EXHIBIT 10.6
TERM LOAN SUPPLEMENT
(EQUIPMENT)
TO
CREDIT AGREEMENT
This Agreement is made this 31st day of August, 2005, by Resistance
Technology, Inc., a Minnesota corporation, and RTI Electronics, Inc., a Delaware
corporation (herein individually called "Borrower" and and collectively, the
"Borrowers"), for the benefit of Diversified Business Credit, Inc., a Minnesota
corporation (herein referred to as the "Lender").
RECITALS
Borrowers have executed and delivered to Lender a credit and security
agreement dated August 31, 2005 (herein, as amended from time to time, called
the "Credit Agreement") pursuant to which Lender has made or may make certain
loans to the Borrowers. These loans and all other debts, liabilities and
obligations of Borrowers to Lender are secured pursuant to the Credit Agreement
and other security documents (all herein called the "Security Documents")
referred to in the Credit Agreement.
Borrowers have requested that Lender make one or more loans (herein
individually called the "Equipment Term Loan" and collectively, the "Equipment
Term Loans" ) under the Credit Agreement, repayable in installments. This
Agreement supplements the Credit Agreement to set forth the terms on which any
such Equipment Term Loans shall be advanced and repaid. Capitalized terms used
but not otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
ACCORDINGLY, to induce Lender to make one or more advances on the
Equipment Term Loans under this Supplement, and in consideration of the mutual
agreements herein contained, each Borrower and Lender hereby agree that:
1. THE EQUIPMENT TERM LOANS. Subject to the terms and conditions set
forth in the Credit Agreement and in this Supplement, the Lender shall make Term
Advances to each Borrower from time to time from the date all of the conditions
set forth in Section 12(a) and (c) of Credit Agreement and Section 4 of this
Supplement are satisfied to August 31, 2007, up to an aggregate amount equal the
sum of: (i) seventy-five percent (75%) of the orderly liquidation value (as
dertermined by an appraisal in form and substance acceptable to the Lender) of
existing Eligible Equipment (as hereinafter defined) of such Borrower, and (ii)
eighty percent (80%) of the acquisition price of any new Eligible Equipment to
be contemporaneously acquired by such Borrower in connection with any Term
Advance; subject further to the limitations that (a) the aggregate amount of
Term Advances made to both Borrowers under this Supplement shall at no time
exceed $1,000,000, and (b) with each of the sums under (i) and (ii) reduced by
the aggregate amount of principal payments made pursuant to Sections 2 and 3
hereof. Without notice or demand, if the sum of the outstanding principal
balance of the Equipment Term Loans shall at any time exceed such limitations,
Borrowers shall immediately prepay the Equipment Term Loans to the extent
necessary to eliminate such excess.
Without limiting the foregoing, the Lender may also, from time to time, obtain
at Borrowers' expense an appraisal of each Borrower's equipment by an appraiser
acceptable to the Lender in its sole discretion;
provided that prior to the occurrence of an Event of Default, the Lender shall
not obtain more than one appraisal of each Borrower's equipment every twelve
(12) months during the term of each loan made under this Supplement. If the
Lender at any time obtains an appraisal of the equipment as permitted herein,
and the appraisal shows the aggregate outstanding principal balance of each
Borrower's Equipment Term Loan to exceed the limitations set forth in this
Section 1 above, then Borrowers, upon demand by the Lender, shall immediately
prepay such Equipment Term Loan in the amount of such excess, together with a
prepayment fee equal to a percentage of the amount of such prepayment in
accordance with prepayment percentages set forth in Section 11 of the Credit
Agreement.
As used herein, the term "Eligible Equipment" means Equipment (as defined under
the Uniform Commercial Code as adopted in the state of Minnesota) designated by
the Lender as eligible from time to time in its sole discretion but excluding
any Equipment having any of the following characteristics:
(i) Equipment that is subject to any lien other than in favor
of the Lender;
(ii) Equipment that has not been delivered to a Borrower's
Premises;
(iii) Equipment in which the Lender does not hold a first
priority Security Interest;
(iv) Equipment that is obsolete or not currently saleable;
(v) Equipment that is not covered by standard "all risk"
insurance for an amount equal to its forced liquidation value;
(vi) Equipment that requires proprietary software in order to
operate in the manner in which it is intended when such software is not
freely assignable to the Lender or any potential purchaser of such
Equipment;
(vii) Equipment consisting of computer hardware, software,
tooling, or molds; and
(viii) Equipment otherwise deemed unacceptable by the Lender
in its sole discretion.
