sec document

EX-10.3 4 ex103to10qa03725_09302007.htm sec document

Exhibit 10.3

FIRST NATIONAL BANK

---------------------------------------------------------------------------------------------------------------------
LOAN NUMBER LOAN NAME ACCT. NUMBER NOTE DATE INITIALS
8558911/ Renewal + M-Tron Industries, Inc. 08/01/07 MKM
NOTE AMOUNT INDEX (W/MARGIN) RATE MATURITY DATE LOAN PURPOSE
$1,500,000.00 30-Day LIBOR plus 7.428% 08/30/10 Commercial
2.100%
Creditor Use Only
---------------------------------------------------------------------------------------------------------------------

PROMISSORY NOTE
(Commercial - Single Advance)
---------------------------------------------------------------------------------------------------------------------

DATE AND PARTIES. The date of this Promissory Note (Note) is August 1, 2007. The
parties and their addresses are:

LENDER:
FIRST NATIONAL BANK OF OMAHA
Stop Code 1031
1620 Dodge St
Omaha, Nebraska 68197
Telephone: (402) 633-3617

BORROWER:
M-TRON INDUSTRIES, INC.
a Delaware Corporation
100 Douglas Avenue
Yankton, South Dakota 57078

PIEZO TECHNOLOGY, INC.
a Florida Corporation
100 Douglas Avenue
Yankton, South Dakota 57078

1. DEFINITIONS. As used in this Note, the terms have the following meanings:

A. PRONOUNS. The pronouns "I," "me," and "my" refer to each Borrower
signing this Note, individually and together. "You" and "Your" refer
to the Lender.

B. NOTE. Note refers to this document, and any extensions, renewals,
modifications and substitutions of this Note.

C. LOAN. Loan refers to this transaction generally, including
obligations and duties arising from the terms of all documents
prepared or submitted for this transaction such applications, security
agreements, disclosures or notes, and this Note.

D. LOAN DOCUMENTS. Loan Documents refer to all the documents executed
as a part of or in connection with the Loan.

E. PROPERTY. Property is any property, real, personal or intangible,
that secures my performance of the obligations of this Loan.

F. PERCENT. Rates and rate change limitations are expressed as
annualized percentages.

2. PROMISE TO PAY. For value received, I promise to pay you or your order, at
your address, or at such other location as you may designate, the principal sum
of $1,500,000.00 (PRINCIPAL) plus interest from August 1, 2007 on the unpaid
Principal balance until this Note matures or this obligation is accelerated.

3. INTEREST. Interest will accrue on the unpaid Principal balance of this Note
at the rate of 7.428 percent (Interest Rate) until August 2, 2007, after which
time it may change as described in the Variable Rate subsection.

A. INTEREST AFTER DEFAULT. If you declare a default under the terms of
the Loan, including for failure to pay in full at maturity, you may
increase the Interest Rate otherwise payable as described in this
section. In such event, interest will accrue on the unpaid Principal
balance of this Note at a rate equal to the rate in effect prior to
default, plus 6.000 percent, until paid in full.

B. MAXIMUM INTEREST AMOUNT. Any amount assessed or collected as
interest under the terms of this Note will be limited to the maximum
lawful amount of interest allowed by state or federal law, whichever
is greater. Amounts collected in excess of the maximum lawful amount
will be applied first to the unpaid Principal balance. Any remainder
will be refunded to me.

C. ACCRUAL. Interest accrues using an Actual/360 days counting method.

D. VARIABLE RATE. The Interest Rate may change during the term of this
transaction.

(1) Index. Beginning with the first Change Date, the Interest
Rate will be based on the following index: 30-day LIBOR based
on the British Banker's Association average of interbank
offered rates for dollar deposits in the London market based
on quotations at sixteen major banks.

The Current Index is the most recent index figure available
on each Change Date. You do not guaranty by selecting this
Index, or the margin, that the Interest Rate on this Note
will be the same rate you charge on any other loans or class
of loans you make to me or other borrowers. If this Index is
no longer available, you will substitute a similar index. You
will give me notice of your choice.

(2) Change Date. Each date on which the Interest Rate may
change is called a Change Date. The Interest Rate may change
August 2, 2007 and daily thereafter.

(3) Calculation Of Change. On each Change Date you will
calculate the Interest Rate, which will be the Current Index
plus 2.100 percent. The result of this calculation will be
rounded to the nearest .001 percent. Subject to any
limitations, this will be the Interest Rate until the next
Change Date. The new Interest Rate will become effective on
each Change Date. The Interest Rate and other charges on this
Note will never exceed the highest rate or charge allowed by
law for this Note.

