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                                 EXHIBIT 10(AA)

SUNTRUST                                 UNLIMITED CONTINUING GUARANTY AGREEMENT

The "Lender" referred to in this Agreement is SunTrust Bank.

Lender's address is  25 Park Place, Atlanta, Georgia  30303

Guarantor:                                           Borrower:
Lynch Corporation                                    Lynch Systems, Inc.
50 Kennedy Plaza, Suite 1250                         601 Independent Street
Providence, Rhode Island  02903                      Bainbridge, Georgia  31717

1.       CONSIDERATION. To induce Lender to extend credit or other financial
accommodations to Borrower, or to continue to extend credit or other financial
accommodations to Borrower, and in consideration therefor, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Guarantor (which term shall mean each Guarantor named herein
individually and all Guarantors named herein collectively) does hereby agree as
follows:

2.       DEFINITIONS:

         2.1.     "Lender" shall include the bank set forth above and any Person
         acting as its nominee or agent, and any member of its "affiliated
         group" as such term is defined in Section 1504(a) of the Internal
         Revenue Code of 1986, as amended.

         2.2.     "Liability" and "Liabilities" shall include all of the
         Obligations as defined in that certain Amended and Restated Credit
         Agreement, dated as of the date hereof, by and between the Lender and
         the Borrower (as the same may be amended from time to time, the "Credit
         Agreement") and the other Credit Documents referred to in the Credit
         Agreement, including all renewals, extensions, modifications, and
         refinancings thereof, now or hereafter existing, whether for principal,
         interests, fees, expenses or otherwise, and all expenses (including
         reasonable attorney's fees and expenses) actually incurred by Lender in
         enforcing any of its rights hereunder or under the Credit Agreement and
         the other Credit Documents.

         2.3.     "Borrower" shall mean, individually and collectively, any
         individual or individuals, association, partnership, corporation or
         other entity named herein as Borrower and (i) all successors and
         assigns of the Borrower, (ii) any individual or individuals,
         association, partnership, corporation or other entity to which all or
         substantially all of the business or assets of said Borrower shall have
         been transferred, (iii) in the case of a partnership Borrower, any new
         partnership which shall have been created by reason of the admission of
         any new partner or partners therein and/or the dissolution of the
         existing partnership by the death, resignation or other withdrawal of
         any partner, and (iv) in the case of a corporate Borrower, any other
         corporation into or with which said Borrower shall have been merged,
         consolidated, reorganized, purchased or absorbed.

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         2.4.     "Person" and "Persons" shall include natural persons,
         partnerships, and incorporated and unincorporated entities and
         associations of every kind.

3.       OBLIGATION OF GUARANTOR. Guarantor hereby absolutely and
unconditionally delivers this Guaranty to Lender and hereby absolutely and
unconditionally guarantees to Lender and any transferee of this Guaranty or of
any Liability guaranteed hereby, the prompt and full payment of all Liabilities.
Guarantor agrees that if Borrower fails to fully and timely perform any
Liability, Guarantor will fully and timely perform the Liability without resort
by the Lender to any other Person. Any obligation of the Guarantor hereunder is
in addition to and shall not prejudice or be prejudiced by any other agreement,
instrument, surety or guaranty (including any other agreement, instrument,
surety or guaranty signed by Guarantor) which Lender may now or hereafter hold
relative to any of the Liabilities. Any payment of Guarantor hereunder may be
applied to any of the Liabilities as Lender may choose. The obligation of
Guarantor to Lender hereunder is primary, absolute and unconditional.

4.       TERM OF GUARANTY. Guarantor acknowledges that there may be future
advances by Lender to Borrower (although Lender may be under no obligation to
make such advances) and that the number and amount of the Liabilities are
unlimited and may fluctuate from time to time hereafter. Guarantor expressly
agrees that Guarantor's obligation hereunder shall remain absolute, primary and
unconditional notwithstanding such future advances and fluctuations, if any, and
agrees that, in any event, this agreement is a continuing guaranty and shall
remain in force at all times hereafter, whether there are any Liabilities
outstanding or not, until all originals hereof are returned to Guarantor by
Lender or until a written notice from Guarantor terminating this Guaranty has
been received and acknowledged by Lender, but such written termination shall not
release Guarantor from any obligation for payment of (i) any and all Liabilities
then in existence; (ii) any renewals or extensions thereof, in whole or in part,
whether such renewals or extensions are made before or after such termination;
and (iii) any damages, losses, costs, interest, charges, attorneys fees or
expenses then or thereafter incurred in connection with the Liabilities or any
renewals or extensions thereof.

5.       PROPERTY IN LENDER'S POSSESSION. As security for the payment of the
Liabilities and the obligation of Guarantor hereunder, Guarantor hereby assigns
and grants a security interest to Lender in: (i) all property of Guarantor in or
coming into the possession, control, or custody of Lender, or in which Lender
has or hereafter acquires a lien, security interest, or other right; and (ii)
any existing or hereafter created lien or security interest in favor of
Guarantor in any property of Borrower. Guarantor hereby agrees that any rights
Guarantor may now or hereafter have in any collateral securing any of the
Liabilities or against Borrower or any property of Borrower, including rights
arising by virtue of subrogation or otherwise, shall be subordinate and junior
to Lender's rights to said collateral or property and to Lender's indefeasible
right to the prior payment of the Liabilities. Guarantor hereby grants to Lender
a lien on, and a security interest in, the deposit balances, funds, accounts,
items, certificates of deposit, securities, other property and the monies of
Guarantor now or hereafter in the possession or custody of Lender for any
purpose (including property left in safekeeping or custody) or on deposit with
Lender to secure, and as collateral for, the payment and performance of this
Guaranty as well as of any other obligation or liability (present or future,
absolute or contingent, due or not due) of Guarantor to Lender. Lender may at
any time and from time to time,

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without demand or notice, appropriate and set off against such deposit balances,
funds, accounts, items, certificates of deposit, securities, other property and
monies and apply the same to the obligations of Guarantor hereunder.