If a Borrower desires to borrow under this Supplement, it shall submit borrowing
requests in the manner set forth in the Credit Agreement and this Supplement and
will notify Lender that the advance is requested on the Equipment Term Loan
under this Supplement. The Equipment Term Loan shall bear interest at the rate
specified in the Credit Agreement, shall be secured by the Credit Agreement,
Security Documents and all other collateral security (without apportionment,
exclusion or segregation) as provided in the Credit Agreement.
Each Borrower further agrees that the proceeds of any Term Advance wholly or
partially obtained in connection with the acquisition of Eligible Equipment
shall be used first to pay the purchase price of such Equipment and any surplus
shall be subject to the use of proceeds restrictions set forth in the Credit
Agreement.
2. REPAYMENT OF EQUIPMENT TERM LOANS. Interest and principal on each
Equipment Term Loan shall be repaid as follows:
-2-
- Each month, on the first day of the month, Borrowers shall pay all
interest accrued on the Equipment Term Loans in the preceding month.
- Each month, on the first day of the month following the initial Term
Advance under this Supplement, Borrowers shall pay principal on each
Equipment Term Loan in amount sufficient to fully amortize the then
outstanding principal balance of such Equipment Term Loan over an
assumed amortization period of sixty (60) months commencing on the date
of this Agreement.
- On August 31, 2008, the entire unpaid principal balance of the
Equipment Term Loans, and all unpaid interest accrued thereon, shall in any
event be due and payable in full.
3. PREPAYMENT OF EQUIPMENT TERM LOANS. Borrowers shall prepay the
Equipment Term Loans (a) as and when required by the Credit Agreement, and (b)
whenever required to assure that the maximum amount of the Equipment Term Loans
do not exceed the limitations prescribed in Section 1 of this Supplement. In the
event either Borrower shall sell, collect insurance proceeds on, or otherwise
dispose of or realize on any collateral security, other than inventory and trade
accounts receivable, granted to Lender, Borrowers shall immediately prepay the
Obligations, in such order as the Lender shall determine in its sole discretion,
by the full amount of the proceeds so realized (it being understood and agreed
that no such collateral security may be sold or otherwise disposed of or
realized on except with the written consent of Lender and that each Borrower
shall pay over and account for all proceeds of inventory and trade accounts
receivable as provided in the Credit Agreement). No prepayment under this
Section 3 shall reduce any monthly installment due on the Equipment Term Loans
pursuant to Section 2 above.
4. ADDITIONAL EQUIPMENT TERM LOAN ADVANCE CONDITIONS. The Lender's
obligation to make any Term Advance hereunder shall be subject to the additional
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
i. A true and correct listing of all Equipment and the
location thereof of each Borrower in form and substance acceptable to
the Lender and duly certified by an authorized officer of each
Borrower, including without limitation, a listing of Equipment that
shall be further certified by each Borrower as constituting Eligible
Equipment.
ii. In connection with the acquisition of any new
Eligible Equipment, a copy of the purchase order, sales invoice and
related purchase documents.
iii. The Lender shall have received and approved an
appraisal of the Equipment of the Borrowers by an appraiser acceptable
to the Lender setting forth the estimated orderly liquidation value of
such Equipment.
iv. Borrowers shall have executed and/or delivered, or
caused to be executed and/or delivered, to the Lender and any other
appropriate party such other documents, instruments and agreements as
the Lender may reasonably request.
5. MISCELLANEOUS PROVISIONS. This Supplement is part of the Credit
Agreement and is subject and entitled to all of the rights, terms and provisions
set forth therein and, as supplemented and modified hereby, the Credit Agreement
remains in full force and effect. No waiver or modifications of any of the
provisions hereof shall be binding on Lender unless agreed to in a writing
signed by Lender.
-3-
This Term Loan Supplement has been duly executed and delivered as of the date
hereof.
BORROWER: Resistance Technology, Inc.
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Its
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By /s/
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Its
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RTI Electronics, Inc.
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Its
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Its
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LENDER: Diversified Business Credit, Inc.
By /s/
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Vice President