(4) Effect Of Variable Rate. A change in the Interest Rate
will have the following effect on the payments: The amount of
the final payment will change.

4. PAYMENT. I agree to pay this Note in 37 payments. This Note is amortized over
60 payments. A payment of $30,076.15 will be due August 30, 2007, and on the
30th day of each month thereafter. A final payment of the entire unpaid balance
of Principal and interest will be due August 30, 2010. Any changes in the
Interest Rate will affect the amount of this payment.

Payments will be rounded to the nearest $.01. With the final payment I also
agree to pay any additional fees or charges owing and the amount of any advances
you have made to others on my behalf. Payments scheduled to be paid on the 29th,
30th or 31st day of a month that contains no such day will, instead, be made on
the last day of such month.

If the amount of a scheduled payment does not equal or exceed interest accrued
during the payment period the unpaid portion will be added to, and will be
payable with, the next scheduled payment.

Each payment I make on this Note will be applied first to interest that is due
then to principal that is due, and finally to any charges that I owe other than
principal and interest. If you and I agree to a different application of
payments, we will describe our agreement on this Note. You may change how
payments are applied in your sole discretion without notice to me. The actual
amount of my final payment will depend on my payment record.

5. PREPAYMENT. I may prepay this Loan in full or in part at any time. Any
partial prepayment will not excuse any later scheduled payments until I pay in
full.

6. LOAN PURPOSE. The purpose of this Loan is to increase loan amount to cover
machinery and equipment purchased over the last 2 years.

7. ADDITIONAL TERMS. A. AUTOMATIC TRANSFER AUTHORIZATION:

I authorize you to charge my Account No. for all payments due on this Loan as
set forth in the PAYMENT section of this Note. You may continue to charge the
Account until the Loan is paid or until I provide you with notice of
cancellation.

I understand and agree that if a payment due date falls on a non-business day,
the payment amount will be debited from the Account and credited to the Loan as
a loan payment on the next day you are open for regular business.

I further understand and agree that if the Account does not have a sufficient
balance on a day that a payment is to be debited from the Account and credited
to the Loan, you may, at your option, suspend further efforts to debit the
Account and look to me for the payment and all subsequent payments until such
time as all payments under the Loan are current. In no event will availability
of any credit line that I may have with you be used in determining whether the
Account has a sufficient balance.

At your option and sole discretion, you may resume charging the Account without
further instruction from me once all payments are current. In the event that you
do not resume charging to the Account, you will notify me in writing that this
authorization has been cancelled. Such cancellation of this authorization does
not excuse me from making timely payment under the terms of the Loan.

In any event, you, at your option, may cancel this authorization at any time.

B. IMPORTANT NOTICE: To help the government fight the funding of terrorism and
money laundering activities, the USA PATRIOT Act requires all banks to obtain
and verify the identity of each person or business that opens an account. When I
open an account you will ask me for information that will allow you to properly
identify me and you will verify that information. If you cannot properly verify
identity within 30 calendar days, you reserve the right to deem all of the
balance and accrued interest due and payable immediately.

8. SECURITY. The Loan is secured by the following, previously executed, security
instruments or agreements: Loan Agreement dated 10/14/04 and all amendments;
Security Agreement dated 10/14/04 covering Business Assets.

9. DEFAULT. I will be in default if any of the following occur:

A. PAYMENTS. I fail to make a payment in full when due.

B. INSOLVENCY OR BANKRUPTCY. The death, dissolution or insolvency of,
appointment of a receiver by or on behalf of, application of any
debtor relief law, the assignment for the benefit of creditors by or
on behalf of, the voluntary or involuntary termination of existence
by, or the commencement of any proceeding under any present or future
federal or state insolvency, bankruptcy, reorganization, composition
or debtor relief law by or against me or any co-signer, endorser,
surety or guarantor of this Note or any other obligations I have with
you.

C. BUSINESS TERMINATION. I merge, dissolve, reorganize, end my
business or existence, or a partner or majority owner dies or is
declared legally incompetent.

D. FAILURE TO PERFORM. I fail to perform any condition or to keep any
promise or covenant of this Note.

E. OTHER DOCUMENTS. A default occurs under the terms of any other Loan
Document.

F. OTHER AGREEMENTS. I am in default on any other debt or agreement I
have with you.

G. MISREPRESENTATION. I make any verbal or written statement or
provide any financial information that is untrue, inaccurate, or
conceals a material fact at the time it is made or provided.

H. JUDGMENT. I fail to satisfy or appeal any judgment against me.

I. FORFEITURE. The Property is used in a manner or for a purpose that
threatens confiscation by a legal authority.

J. NAME CHANGE. I change my name or assume an additional name without
notifying you before making such a change.

K. PROPERTY TRANSFER. I transfer all or a substantial part of my money
or property.

L. PROPERTY VALUE. You determine in good faith that the value of the
Property has declined or is impaired.

M. MATERIAL CHANGE. Without first notifying you, there is a material
change in my business, including ownership, management, and financial
conditions.