6.       CONSENT TO LENDER'S ACTS. Guarantor hereby consents and agrees that, at
any time or times, without notice to or further approval of Guarantor or
Borrower, and without in any way affecting the obligation of Guarantor
hereunder, Lender may, with or without consideration: (i) release, compromise,
or agree not to sue, in whole or in part, Borrower, any Guarantor or any other
obligor, guarantor, endorser or surety upon any of the Liabilities; (ii) waive,
rescind, renew, extend, modify, increase, decrease, delete, terminate, amend, or
accelerate in accordance with its terms, either in whole or in part, any of the
Liabilities, any of the terms thereof, or any agreement, covenant, condition, or
obligation of or with Borrower, any Guarantor, or any other obligor, guarantor,
endorser or surety upon any of the Liabilities; and (iii) apply any payment
received from Borrower, any Guarantor or any other obligor, guarantor, endorser
or surety upon any of the Liabilities to any of the Liabilities which Lender may
choose. Further, Lender may at any time, either with or without consideration,
surrender, release or receive any property or other security of any kind or
nature whatsoever held by it or any Person on its behalf or for its account
securing any indebtedness of Borrower or any Liability, or substitute any
collateral so held by Lender for other collateral of like kind, or of any kind,
without notice to or further consent from Guarantor, and such surrender,
receipt, release or substitution shall not in any way affect the obligation of
Guarantor hereunder. Lender shall have full authority to adjust, compromise and
receive less than the amount due upon any such collateral, and may enter into
any accord and satisfaction agreement as deemed advisable by Lender without
affecting the obligation of Guarantor hereunder. Lender shall be under no duty
to undertake to collect upon such collateral or any part thereof, and shall not
be liable for any negligence or mistake in judgment in handling, disposing of,
obtaining, or failing to collect upon, or perfecting or maintaining a security
interest in, any such collateral and any such actions by Lender will not release
Guarantor from any obligation under this Guaranty.

7.       WAIVERS BY GUARANTOR. Guarantor waives: (i) notice of acceptance of
this Guaranty by Lender and of the creation, extension or renewal of any
Liability to which it relates and of any default by Borrower; (ii) notice of
presentment, demand for payment, notice of dishonor or protest of any of
Borrower's obligations or the obligation of any Person held by Lender as
collateral security for any Liability; (iii) notice of the failure of any Person
to pay to Lender any indebtedness held by Lender as collateral security for any
Liability; (iv) failure of Lender to obtain and perfect or maintain the
perfection or priority of any security interest or lien on property to secure
any Liability; (v) any defense resulting from the failure of Lender to have any
other Person execute this Guaranty or execute any other guaranty relating to a
credit facility granted to Borrower; (vi) any failure to promptly commence suit
against any party thereto or liable thereon or to give any notice to or make any
claim or demand upon Guarantor or Borrower; and (vii) all defenses, offsets and
counterclaims which Guarantor may at any time have to any claim of Lender
against Borrower. No act, failure to act, or omission of any kind on the part of
Guarantor, Borrower, Lender or any Person shall be a legal or equitable
discharge or release of Guarantor hereunder unless agreed to hereafter in
writing by Lender. This Guaranty shall not be affected by any change which may
arise by reason of the death of Guarantor, or of any partner(s) of Guarantor, or
of Borrower, or by reason of the accession to any such partnership of any one or
more new partners. Guarantor further agrees that this instrument shall

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continue to be effective or be reinstated as the case may be, if at any time
payment, or any part thereof, of the principal or interest on any of the
Liabilities is rescinded or must otherwise be restored or returned by Lender
upon the insolvency, bankruptcy or reorganization of Borrower, or otherwise, all
as though such payment had not been made.

8.       BORROWER AUTHORIZATION. This Guaranty covers all Liabilities to Lender
purporting to be made on behalf of Borrower by any officer, agent or partner of
Borrower, without regard to the actual authority of such officer, agent or
partner to bind Borrower, and without regard to the capacity of Borrower or
whether the organization or charter of Borrower is in any way defective.

9.       PAYMENT EVENTS, SUBROGATION RIGHTS. In the event of: (i) the insolvency
(as defined in the Uniform Commercial Code as in effect at the time) of Borrower
or any Guarantor; or (ii) written notice from any Guarantor terminating this
Guaranty is received and acknowledged by Lender, and whether or not any such
event occurs at a time when any Liabilities are otherwise due and payable,
Guarantor agrees to pay to Lender upon demand the full amount which would be
payable hereunder by Guarantor if all Liabilities were then due and payable. If
a bankruptcy or insolvency action be filed by or against Borrower or any
Guarantor or if a receiver be appointed for any part of the property or assets
of Borrower or any Guarantor, whether or not such event occurs at a time when
any of the Liabilities are otherwise due and payable, then simultaneously
therewith Guarantor will be obligated to pay to Lender the full amount which
would be payable hereunder by Guarantor if all Liabilities were then due and
payable, all without notice or demand from Lender. Until all obligations of
Guarantor to Lender have been paid in full, Guarantor shall have no right of
subrogation and hereby waives any right to enforce any remedy which Lender now
has or may hereafter have against Borrower and any benefit of, and any right to
participate in, any collateral now or hereafter held by Lender.

10.      SUBORDINATION. In the event that for any reason whatsoever, Borrower is
now or hereafter becomes indebted to Guarantor, Guarantor agrees that the amount
of such indebtedness and all interest thereon shall at all times be subordinate
as to lien, time of payment and in all other respects to all Liabilities which
are covered by this Guaranty, and that Guarantor shall not be entitled to
enforce or receive payment thereof until all sums then due and owing to Lender
shall have been paid in full. If any payment shall have been made to Guarantor
by Borrower on any said indebtedness during any time that there are Liabilities
outstanding, Guarantor shall hold in trust all such payments for the benefit of
Lender and shall make said payments to Lender to be credited and applied against
the Liabilities, whether matured or unmatured, in accordance with the discretion
of Lender.

11.      REPRESENTATIONS BY GUARANTOR. Guarantor represents that, at the time of
the execution and delivery of this Guaranty, nothing exists to impair the
effectiveness of the obligation of Guarantor to Lender hereunder, or this
Guaranty becoming effective immediately.

