws;

(j)

Opinion of Counsel for Guarantor .  A favorable opinion of counsel for Guarantor, in substantially the form of Exhibit D;

(k)

Subordination Agreement .  A Subordination Agreement, duly executed by all parties thereto, in substantially the form of Exhibit E; and

(l)

Officer’s Certificate, Etc .  The following statements shall be true and Bank shall have received a certificate signed by a duly authorized officer of each of Borrowers and Guarantor dated the date of Closing stating that:

(i)

the representations and warranties contained in the Loan Documents are correct on and as of the date of Closing as though made on and as of such date; and

(ii)

no Default or Event of Default has occurred and is continuing under this Agreement.

(m)

Other .  Such other approvals, opinions or documents as Bank may reasonably request

Section 3.02.  Conditions Precedent to Revolving Credit Loan .  The obligation of Bank to make an advance under the Revolving Loan shall be subject to the further conditions precedent that on the date of such advance:

(a)

The following statements shall be true and Bank shall have received a certificate signed by a duly authorized officer of Borrowers dated the date of such advance stating that:

(i)

the representation and warranties contained in the Loan Documents are correct on and as of the date of such advance 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 advance.

(b)

Bank shall have received a borrowing base certificate in the form of Exhibit F, as amended or modified from time to time by Bank (the “Borrowing Base Certificate”).

(c)

Bank shall have received such other approvals, opinions or documents as Bank may reasonably request.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF M-TRON INDUSTRIES, INC.

To induce Bank to enter into this Agreement, M-TRON makes the following representations and warranties as of the date hereof:

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 the 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 Bank consolidated financial statements of Guarantor and its Subsidiaries as of December 31, 2008, and for the five months ended May 31, 2009 (the “Financial Statements”).  The Financial Statements fairly present the financial condition of Borrowers on the dates thereof and were prepared in accordance with GAAP.  There has been no material adverse change in the operations, properties or condition (financial or otherwise) of Borrowers since the date of the Financial Statements, and no additional borrowings have been made by Borrowers other than the borrowing contemplated hereby or approved by Bank.  No certificate or statement furnished to Bank by or on behalf of Borrowers in connection with the transactions contemplated hereby contains any untrue

 

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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, nor its Subsidiaries nor Guarantor 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 M-TRON, any of its Subsidiaries or Guarantor.

Section 4.08.  Other Agreements .  Neither M-TRON, nor any of its Subsidiaries, nor 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, any of its Subsidiaries or Guarantor, or the ability of M-TRON or Guarantor to carry out its obligations under the Loan Documents to which it is a party.  Neither M-TRON, nor any of its Subsidiaries nor Guarantor is in default in any respect in the performance, obse