N. INSECURITY. You determine in good faith that a material adverse
change has occurred in my financial condition from the conditions set
forth in my most recent financial statement before the date of this
Note or that the prospect for payment or performance of the Loan is
impaired for any reason.

10. DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire
balance of this Note to be due and payable upon the creation of, or contract for
the creation of, any lien, encumbrance, transfer or sale of all or any part of
the Property. This right is subject to the restrictions imposed by federal law
(12 C.F.R. 591), as applicable.

11. WAIVERS AND CONSENT. To the extent not prohibited by law, I waive protest,
presentment for payment, demand, notice of acceleration, notice of intent to
accelerate and notice of dishonor.

A. ADDITIONAL WAIVERS BY BORROWER. In addition, I, and any party to
this Note and Loan, to the extent permitted by law, consent to certain
actions you may take, and generally waive defenses that may be
available based on these actions or based on the status of a party to
this Note.

(1) You may renew or extend payments on this Note, regardless
of the number of such renewals or extensions.

(2) You may release any Borrower, endorser, guarantor,
surety, accommodation maker or any other co-signer.

(3) You may release, substitute or impair any Property
securing this Note.

(4) You, or any institution participating in this Note, may
invoke your right of set-off.

(5) You may enter into any sales, repurchases or
participations of this Note to any person in any amounts and
I waive notice of such sales, repurchases or participations.

(6) I agree that any of us signing this Note as a Borrower is
authorized to modify the terms of this Note or any instrument
securing, guarantying or relating to this Note.

B. NO WAIVER BY LENDER. Your course of dealing, or your forbearance
from, or delay in, the exercise of any of your rights, remedies,
privileges or right to insist upon my strict performance of any
provisions contained in this Note, or any other Loan Document, shall
not be construed as a waiver by you, unless any such waiver is in
writing and is signed by you.

12. REMEDIES. After I default, and after you give any legally required notice
and opportunity to cure the default, you may at your option do any one or more
of the following.

A. ACCELERATION. You may make all or any part of the amount owing by
the terms of this Note immediately due.

B. SOURCES. You may use any and all remedies you have under state or
federal law or in any Loan Document.

C. INSURANCE BENEFITS. You may make a claim for any and all insurance
benefits or refunds that may be available on my default.

D. PAYMENTS MADE ON MY BEHALF. Amounts advanced on my behalf will be
immediately due and may be added to the balance owing under the terms
of this Note, and accrue interest at the highest post-maturity
interest rate.

E. SET-OFF. You may use the right of set-off. This means you may
set-off any amount due and payable under the terms of this Note
against any right I have to receive money from you.

My right to receive money from you includes any deposit or share
account balance I have with you; any money owed to me on an item
presented to you or in your possession for collection or exchange; and
any repurchase agreement or other non-deposit obligation. "Any amount
due and payable under the terms of this Note" means the total amount
to which you are entitled to demand payment under the terms of this
Note at the time you set-off.

Subject to any other written contract, if my right to receive money
from you is also owned by someone who has not agreed to pay this Note,
your right of set-off will apply to my interest in the obligation and
to any other amounts I could withdraw on my sole request or
endorsement.

Your right of set-off does not apply to an account or other obligation
where my rights arise only in a representative capacity. It also does
not apply to any Individual Retirement Account or other tax-deferred
retirement account.

You will not be liable for the dishonor of any check when the dishonor
occurs because you set-off against any of my accounts. I agree to hold
you harmless from any such claims arising as a result of your exercise
of your right of set-off.

F. WAIVER. Except as otherwise required by law, by choosing any one or
more of these remedies you do not give up your right to use any other
remedy. You do not waive a default if you choose not to use a remedy.
By electing not to use any remedy, you do not waive your right to
later consider the event a default and to use any remedies if the
default continues or occurs again.

13. COLLECTION EXPENSES AND ATTORNEYS' FEES. On or after Default, to the extent
permitted by law, I agree to pay all expenses of collection, enforcement or
protection of your rights and remedies under this Note or any other Loan
Document. Expenses include, but are not limited to, attorneys' fees, court costs
and other legal expenses. These expenses are due and payable immediately. If not
paid immediately, these expenses will bear interest from the date of payment
until paid in full at the highest interest rate in effect as provided for in the
terms of this Note. All fees and expenses will be secured by the Property I have
granted to you, if any. In addition, to the extent permitted by the United
States Bankruptcy Code, I agree to pay the reasonable attorneys' fees incurred
by you to protect your rights and interests in connection with any bankruptcy
proceedings initiated by or against me.