12.      REMEDIES OF LENDER. Lender may at its option proceed in the first
instance against Guarantor to collect any Liability, without first proceeding
against Borrower for said Liability, or any other Person liable for said
Liability, and without first resorting to any property at any time held by
Lender as collateral security for any Liability and without any marshalling of
assets whatsoever. Guarantor further authorizes Lender, without notice or
demand, to apply any indebtedness due or to

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become due to Guarantor from Lender in satisfaction of any of the Liabilities
and Guarantor's obligation hereunder, including, but not limited to, the right
to set-off against any deposits of Guarantor with Lender. Lender shall further
have any other rights provided by law or under any other document, all of which
rights are cumulative. The obligation of each Guarantor hereby created is joint
and several, and Lender is authorized and empowered to proceed against Guarantor
or any of them, without joining Borrower or any other Guarantor. All of said
parties may be sued together, or any of them may be sued separately without
first or contemporaneously suing the others. There shall be no duty or
obligation upon Lender, whether by notice or otherwise: (i) to proceed against
Borrower or any other Guarantor; (ii) to initiate any proceeding or exhaust any
remedy against Borrower or any other Guarantor; or (iii) to give any notice to
any other Guarantor or Borrower, whatsoever, before bringing suit, exercising
any rights to any collateral or security, or instituting proceedings of any kind
against Borrower, Guarantor or any of them.

13.      INUREMENT, GOVERNING LAW, COSTS AND EXPENSES. This agreement shall bind
and inure to the benefit of Lender, its successors and assigns, and likewise
shall bind and inure to the benefit of Guarantor, the heirs, executors,
administrators, personal representatives, estates, successors and assigns of the
Guarantor. This agreement and its performance, interpretation and enforcement
shall in all respects be governed by the laws of the State indicated in Lender's
address as shown above. Guarantor waives any and all privilege and rights which
Guarantor may have under state statute, relating to venue, as it now exists or
may hereafter be amended. Any legal action brought on this Guaranty may, at
Lender's discretion, be brought in the appropriate court for the county in which
the Lender's address, indicated above, is located or in such other court as
provided by law. If any legal action or actions are instituted by Lender to
enforce any of its rights against Guarantor hereunder, then Guarantor, jointly
and severally, agrees to pay Lender all expenses incurred by Lender relative to
such legal action or actions, including, but not limited to, court costs plus
reasonable attorney's fees actually incurred.

14.      WAIVER OF HOMESTEAD EXEMPTION RIGHTS AND BORROWER DEFENSES. Guarantor
hereby ratifies, confirms, and adopts all the terms, conditions, agreements and
stipulations of all notes and other evidences of the Liabilities heretofore or
hereafter executed. Without in any way limiting the generality of the foregoing,
Guarantor waives and renounces any and all homestead or exemption rights
Guarantor may have under or by virtue of the Constitution or laws of any state,
or the United States, as against the obligation hereby created, provided,
however, that such waiver shall not apply to any obligation created hereunder
which arises from any of the Liabilities that are consumer credit transactions;
and Guarantor does hereby transfer, convey and assign, and direct any Trustee in
Bankruptcy or receiver to deliver to Lender, a sufficient amount of property or
money in any homestead or exemption that may be allowed to Guarantor to pay any
Liability in full and all costs of collection.

15.      FINANCIAL STATEMENTS. At the request of Lender, Guarantor shall prepare
and deliver to Lender no more frequently than each fiscal quarter a complete and
current financial statement setting forth all the assets and liabilities of
Guarantor (and to the extent any Person other than Guarantor, including a spouse
of Guarantor, has any interest in said assets or is jointly liable for any of
said liabilities, said matters shall be set forth in their entirety in the
financial statements), signed by Guarantor under oath as being true and correct.

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16.      INDEPENDENT DETERMINATION OF FACTS. Guarantor's execution of this
Guaranty was not based upon any facts or materials provided by Lender nor was
Guarantor induced to execute this Guaranty by any representation, statement or
analysis made by Lender. Guarantor acknowledges and agrees that Guarantor
assumes sole responsibility for independently obtaining any information or
reports deemed advisable by Guarantor with regard to Borrower or any other
Guarantor, and Guarantor agrees to rely solely on the information or reports so
obtained in reaching any decision to execute or not to terminate this Guaranty.
Guarantor acknowledges and agrees that Lender is and shall be under no
obligation now or in the future to furnish any information to Guarantor
concerning Borrower, the Liabilities or any other Guarantor, and that Lender
does not and shall not be deemed in the future to warrant the accuracy of any
information or representation concerning the Borrower, any Guarantor or any
other Person which may induce the Guarantor to execute or not to terminate this
Guaranty.

17.      MISCELLANEOUS. All of the Lender's rights and remedies are cumulative
and those granted hereunder are in addition to any rights and remedies available
to the Lender under law. If any provision of this agreement or the application
thereof to any Person or circumstances shall to any extent, be invalid or
unenforceable, the remainder of this agreement or the application of such
provision to Persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each provision of
this agreement shall be valid and enforceable to the full extent permitted by
law. The failure or forbearance of Lender to exercise any right hereunder, or
otherwise granted to it by law or another agreement, shall not affect the
obligation of Guarantor hereunder and shall not constitute a waiver of said
right. This Guaranty contains the entire agreement between the parties, and no
provision hereof may be waived, modified, or altered except by a writing
executed by Guarantor and Lender. There is no understanding that any Person
other than or in addition to Guarantor shall execute this Guaranty. The captions
to the paragraphs are for convenience only and shall not be deemed a part of
this agreement.

18.      JURY WAIVER. GUARANTOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN CONTRACT OR TORT, AT LAW
OR IN EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER TO EXTEND, OR TO CONTINUE TO EXTEND CREDIT OR
OTHER FINANCIAL ACCOMMODATIONS TO BORROWER. FURTHER, GUARANTOR HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF LENDER, NOR THE LENDER'S COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO
REPRESENTATIVE OR AGENT OF THE LENDER, NOR LENDER'S COUNSEL HAS THE AUTHORITY TO
WAIVE, CONDITION, OR MODIFY THIS PROVISION.

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19.      WAIVER OF O.C.G.A. SECTION 10-7-24. If this Guaranty is executed or
enforced in Georgia, or if the obligations guaranteed hereby are due and payable
in Georgia, or if this Guaranty is governed by the laws of Georgia, then
Guarantor waives all rights under Section 10-7-24 of the Official Code of
Georgia Annotated, as amended, including any right to require Lender to proceed
against Borrower.

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Guarantor has read, understands, and agrees to the provisions of this Guaranty
and has executed the same voluntarily, under seal, with full authority and with
the intent to be legally bound by its terms, conditions, and obligations.

