Exhibit 10.6

 

LINE OF CREDIT

NOTE

 

Maximum Credit Limit: Up to $3,000,000.00

 

Date: April 28, 2006

 

FOR VALUE RECEIVED, WITHOUT DEFALCATION AND INTENDING TO BE LEGALLY BOUND
HEREBY, SPITZ, INC., a Delaware corporation (hereinafter referred to as the
“Debtor”), promises to pay to the order of FIRST KEYSTONE BANK, a corporation
organized and existing under the laws of the United States of America
(hereinafter “Bank”), at its offices located at 22 West State Street, Media,
Pennsylvania,19063, or such other place as the holder hereof may from time to
time direct, the sum of up to Three Million Dollars ($3,000,000.00), or so much
thereof as may be advanced from time to time, and remain unpaid, under that
certain Line of Credit Agreement dated even date herewith between Debtor,
Guarantor (hereinafter defined), and Bank (the “Line of Credit Agreement”),
together with interest from the date hereof at the per annum rate of one-half of
one (.50%) percent above the Wall Street Prime Rate (hereinafter defined) in
effect from time to time (the “Rate”), the effective date of any change in the
Rate to be the first day next succeeding the day on which the Wall Street Prime
Rate changes. Bank extended to Debtor and Transnational Industries, Inc. a line
of credit facility on June 12, 1997, evidenced by that certain Line of Credit
Note executed by Debtor and Transnational Industries, Inc. and delivered to Bank
on June 12, 1997 (the “Line of Credit Note”). The obligations evidenced by the
Line of Credit Note were subsequently modified, increased, extended and renewed
by the following: (i) a Modification Agreement dated July 7, 2000 (the “First
Modification Agreement”);  (ii) a Renewal Line of Credit Note (the “First
Renewal Note”) dated July 7, 2000; (iii) a Second Modification Agreement dated
July 18, 2002 (the “Second Modification Agreement”); a Second Renewal Line of
Credit Note (the “Second Renewal Note”) dated July 18, 2002; (iv) an Amendment
No. 1 to Second Modified Line of Credit Agreement dated as of September 15, 2003
(“Amendment No .1 to Second Modified Line of Credit Agreement”); (v) a Third
Modification Agreement dated July 14, 2004 (the “Third Modification Agreement”);
and (vi) a Third Renewal Line of Credit Note (the “Third Renewal Note”) dated
July 14, 2004. The Line of Credit Note, the First Modification Agreement, the
First Renewal Note, the Second Modification Agreement, the Second Renewal Note,
Amendment No. 1 to Second Modified Line of Credit Agreement, Third Modification
Agreement and the Third Renewal Note are herein collectively referred to as the
“Existing Line of Credit”. As of the date of this line of credit note (“Note”)
the outstanding balance of the Existing Line of Credit is Two Million Two
Hundred Twenty Four Thousand Nine Hundred Eighty Dollars and Six Cents
($2,224,980.06). This Note is executed and delivered in substitution and
replacement of the Debtor’s obligations under and the indebtedness evidenced by
the Existing Line of Credit and stands in the place and stead of the documents
evidencing the Existing Line of Credit and is not an additional indebtedness or
a satisfaction of the indebtedness evidenced by the documents executed in
connection with the Existing Line of Credit. The indebtedness and obligations
evidenced by the Existing Line of Credit are continued, renewed, extended and
modified by this Note. The indebtedness evidenced by this Note is to be paid as
follows:

 

 

JONES, STROHM & GUTHRIE

 

10 Beatty Road

A Professional Corporation

 

Media, Pennsylvania 19063

Attorneys At Law

 

Telephone (610) 565-7100

 

 

Fax (610) 565-7180

 