14. COMMISSIONS. I understand and agree that you (or your affiliate) will earn
commissions or fees on any insurance products, and may earn such fees on other
services that I buy through you or your affiliate.

15. WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and
representations which will continue as long as this Note is in effect:

A. POWER. I am duly organized, and validly existing and in good
standing in all jurisdictions in which I operate. I have the power and
authority to enter into this transaction and to carry on my business
or activity as it is now being conducted and, as applicable, am
qualified to do so in each jurisdiction in which I operate.

B. AUTHORITY. The execution, delivery and performance of this Note and
the obligation evidenced by this Note are within my powers, have been
duly authorized, have received all necessary governmental approval,
will not violate any provision of law, or order of court or
governmental agency, and will not violate any agreement to which I am
a party or to which I am or any of my Property is subject.

C. NAME AND PLACE OF BUSINESS. Other than previously disclosed in
writing to you I have not changed my name or principal place of
business within the last 10 years and have not used any other trade or
fictitious name. Without your prior written consent, I do not and will
not use any other name and will preserve my existing name, trade names
and franchises.

16. APPLICABLE LAW. This Note is governed by the laws of Nebraska, the United
States of America, and to the extent required, by the laws of the jurisdiction
where the Property is located, except to the extent such state laws are
preempted by federal law. In the event of a dispute, the exclusive forum, venue
and place of jurisdiction will be in Nebraska, unless otherwise required by law.

17. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan
is independent of the obligation of any other person who has also agreed to pay
it. You may sue me alone, or anyone else who is obligated on the Loan, or any
number of us together, to collect the Loan. Extending the Loan or new
obligations under the Loan, will not affect my duty under the Loan and I will
still be obligated to pay the Loan. This Note shall inure to the benefit of and
be enforceable by you and your successors and assigns and shall be binding upon
and enforceable against me and my personal representatives, successors, heirs
and assigns.

18. AMENDMENT, INTEGRATION AND SEVERABILITY. This Note may not be amended or
modified by oral agreement. No amendment or modification of this Note is
effective unless made in writing and executed by you and me. This Note and the
other Loan Documents are the complete and final expression of the agreement. If
any provision of this Note is unenforceable, then the unenforceable provision
will be severed and the remaining provisions will still be enforceable.

19. INTERPRETATION. Whenever used, the singular includes the plural and the
plural includes the singular. The section headings are for convenience only and
are not to be used to interpret or define the terms of this Note.

20. NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise
required by law, any notice will be given by delivering it or mailing it by
first class mail to the appropriate party's address listed in the DATE AND
PARTIES section, or to any other address designated in writing. Notice to one
Borrower will be deemed to be notice to all Borrowers. I will inform you in
writing of any change in my name, address or other application information. I
will provide you any financial statement or information you request. All
financial statements and information I give you will be correct and complete. I
agree to sign, deliver, and file any additional documents or certifications that
you may consider necessary to perfect, continue, and preserve my obligations
under this Loan and to confirm your lien status on any Property. Time is of the
essence.

21. CREDIT INFORMATION. I agree to supply you with whatever information you
reasonably request. You will make requests for this information without undue
frequency, and will give me reasonable time in which to supply the information.

22. ERRORS AND OMISSIONS. I agree, if requested by you, to fully cooperate in
the correction, if necessary, in the reasonable discretion of you of any and all
loan closing documents so that all documents accurately describe the loan
between you and me. I agree to assume all costs including by way of illustration
and not limitation, actual expenses, legal fees and marketing losses for failing
to reasonably comply with your requests within thirty (30) days.

--------------------------------------------------------------------------------
A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW. TO
PROTECT YOU AND US FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT,
PROMISE, UNDERTAKING, OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY
OTHER FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR
EXTENSION OF CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER OF, OR
SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR
DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF
CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.

BORROWER:

M-Tron Industries, Inc.

By: /s/ David Rein
-----------------
Authorized Signer

Piezo Technology, Inc.

By: /s/ David Rein
-----------------
Authorized Signer

--------------------------------------------------------------------------------

23. SIGNATURES. By signing, I agree to the terms contained in this Note. I also
acknowledge receipt of a copy of this Note.

BORROWER:

M-Tron Industries, Inc.

By: /s/ David Rein
--------------------------------
Authorized Signer

Piezo Technology, Inc.

By: /s/ David Rein
--------------------------------
Authorized Signer
LENDER:

First National Bank of Omaha

By: /s/ Mark K. McMillan
--------------------------------
Mark K. McMillan, Vice President