Dated June 10, 2002

                                               Guarantor:

                                               LYNCH CORPORATION

                                               By: /S/ RAYMOND H. KELLER
                                                   ---------------------
                                                   RAYMOND H. KELLER

                                                                          (SEAL)

                                               Name:  Raymond H. Keller

                                               Address:50 Kennedy Plaza
                                                       Providence, RI 02903
                                               Phone: (401) 453-2007

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                                 EXHIBIT 10 (BB)

                      RESTATED LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT, dated as of August 31, 2001, by and
between M-Tron Industries, ("BORROWER"), a Delaware corporation, and First
National Bank of Omaha, a national banking association with principal business
offices in Omaha, Nebraska ("BANK").

      This LOAN AND SECURITY AGREEMENT replaces the previously executed RESTATED
REVOLVING LOAN AND SECURITY AGREEMENT dated April 30, 2000.

WITNESSETH:

      BACKGROUND.   The BANK will provide the following credit facilities
to BORROWER:  a TERM LOAN for $1,200,000.00 and a REVOLVING LOAN for
$5,000,000.00.

      NOW, THEREFORE, in consideration of the promises herein contained, and
each intending to be legally bound thereby, the parties agree as follows:

Section I. Definitions as used herein:

1.    "Accounts", "Chattel Paper", "Commercial Tort Claims", "Contracts",
      "Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
      "Health-care-insurance" receivable/account", "Instruments", "Inventory",
      "Investment Property", "Letter-of-credit right" and "Payment intangible",
      shall have the same meanings as are given to those terms in the Uniform
      Commercial Code as presently adopted and in effect in the State of
      Nebraska. The term "Instruments" shall also include all forms of chattel
      paper, including chattel paper involving related software as well as
      electronic chattel paper and tangible chattel paper.

2.    Accounting. Accounting terms used and not otherwise defined in this
      AGREEMENT have the meanings determined by, and all calculations with
      respect to accounting or financial matters unless otherwise provided
      herein shall be computed in accordance with, GAAP.

3.    "AFFILIATE" means as to any PERSON, each other PERSON that directly, or
      indirectly through one or more intermediaries, controls, or is controlled
      by, or under common control with, such PERSON.

4.    "AGREEMENT" means this Agreement, as the same may from time to time be
      amended or supplemented.

5.    "BORROWING BASE" means, at any time, the amount computed as Total
      Borrowing Base on the BORROWING BASE CERTIFICATE most recently
<PAGE>
      delivered to, and accepted by, the BANK in accordance with this AGREEMENT,
      and equal to the lesser of:

      A.    $5,000,000.00 or

      B.    (i)Eighty (80%) of ELIGIBLE ACCOUNTS of the BORROWER, (ii)plus fifty
            per cent (50%) of the Inventory of BORROWER at cost; provided
            however, no amount in excess of $2,400,000.00 attributable to
            INVENTORY shall be included in Borrowing Base Certificate.

6.    "BORROWING BASE CERTIFICATE" means a fully completed certificate in the
      form of Exhibit I.6 to this AGREEMENT certified by the chief financial
      officer of the BORROWER to be correct and delivered to, and accepted by,
      the BANK.

7.    "BUSINESS DAY" means other than a Saturday, a Sunday, or a day on which
      commercial banks in Nebraska are authorized to close.

8.    "CLOSING" has the meaning given to such term in Section III.

9.    "COLLATERAL" has the meaning given to such term in Section IV.

10.   "COLLATERAL DOCUMENTS" means the NOTE, financing statements, security
      agreement, pledge agreements, and other documents required by BANK as set
      forth herein, together with any real estate mortgage or deed of trust
      documents used in this transaction.

11.   "ELIGIBLE ACCOUNT" means, at any time, an Account that conforms and
      continues to conform to the following conditions:

      A.    The Account arose from a bona fide outright sale of Goods by the
            BORROWER or from services performed by the BORROWER, and such Goods
            have been shipped to the appropriate account debtors or their
            designees (or the sale has otherwise been consummated), or the
            services have been performed for the appropriate account debtors;

      B.    The Account is based upon an enforceable order or contract, written
            or oral, for Goods shipped or held, or for services performed, and
            the same were shipped or held, or performed in accordance with such
            order or contract;

      C.    Title of the BORROWER to the Account is absolute and is not subject
            to a prior assignment, claim, lien, or security interest.

      D.    The amount shown on the books of the BORROWER and on any invoice or
            statement delivered to the BANK is owing to the BORROWER, less any
            partial payment that has been made thereon by anyone;

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      E.    The Account shall be eligible only to the extent that it is not
            subject to any claim of reduction, counterclaim, set-off,
            recoupment, or any claim or credits, allowances, or adjustments by
            the Account debtor because of returned, inferior, or damaged Goods
            or unsatisfactory services, or for any other reason;

      F.    The Account debtor has not returned or otherwise notified the
            BORROWER of any dispute concerning, or claimed nonconformity of, any
            of the Goods or services from the sale of which the Account arose;

      G.    The Account is due and payable not more than 60 days from the
            statement date, and the statement must be dated contemporaneously
            with the shipment of goods sold or services performed;

      H.    The Account or any portion thereof is not more than 60 days past due
            nor outstanding more than 60 days from the date of the invoice
            therefor;

      I.    If more than ten per cent (10%) of the invoices to a particular
            account debtor are ineligible, then all invoices to such account
            debtor shall become ineligible for borrowing purposes;

      J.    The BORROWER has not received any note, trade acceptance, draft or
            other Instrument with respect to, or in payment of, the Account, nor
            any Chattel Paper with respect to the Goods giving rise to the
            Account, unless, if any such Instrument or Chattel Paper has been
            received, the BORROWER immediately notifies the BANK and, at the
            latter's request, endorses or assigns and delivers the same to BANK;

      K.    The BORROWER has not received any notice of the filing of a petition
            in bankruptcy or insolvency laws by or against, the account debtor.
            Upon the receipt by the BORROWER of any such notice, it will
            immediately give the BANK written advice thereof;

      L.    The account debtor is not a subsidiary or other AFFILIATE of the
            BORROWER; and

      M.    The BANK has not deemed such account ineligible because of
            uncertainty about the credit worthiness of the account debtor or
            because the BANK otherwise reasonably considers the collateral value
            thereof to the BANK to be impaired or its ability to realize such
            value to be insecure.

      In addition to the foregoing, ELIGIBLE ACCOUNT shall mean any amount
receivable by the BORROWER under any insurance policy covering Goods which have,
within the preceding forty-five (45) days, been damaged or destroyed by fire or
other direct casualty loss, provided that a claim therefor has been made in
compliance with such insurance policy, to the extent that such claim has not
been in any way denied or contested by the insurer and provided that such
insurer, if such insurer were an account debtor of the BORROWER, would be a
qualified account debtor under this paragraph.