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(i)                                    On May 1, 2006, a payment of interest
only on the daily principal balance outstanding from the date hereof to April
30, 2006, and thereafter a payment of interest only (the “Interest Installment”)
on the daily principal balance outstanding from the date hereof in monthly
installments of said interest payable on the first day of June, 2006, and on the
same day of each month thereafter until the earlier to occur of (a) demand by
Bank upon the occurrence of an Event of Default (as hereinafter defined), (b)
demand by Bank in the event of the retirement, termination, departure from the
employ of Debtor or the substantial diminution of the management authority or
responsibilities of either Jonathan Shaw or Paul Dailey in the operations of
Debtor unless otherwise reasonably consented to by Bank; (c) demand by Bank in
the event of the retirement, termination, departure from the employ of Debtor or
the substantial diminution of the management authority or responsibilities of
both Jonathan Shaw and Paul Dailey in the operations of Debtor, (d) thirty (30)
days after demand by Bank; or (e) June 30, 2007 (the “Maturity Date”), at which
time the entire indebtedness evidenced by this Note, including, without
limitation, the entire outstanding principal balance and accrued interest
thereon, together with any other sums due and payable hereunder, shall be due
and payable in full;

 

(ii)                                Notwithstanding anything herein to the
contrary, in the event the outstanding balance of this Note exceeds the Maximum
Credit Limit because of a reduction in the Maximum Credit Limit by reason of a
reduction in the amount of Qualified Accounts Receivable or Qualified inventory
(as those terms are defined in the Line of Credit Agreement) or otherwise,
Debtor will immediately pay to Bank the amount necessary to reduce the
outstanding balance of this Note to a sum equal to or less than the Maximum
Credit Limit;

 

(iii)                            The Wall Street Prime Rate is the “Prime Rate”
published in the “Money Rates” section of The Wall Street Journal, Eastern
Edition, or the average “Prime Rate” if more than one is published. If The Wall
Street Journal ceases to be published or goes on strike or is otherwise not
published for any period of time, or if it ceases to publish a “Prime Rate”,
then Bank may use any similar published prime or base rate; and

 

(iv)                               The amount of any monthly installment shall
be the result obtained by multiplying the product of the outstanding balance on
any day times the applicable Rate by a fraction, the numerator of which is the
actual number of days during the period for which the calculation is being made
that any given outstanding balance is applicable, and the denominator of which
is three hundred sixty-five (365).

 

I.                                         ADVANCES:  Subject to the terms and
conditions of this Note and the Line of Credit Agreement, Bank agrees to advance
to Debtor from time to time and until the Maturity Date, such sums as Debtor may
request, in writing, not to exceed at any time outstanding, the Maximum Credit
Limit (as defined in the Line of Credit Agreement). Within the limits of this
Note and the Line of Credit Agreement and prior to the Maturity Date Debtor may
borrow, repay, and borrow again.

 

II.                                     SECURITY: The payment of this Note is
secured by, inter alia: (i)  that certain second-lien priority Open-End Mortgage
and Security Agreement dated even date herewith (the “Mortgage”) encumbering
that certain real estate known as Route 1, Chadds Ford, Chadds Ford Township,
Delaware County, Pennsylvania (the “Mortgaged Premises”); (ii)  that certain
Security Agreement between Bank and Debtor and UCC-1 Financing Statements of
even date herewith (the

 

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“Security Agreement”) encumbering the Collateral as defined in the Security
Agreement; (iii) a guaranty and suretyship agreement of Evans & Sutherland
Computer Corporation, a Utah corporation (hereinafter the “Guarantor”); and (iv)
that certain Pledge Agreement between bank and Guarantor respecting all of the
issued and outstanding shares of stock of Debtor (the “Pledge Agreement”).

 

III.                                 ADVANCES FOR PROTECTION OF SECURITY
INTEREST:  In the event Debtor fails to pay any cost or expense relating to the
protection of the Mortgaged Premises or the Collateral (as defined in the
Security Agreement), then Bank may, at its option and without prior notice,
advance sums on behalf of Debtor in payment of any of the aforesaid, including,
without limitation, charges and claims, prior liens and insurance premiums
without prejudice to the right of enforcement of the within indebtedness or the
other remedies of Bank as hereinafter set forth by reason of the failure of
Debtor to make payment of the same; and all such sums so advanced by Bank shall
be added to and become part of the within indebtedness, with interest on each
advance at the Rate, from the dates of the respective expenditures, shall be
secured by the security for this Note, and shall be payable by Debtor to Bank
upon demand. The production of a receipt by the Bank shall be conclusive proof
of a payment or advance authorized hereby and the amount and validity thereof.
The provisions of this paragraph shall apply after the entry of a judgment in
any collection action based upon this Note or the security for this Note and
Debtor shall be obligated to pay to Bank any post judgment advances made by Bank
pursuant to this paragraph.