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      In the event of any dispute, under the foregoing criteria, about whether
an Account is or has ceased to be an ELIGIBLE ACCOUNT the decision of the BANK
shall control.

12.   "EVENT OF DEFAULT" has the meaning provided for in Section VII.

13.   "FINANCIAL STATEMENTS" means the balance sheet of the BORROWER as of
      December 31, 2000 and statements of income, stockholders' equity, and
      statement of cash flow, and notes thereto, of the BORROWER for the years
      or, as appropriate, month ended on such dates as audited by independent
      certified public accountants of recognized standing to present fairly the
      consolidated financial position and results of operations of the BORROWER
      at such dates and for such periods in accordance with GAAP.

14.   "GAAP" means generally accepted accounting principles applied consistently
      as was done in the preparation of the FINANCIAL STATEMENTS with such
      changes or modifications hereto as may be approved in writing by the BANK.

15.   "INDEBTEDNESS" means, as to the BORROWER, all items of indebtedness,
      obligation or liability, whether matured or unmatured, liquidated or
      unliquidated, direct or contingent, joint or several.

16.   "INTELLECTUAL PROPERTY" means all of the BORROWER's now owned or
      subsequently acquired or developed designs, patents, patent rights (and
      applications therefor), trademarks and registrations (and applications
      therefor), trade names, inventions, copyrights, software and computer
      programs, license rights, trade secrets, methods, processes, know how,
      drawings, specifications, descriptions, and all memoranda, notes, and
      records with respect to any research and development, whether now owned or
      subsequently acquired or developed by the BORROWER and whether in tangible
      or intangible form.

17.   "LAWS" means all ordinances, statutes, rules, regulations, orders,
      injunctions, writs, or decrees of any government or political subdivision
      or agency thereof, or of any court or similar entity established by any
      thereof.

18.   "LOAN TERMINATION DATE" means the earliest to occur of the following: (i)
      as to the REVOLVING LOAN May 31, 2002; as to the TERM LOAN September 30,
      2004, (ii) and the date the OBLIGATIONS are accelerated pursuant to this
      AGREEMENT, and (iii) the date BANK receives (a) notice in writing from
      BORROWER of BORROWER's election to terminate this AGREEMENT and (b)
      indefeasible payment in full of the OBLIGATIONS, or such other date or
      dates as may later be agreed to by BANK and BORROWER in a written
      amendment to this AGREEMENT.

19.   "NOTE" or "NOTES" means any and all of the promissory notes and letter of
      credit agreements referred to in Section II.

                                       4
<PAGE>
20.   "OBLIGATIONS" means the obligation of the BORROWER:

      A.    To pay the principal of, and interest on, any promissory note in
            accordance with the terms thereof and to satisfy all of its other
            liabilities to the BANK, whether hereunder or otherwise, whether now
            existing or hereafter incurred, matured or unmatured, direct or
            contingent, joint or several, including any extensions,
            modifications, renewals thereof, and substitutions therefor and
            including, but not limited to, any obligations under letter of
            credit agreements;

      B.    To repay to the BANK all amounts advanced by the BANK hereunder or
            otherwise on behalf of the BORROWER, including, but without
            limitation, advances for principal or interest payments to prior
            secured parties, mortgagees, or licensors, or taxes, levies,
            insurance, rent, or repairs to, or maintenance or storage of, any of
            the COLLATERAL; and

      C.    To reimburse the BANK, on demand, for all of the BANK's 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 documents
            required hereunder, including, without limitation, any proceeding
            brought or threatened, to enforce payment of any of the OBLIGATIONS
            referred to in the foregoing Paragraphs A and B.

21.   "PERMITTED LIENS" means:

      A.    Liens for taxes, assessments, or similar charges, incurred in the
            ordinary course of business that are not yet delinquent;

      B.    Pledges or deposits made in the ordinary course of business to
            secure payment of workers' compensation, or to participate in any
            fund in connection with workers' compensation, unemployment
            insurance, old-age pensions or other social security programs;

      C.    Liens of mechanics, materialmen, warehousemen, carriers, or other
            like liens, securing obligations incurred in the ordinary course of
            business that are not yet due and payable;

      D.    Liens in favor of the BANK; and

      E.    Any liens identified on Exhibit I.19.E attached hereto.

22.   "PERSON" means any individual, corporation, partnership, association,
      joint-stock company, trust, unincorporated organization, joint venture,
      court, or government or political subdivision or agency thereof.

                                       5
<PAGE>
23.   "RECORDS" means correspondence, memoranda, tapes, discs, papers, books and
      other documents, or transcribed information of any type, whether expressed
      in ordinary or machine readable language.

Section II. THE LOANS.

1.    TYPES OF CREDIT. The BANK will provide the following credit facilities to
      BORROWER: a TERM LOAN and a REVOLVING LOAN. Each of these facilities refer
      to the LOANS described in this Section II, and are collectively and
      individually referred to herein as the "LOAN" or "LOANS".

2.    TERM LOAN. BANK agrees to lend $1,200,000.00 to BORROWER pursuant to this
      agreement (the "TERM LOAN").

      A.    THE NOTE. The TERM LOAN shall be evidenced by a NOTE having a stated
            maturity on the LOAN TERMINATION DATE, in the form attached hereto
            as Exhibit II.2.A. The NOTE shall specify the manner of principal
            and interest payments and rate of interest accrued.

3.    REVOLVING LOAN. BANK agrees to lend $5,000,000.00 to BORROWER pursuant to
      this facility. BANK will credit proceeds of this revolving loan
      ("REVOLVING LOAN") to BORROWER'S deposit account with the BANK, bearing
      number 26712880.

      A.    Subject to the terms hereof the BANK will lend the BORROWER, from
            time to time until the LOAN TERMINATION DATE such sums in integral
            multiples of $1,000.00 as the BORROWER may request by reasonable
            same day notice to the BANK, received by the BANK not later than
            11:00 A.M. of such day, but which shall not exceed in the aggregate
            principal amount at any one time outstanding, $5,000,000.00 (the
            "LOAN COMMITMENT"). The BORROWER may borrow, repay without penalty
            or premium and reborrow hereunder, from the date of this AGREEMENT
            until the LOAN TERMINATION DATE, either the full amount of the LOAN
            COMMITMENT or any lesser sum which is $1,000.00 or an integral
            multiple thereof. It is the intention of the parties that the
            outstanding principal amount of the REVOLVING LOAN shall at no time
            exceed the amount of the then existing BORROWING BASE and if, at any
            time, an excess shall for any reasons exist, the full amount of such
            excess, together with accrued and unpaid interest thereon as herein
            provided, shall be immediately due and payable in full.

      B.    THE NOTE. The LOAN COMMITMENT shall be evidenced by a NOTE having
            stated maturity on the LOAN TERMINATION DATE, in the form attached
            hereto as Exhibit II.3.B. The NOTE shall specify the manner of
            principal and interest payments and rate of interest accrual.

4.    PAYMENT TO THE BANK AND COLLECTIONS.

                                       6
<PAGE>
      A. All sums payable to the BANK hereunder shall be paid directly to the
BANK in immediately available funds. The BANK shall provide the BORROWER
statements of all amounts due hereunder, which statements shall be considered
correct and conclusively binding on the BORROWER unless BORROWER notifies the
BANK to the contrary within thirty (30) days of its receipt of any statement
that it deems to be incorrect. Alternatively, at its sole discretion, the BANK
may charge against any deposit account, including the LOCKBOX CHECKING ACCOUNT
of the BORROWER all or any portion of any amount due hereunder. Lockbox checking
account is defined in paragraph B hereof.

      B.    COLLECTION OF ACCOUNTS AND LOCKBOX.

                  1.    Accounts will be collected through direct lockbox
                        deposit by account debtors, pursuant to the provisions
                        of the COLLATERAL DOCUMENTS. BORROWER will take such
                        action with respect to the collection of Accounts and of
                        the proceeds thereof, as BANK may reasonably request.

                  2.    BANK shall have the rights at any time or times
                        hereafter all the rights of a secured creditor holding a
                        valid, and indefeasibly perfected security interest in
                        accounts pursuant to the Nebraska Uniform Commercial
                        Code, as well as the rights conferred by the COLLATERAL
                        DOCUMENTS.

                  3.    BORROWER hereby authorizes BANK to endorse, in the name
                        BORROWER, any item, howsoever received by BANK
                        representing payment on or other proceeds of any of the
                        COLLATERAL.

                  4.    BORROWER covenants that all receipts of money on the
                        Accounts or any other payments of money to be received
                        by the BORROWER shall be directed to a lockbox to be
                        established at post office box 630, Yankton, South
                        Dakota 57078 under the exclusive control of BANK, it
                        being the intention that all monies coming to the
                        BORROWER on account of any of the COLLATERAL shall be
                        directed to such lockbox, and thereafter deposited in a
                        checking account established for such purpose, herein
                        referred to as the LOCKBOX CHECKING ACCOUNT. BORROWER
                        agrees that all invoices or other instructions for
                        payment will bear a notation that payment must be made
                        to such lockbox number. Deposits in the LOCKBOX CHECKING
                        ACCOUNT shall be deemed payments directly to BANK and
                        all such deposits shall be the property of the BANK.
                        BORROWER covenants that it will perform the duties set
                        forth in the separate security agreement specified in
                        paragraph 4, thereof.

                                       7
<PAGE>
                  5.    For purposes of determining the amount of the
                        OBLIGATIONS, including, without limitation, the
                        computations of interest which may from time to time be
                        owing by BORROWER to BANK, the receipt of any check or
                        other item of payment by BANK shall not be treated as a
                        payment on account of the liabilities until such check
                        or other item of payment is actually paid in cash or
                        cash equivalent.

Section III.  CONDITIONS PRECEDENT.

1.    CERTAIN EVENTS. At the time of, and as a condition to, the CLOSING and
      each disbursement of any part of the REVOLVING LOAN to be made by the BANK
      at or subsequent to the CLOSING:

      A.    No EVENT OF DEFAULT shall have occurred and be continuing, and
            no event shall have occurred and be continuing that, with the
            giving of notice or passage of time or both, would be an EVENT
            OF DEFAULT;

      B.    No material adverse change shall have occurred in the business
            prospects, financial condition, or results of operations of
            the BORROWER since the dates of the FINANCIAL STATEMENTS; and

      C.    All of the COLLATERAL DOCUMENTS shall have remained in full
            force and effect.

Section IV.  COLLATERAL SECURITY.

1.    COMPOSITION OF THE COLLATERAL. The property in which a security interest
      is granted pursuant to the provisions of Section IV.2. and IV.3. is herein
      collectively called "COLLATERAL". The COLLATERAL, together with all other
      property of the BORROWER of any kind held by the BANK, shall stand as one
      general, continuing collateral security for all OBLIGATIONS and may be
      retained by the BANK until all OBLIGATIONS have been satisfied in full.
      This security agreement is intended by the parties to include all
      OBLIGATIONS of BORROWER to BANK which have arisen in the past or which
      arise in the future, regardless of form or purpose, including, without
      limitation, loans for consumer, agricultural or business purposes;
      OBLIGATIONS which are primary or secondary, absolute or contingent, sole
      or joint; and credit evidenced by promissory notes, open accounts,
      overdrafts or letters of credit.

2.    RIGHTS IN PROPERTY HELD BY THE BANK. As security for the prompt
      satisfaction of all OBLIGATIONS the BORROWER hereby assigns, transfers,
      and sets over to the BANK all of its right, title and interest in and to,
      and grants the BANK a lien on and a security interest in, all amounts that
      may be owing, from time to time, by the BANK to the BORROWER in any
      capacity, including, but without limitation, any balance or share
      belonging to the BORROWER in any capacity, including, but without
      limitation, any balance or share belonging to the BORROWER, or any deposit
      or other account with the BANK, which lien and

                                       8
<PAGE>
      security interest shall be independent of, and in addition to, any right
      of set-off that the BANK has under applicable LAWS or otherwise.