 

IV.                                REPAYMENTS:  Debtor may at any time prepay
the principal outstanding balance hereof in whole or in part without penalty or
premium, provided that Debtor gives written notice to Bank prior to or
contemporaneously with any such prepayment of principal. Partial prepayments
shall be applied first on account of interest, then on account of other sums due
under this Note, other than principal, and then on account of principal.

 

V.                                    DEFAULT RATE OF INTEREST:  In the event
Debtor fails to pay any amount due under this Note when due or as demanded, then
interest shall at all times during the continuance of such payment default
accrue on all sums due under this Note at the Rate plus five (5%) percent per
annum (the “Default Rate”).

 

VI.                                LATE CHARGE:  In the event any Interest
Installment shall become overdue for a period of fifteen (15) days, Debtor shall
promptly pay to Bank a late charge of five (5) cents for each dollar so overdue.
This shall not be construed to obligate Bank to accept any overdue installment
(i.e., any payment remaining unpaid for a period of five (5) days after written
notice of failure to pay the same when due) nor limit Bank’s rights and remedies
for Debtor’s default, as hereinafter set forth.

 

VII.                            DEFAULT:  (a)  Each of the following shall
constitute an event of default by Debtor (“Event of Default”) hereunder:

 

(i)                                    any interest installment, or principal
payment, or any other sum required hereunder remains unpaid for the period of
ten (10) days after written notice to Debtor of failure to pay the same after it
shall become due in accordance with the provisions hereof; or

 

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(ii)                                the failure to cure any event of default
under the provisions of the Mortgage, the Security Agreement, the Pledge
Agreement, the Line of Credit Agreement or any other document executed by Debtor
and or Guarantor in connection with this Note after the expiration of any
applicable cure period (collectively the “Loan Documents”); or

 

(iii)                            the failure to cure an event of default under
any other obligation or indebtedness of Debtor or Guarantor to Bank after the
expiration of any applicable cure period.

 

(b)                                  Upon and after the occurrence of an Event
of Default, the entire unpaid principal balance hereof, together with interest
accrued thereon at the Rate hereinbefore specified to the date of Event of
Default and thereafter at the Default Rate, and all other sums due by Debtor
hereunder or under the other Loan Documents together with reasonable attorney’s
fees, shall, upon the declaration of Bank, immediately become due and payable
without presentment, demand or further action of any kind, and payment of the
same may be enforced and recovered in whole or in part at any time by the entry
of judgment on this Note or any other judicial proceeding and the issuance of a
writ of execution thereon upon any real or personal property of Debtor; and Bank
may also recover all costs of suit and other expenses, including reasonable
attorney’s fees and the cost of the title search, in connection therewith.

 

(c)                                  Upon the occurrence of an Event of Default
and the acceleration of the entire unpaid balance of principal of this Note,
interest shall continue to accrue thereafter at the Default Rate until this
Note, and all sums due hereunder, are paid in full, including the period
following the entry of any judgment. Interest after default at the Default Rate
shall be calculated on the basis of a three hundred sixty-five (365) day year,
but charged for the actual number of days elapsed.

 

(d)                                  The rights and remedies provided herein or
in the other Loan Documents shall be cumulative and concurrent and shall not be
exclusive of any right or remedy provided by law, in equity or otherwise. Said
rights and remedies may, at the sole discretion of Bank, be pursued singly,
successively or together as often as occasion therefor shall arise, against
Debtor and/or the Mortgaged Premises or the Collateral or any other security for
this Note, as applicable. No failure on the part of Bank to exercise any of such
rights or remedies shall be deemed a waiver of any such rights or remedies or of
any Event of Default hereunder.

 

(e)                                  Upon the occurrence of an Event of Default,
Bank shall have the right, but not the duty, to cure such default, in part or in
its entirety, and all amounts expended or debts incurred by Bank, including
reasonable attorneys’ fees, shall be deemed to be advances to Debtor, shall be
added to the principal due under this Note, shall be secured by the security for
this Note, and shall be payable by Debtor to Bank upon demand with interest at
the Default Rate.

 

VIII.                        WARRANT OF ATTORNEY. THE FOLLOWING SECTION SETS
FORTH WARRANTS OF ATTORNEY FOR ANY ATTORNEY TO CONFESS JUDGMENTS AGAINST DEBTOR.
IN GRANTING THESE WARRANTS OF ATTORNEY TO CONFESS JUDGMENTS AGAINST DEBTOR,
DEBTOR HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY, AND UNCONDITIONALLY WAIVES
ANY AND

 

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ALL RIGHTS DEBTOR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER
THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE COMMONWEALTH PENNSYLVANIA AND THE
UNITED STATES OF AMERICA.

 

UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, DEBTOR DOES HEREBY IRREVOCABLY
AUTHORIZE AND EMPOWER ANY ATTORNEY OF THE PROTHONOTARY OF ANY COURT OF RECORD OF
THE COMMONWEALTH PENNSYLVANIA OR ELSEWHERE TO APPEAR FOR DEBTOR IN ANY SUCH
COURT, AND WITH OR WITHOUT A COMPLAINT OR DECLARATION FILED, IN AN APPROPRIATE
ACTION BROUGHT AGAINST DEBTOR ON THIS NOTE, TO ENTER AND CONFESS JUDGMENT
AGAINST DEBTOR IN FAVOR OF BANK OR ITS SUCCESSORS AND ASSIGNS, FOR THE ENTIRE
AMOUNT DUE TO BANK UPON SUCH EVENT OF DEFAULT AS PROVIDED HEREIN, TOGETHER WITH
COSTS OF SUIT AND AN ATTORNEY’s COMMISSION EQUAL TO THE LESSER OF THE ACTUAL
ATTORNEYS’ FEES INCURED OR TEN PERCENT OF THE OUTSTANDING BALANCE HEREOF; AND
FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A
SUFFICIENT WARRANT. THE AUTHORITY HEREIN GRANTED TO APPEAR, ENTER AND CONFESS
JUDGMENT SHALL NOT BE EXHAUSTED BY ANY ONE OR MORE EXERCISES THEREOF OR BY ANY
DEFECTIVE EXERCISE THEREOF, BUT SHALL CONTINUE AND BE EXERCISABLE FROM TIME TO
TIME UNTIL THE FULL PAYMENT OF ALL AMOUNTS DUE FROM DEBTOR TO BANK HEREUNDER AND
UNDER THE LINE OF CREDIT AGREEMENT IS MADE.

 

DEBTOR ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF LEGAL COUNSEL IN THE
REVIEW AND EXECUTION OF THIS NOTE AND FURTHER ACKNOWLEDGES THAT THE MEANING AND
EFFECT OF THE FOREGOING PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE BEEN
FULLY EXPLAINED TO DEBTOR BY SUCH COUNSEL AND AS EVIDENCE OF SUCH FACT SIGNS ITS
INITIALS.

 

(Initials of Officer of Debtor)

 

IX.                                WAIVER OF BENEFIT AND DEFECTS. Debtor hereby
waives the benefit of any laws now or hereafter enacted providing for any stay
of execution, marshaling of assets, exemption from civil process, redemption,
extension of time for payment, or valuation or appraisement of all or any part
of the Collateral or any other security for this Note, exempting all or any part
of the Collateral, or any other security for this Note from attachment, levy or
sale upon any such execution or conflicting with any provision of this Note.
Debtor waives and releases Bank and said attorney or attorneys from all errors,
defects and imperfections whatsoever in confessing any such judgment or in any
proceedings relating thereto or instituted by Bank hereunder. Debtor hereby
agrees that any property that may be levied upon pursuant to a judgment obtained
under this Note may be sold upon any execution thereon in whole or in part, and
in any manner and order that Bank, in its sole discretion may elect.