3.    RIGHTS IN PROPERTY HELD EITHER BY THE BORROWER OR BY THE BANK. As further
      security for the prompt satisfaction of all OBLIGATIONS, the BORROWER
      hereby assigns to the BANK all of its right, title and interest in and to,
      and grants the BANK a lien upon and a security interest in, all of the
      following, wherever located, whether now owned or hereafter acquired,
      together with all replacements therefore and proceeds (including without
      limitation, insurance proceeds) and products thereof:

            Accounts;
            Chattel Paper;
            Commercial Tort Claims;
            Contracts;
            Contract rights;
            Documents;
            Equipment;
            Fixtures;
            General Intangibles;
            Goods;
            Health-care-insurance receivables/accounts;
            Instruments;
            INTELLECTUAL PROPERTY;
            Inventory;
            Investment Property;
            Letter-of-credit rights;
            Payment intangibles;
            Tangible chattel paper;
            Rights as seller of Goods and rights to
            returned or repossessed goods; and
            All RECORDS pertaining to COLLATERAL

      BORROWER may also be granting liens in real property by a separate deed of
trust, assignment or real estate mortgage. Such real estate constitutes
COLLATERAL, and the document granting BANK an interest in the real estate
constitutes a COLLATERAL DOCUMENT.

4.    PRIORITY OF LIENS. The foregoing liens shall be first and prior liens
      except for PERMITTED LIENS to PERSONS other than BANK.

5.    FINANCING STATEMENTS.

            A.    The BORROWER will:

                  1.    Join with the BANK in executing such Uniform Commercial
                        Code financing statements, (which, together with
                        amendments thereto and continuation statements thereof
                        are called "FINANCING

                                       9
<PAGE>
                        STATEMENTS") in form satisfactory to the BANK as the
                        BANK, from time to time, may specify;

                  2.    Pay, or reimburse the BANK for paying, all costs and
                        taxes of filing or recording the same in such public
                        offices as the BANK may designate; and

                  3.    Take such other steps as the BANK, from time to time,
                        may direct, including the noting of the BANK's lien on
                        the COLLATERAL and on any certificates of title
                        therefor, all to perfect to the satisfaction of the BANK
                        the BANK's interest in the COLLATERAL.

      B.    In addition to the foregoing, and not in limitation thereof;

                  1.    A carbon, photographic, or other reproduction of this
                        AGREEMENT shall be sufficient as a FINANCING STATEMENT
                        and may be filed in any appropriate office in lieu
                        thereof; and

                  2.    To the extent lawful, the BORROWER hereby appoints the
                        BANK as its attorney-in-fact (without requiring the BANK
                        to act as such) to execute any financing statement in
                        the name of the BORROWER, and to perform all other acts
                        that the BANK deems appropriate to perfect and continue
                        its security interest in, and to protect and preserve,
                        the COLLATERAL.

Section V. REPRESENTATIONS AND WARRANTIES.

1.    ORIGINAL. To induce the BANK to enter into this AGREEMENT, the BORROWER
      represents and warrants to the BANK as follows:

      A.    The BORROWER is a corporation duly organized, validly existing, and
            in good standing under the LAWS of the State of Delaware; the
            BORROWER has no subsidiaries except for a $350,000.00 investment in
            the BORROWER'S Hong Kong subsidiary; the BORROWER has the lawful
            power to own its properties and to engage in the businesses it
            conducts and is duly qualified and in good standing as a foreign
            corporation in the jurisdictions wherein the nature of the business
            transacted by it or property owned by it make such qualification
            necessary; the states in which the BORROWER is qualified to do
            business are disclosed to the BANK in writing; the addresses of all
            places of business of the BORROWER are disclosed to the BANK in
            writing; and the BORROWER has not been the surviving corporation in
            a merger, acquired any business, or changed its principal executive
            office within five (5) years and one (1) month prior to the date
            hereof, nor acquired any assets from a transferor which remain
            subject to a security interest granted by such transferor within one
            (1) year prior to the date hereof, nor moved any COLLATERAL to its
            present location from another State

                                       10
<PAGE>
            where it was subject to a security interest granted to another
            entity, except as is set forth in an Exhibit hereto;

      B.    The BORROWER is not directly or indirectly controlled by, or acting
            on behalf of, any PERSON which is an "Investment Company" within the
            meaning of the Investment Company Act of 1940, as amended;

      C.    The BORROWER is not in default with respect to any of its existing
            INDEBTEDNESS, and the making and performance of this AGREEMENT and
            the COLLATERAL DOCUMENTS will not (immediately or with the passage
            of time, the giving of notice, or both):

            1.    Violate the articles of incorporation or by-laws of the
                  BORROWER, or violate any laws or result in a default under any
                  contract, agreement, or instrument to which the BORROWER is a
                  party or by which the BORROWER or its property is bound; or

            2.    Result in the creation or imposition of any security interest
                  in, or lien or encumbrance upon, any of the assets of the
                  BORROWER except in favor of the BANK;

      D.    The BORROWER has the power and authority to enter into and perform
            this AGREEMENT, the NOTES, and the COLLATERAL DOCUMENTS, and to
            incur the obligations herein and therein provided for, and has taken
            all actions necessary to authorize the execution, delivery, and
            performance of this AGREEMENT, the NOTES, and the COLLATERAL
            DOCUMENTS;

      E.    This AGREEMENT, the NOTES, and the COLLATERAL DOCUMENTS are, or when
            delivered will be, valid, binding, and enforceable in accordance
            with their respective terms;

      F.    There is no pending order, notice, claim, litigation, proceeding, or
            litigation against or affecting the BORROWER, whether or not covered
            by insurance, that would materially or adversely affect the
            financial condition or business prospects of the BORROWER if
            adversely determined;

      G.    The BORROWER has good and marketable title to all of its assets,
            none of which is subject to any security interest, encumbrance or
            lien, or claim of any third PERSON except for PERMITTED LIENS;

      H.    The FINANCIAL STATEMENTS, including any schedules and notes
            pertaining thereto, have been prepared in accordance with GAAP, and
            fully and fairly present the financial condition of the BORROWER at
            the dates thereof and the results of operations for the periods
            covered thereby, and there have been no material adverse changes in
            the consolidated financial condition or business of the BORROWER
            from December 31, 2000, to the date hereof;

                                       11
<PAGE>
      I.    As of the date hereof the BORROWER has no material INDEBTEDNESS of
            any nature, including but without limitation, liabilities for taxes
            and any interest or penalties relating thereto except to the extent
            reflected (in a footnote or otherwise) in the FINANCIAL STATEMENT or
            as disclosed in, or permitted by, this agreement; and the BORROWER
            does not know or have reasonable ground to know of any basis for the
            assertion against it of any such INDEBTEDNESS as of the date of the
            CLOSING;