 

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X.                                    MISCELLANEOUS:  Debtor hereby waives
protest, notice of protest, presentment, dishonor, notice of dishonor and
demand. Debtor agrees to reimburse Bank for all costs and expenses including
reasonable counsel fees incurred by Bank in connection with the enforcement
hereof. The rights and privileges of Bank under this Note shall inure to the
benefit of its successors and assigns. All representations, warranties and
agreements of Debtor made in connection with this Note shall bind Debtor’s
successors and assigns. If any provision of this Note shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, but this Note shall be construed as if
such invalid or unenforceable provision had never been contained herein. This
Note has been delivered in, and shall be governed by the laws of the
Commonwealth Pennsylvania. Notwithstanding anything herein to the contrary, upon
the occurrence of an Event of Default and prior to Banks acceleration of the
sums due or exercise of any other remedy of Bank, Debtor does not have the right
to cure the Event of Default, and Bank shall not be obligated to accept any
payment or other performance tendered to cure the Event of Default. Further, in
the event Bank waives an Event of Default and permits Debtor to cure such Event
of Default, such waiver shall not constitute a waiver of any subsequent Event of
Default or create or be interpreted to create any right of Debtor to cure any
subsequent Event of Default.

 

XI.                                NO WAIVER. The granting, with or without
notice, of any extension or extensions of time for payment of any sum or sums
due hereunder, or for the performance of any covenant, provision, condition or
agreement contained herein, in the other Loan Documents, or the granting of any
other indulgence, or the taking or releasing or subordinating of any security
for the indebtedness evidenced hereby, or any other modification or amendment of
this Note, or the other Loan Documents will in no way release or discharge the
liability of Debtor, whether or not granted or done with the knowledge or
consent of Debtor.

 

XII.                            NOTICES:  All invoices shall be sent by regular
first class mail to Debtor and the Guarantor at the addresses set forth in the
Line of Credit Agreement. All other notices, requests and other communications
hereunder shall be in writing and shall be sent in the manner set forth in the
Line of Credit Agreement.

 

XIII.                        GOVERNING LAW:  This Note shall be governed by and
construed in accordance with the laws of the Commonwealth Pennsylvania.

 

XIV. JOINT AND SEVERAL LIABILITY: Each and every maker and guarantor signing
this Note is fully and personally obligated to keep all of the promises made in
this Note including, without limitation, the promises to pay the full amount
owed. Bank may enforce its rights under this Note against each maker and
guarantor signing this Note jointly and severally.

 

XV.                           WAIVER OF JURY TRIAL:   BY ITS EXECUTION AND
DELIVERY OF THIS NOTE, THE DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY

 

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LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
NOTE, THE MORTGAGE, THE SECURITY AGREEMENT, THE PLEDGE AGREEMENT, THE LINE OF
CREDIT AGREEMENT, ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO OR THERETO,
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BANK
OR THE DEBTOR IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK TO ENTER INTO THIS NOTE.

 

IN WITNESS WHEREOF, and intending to be legally bound hereby, Debtor has duly
executed this Note the day and year first above written and has hereunto set its
hand and seal.

 

 

WITNESS:

DEBTOR:

 

SPITZ, INC.

 

A Delaware Corporation

 

 

 

 

/s/ Donn L. Guthrie

 

BY:

/s/   Jonathan Shaw   (SEAL)

 

(As to Both) Witness

 

 

 

 

 

 

 

ATTEST:

/s/   Paul L. Dailey   (SEAL)

 

Witness

 

 

 

 

 

[Corporate Seal]

 

 

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GUARANTOR

 

For valuable consideration, the undersigned does hereby acknowledge its
liability as endorser, surety and guarantor of this Note, and does hereby waive
and release any right to require that the holder hereof first proceed against
the maker hereof. The undersigned does hereby agree that the terms of this Note
may be modified, waived, released and extended, and that the rights of any
holder hereof may be modified, waived, released or extended, all without notice
to the undersigned, without its approval, and without affecting its liability
hereunder. The undersigned does further waive all notices, including, but not
limited to, notices of default under this Note.

 

Witnesses:

GUARANTOR:

 

EVANS & SUTHERLAND COMPUTER
CORPORATION

 

A Utah Corporation

 

 

 

 

/s/  Analisa Marquardt

BY:   

/s/  David Bateman (SEAL)

 

Witness    

 

 

 

/s/  Analisa Marquardt

ATTEST:   

/s/  Lance Sessions (SEAL)

 

Witness

 

 

  [Corporate Seal]

 

 

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