      J.    Except as otherwise permitted herein, the BORROWER has filed all
            federal, state, and local tax returns and other reports required by
            an applicable LAWS to have been filed prior to the date hereof, has
            paid or caused to be paid all taxes, assessments, and other
            governmental charges that are due and payable prior to the date
            hereof, and has made adequate provisions for the payment of such
            taxes, assessments, or other charges accruing but not yet payable;
            the BORROWER has no knowledge of any deficiency or additional
            assessment in a materially important amount in connection with any
            taxes, assessments, or charges not provided for on its books;

      K.    Except to the extent that the failure to comply would not materially
            interfere with the conduct of the business of the BORROWER, the
            BORROWER has complied with all applicable LAWS with respect to (1)
            any restrictions, specifications, or other requirements pertaining
            to products that it manufactures or sells or to the services it
            performs; (2) the conduct of its business; and (3) the use,
            maintenance, and operation of the real and personal properties owned
            or leased by it in the conduct of its business;

      L.    No representation or warranty by or with respect to the BORROWER
            contained herein or in any certificate or other document furnished
            by the BORROWER pursuant hereto contains any untrue statement of a
            material fact or omits to state a material fact necessary to make
            such representation or warranty not misleading in light of the
            circumstances under which it was made;

      M.    Each consent, approval or authorization of, or filing, registration
            or qualification with, any PERSON required to be obtained or
            effected by the BORROWER in connection with the execution and
            delivery of this AGREEMENT, any NOTE, and the COLLATERAL DOCUMENTS
            or the undertaking or performance of any obligation hereunder or
            thereunder has been duly obtained or effected;

      N.    All existing INDEBTEDNESS of the BORROWER: (1) for money borrowed,
            or (2) under any security agreement, mortgage, or agreement covering
            the lease by the BORROWER as lessee of real or personal property is
            described in a writing delivered to BANK this date;

                                       12
<PAGE>
      O.    Except as disclosed to the BANK in writing (1) the BORROWER has no
            material leases, contracts, or commitments of any kind (including,
            without limitation, employment agreements, collective bargaining
            agreements, powers of attorney, distribution arrangements, patent
            license agreements, contracts for future purchase or delivery of
            goods or rendering of services, bonuses, pension, and retirement
            plans accrued vacation pay, insurance and welfare agreements); (2)
            to the best of BORROWER's knowledge, all parties to all such
            material leases, contracts and other commitments to which the
            BORROWER is a party have complied with the provisions of such
            leases, contracts, and other commitments; and (3) to the best of
            BORROWER's knowledge, no party is in default under any provisions
            thereof and no event has occurred which, but for the giving of
            notice or the passage of time, or both, would constitute a default;

      P.    The BORROWER has not made any agreement or taken any action which
            may cause anyone to become entitled to a commission or finder's fee
            as a result of or in connection with the making of this AGREEMENT;

      Q.    Any federal tax returns for all years of operation, including the
            last tax year for BORROWER have been filed with the Internal Revenue
            Service and have not been challenged;

      R.    Any Employee Pension Benefit Plans, as defined in the Employee
            Retirement Income Security Act of 1974, as amended ("ERISA"), of the
            BORROWER meet, as of the date hereof, the minimum funding standards
            of 29 U.S.C. Sec. 1082 (Sec. 302 of ERISA), and no Reportable Event
            or Prohibited Transaction as defined in ERISA, has occurred with
            respect to any Employee Benefit Plans, as defined in ERISA, of the
            BORROWER;

      S.    The liens and security interests created pursuant to Section IV of
            this AGREEMENT, including any separate real estate liens granted in
            connection herewith, are in all cases first and prior liens except
            for PERMITTED LIENS;

      T.    BORROWER warrants (and this shall be a continuing warranty which
            shall survive until all the OBLIGATIONS of BORROWER to BANK have
            been fully satisfied) that it is in compliance with all federal,
            state and local environmental laws and regulations and has obtained
            all environmental permits necessary or appropriate to the conduct of
            its business. There is not pending nor, to the best of the
            BORROWER's knowledge after due inquiry, are there any threatened
            environmental enforcement actions, suits or proceedings before any
            court, tribunal or administrative body or official. Responsible
            officers and agents of the BORROWER have made an extensive
            investigation and have determined that the BORROWER has not, nor has
            any former owner of real property occupied by BORROWER stored, used
            or disposed of any toxic or hazardous substance on its properties or
            transported any such substance to or from its properties in
            violation of any presently existing or previously existing

                                       13
<PAGE>
            laws, regulations or policies. The BORROWER will not store, use or
            dispose of such substances on its properties.

2.    SURVIVAL. All of the representations and warranties set forth in Section
      V.1. shall survive until all OBLIGATIONS are satisfied in full and there
      remain no outstanding commitments hereunder.

Section VI. COVENANTS OF THE BORROWER.

1.    AFFIRMATIVE COVENANTS. The BORROWER does hereby covenant and agree with
      the BANK that, so long as any of the OBLIGATIONS remain unsatisfied or any
      commitments hereunder remain outstanding, it will comply at all times with
      the following covenants:

      A.    The BORROWER will furnish the BANK:

            1.    Within thirty-five (35) days after the close of each monthly
                  accounting period in each fiscal year an income statement and
                  balance sheet of the BORROWER for such month in reasonable
                  detail, subject to normal year-end audit adjustments and
                  certified by the BORROWER's president or principal financial
                  officer to have been prepared in accordance with GAAP;

            2.    Within thirty-five (35) days after the end of each calendar
                  month, in such form and detail as shall be satisfactory to the
                  BANK, an aging, as of the end of such month, of (a) the then
                  ELIGIBLE ACCOUNTS, and (b) all other Accounts of the BORROWER,
                  certified by the president or chief financial officer of the
                  BORROWER to be complete and correct;

            3.    Each month (and at any additional time in the discretion of
                  the BANK or if any material deterioration in the BORROWING
                  BASE would be disclosed thereby) a BORROWING BASE CERTIFICATE
                  as of the end of such period. Each BORROWING BASE CERTIFICATE
                  shall be effective only as accepted by the BANK (and with such
                  revisions, if any, as the BANK may require as a condition to
                  such acceptance);

      B.    Contemporaneously with each monthly financial report required by the
            foregoing paragraph, a certificate of the president or principal
            financial officer of the BORROWER stating that he has individually
            reviewed the provisions of this AGREEMENT and that a review of the
            activities of the BORROWER during such monthly period, has been made
            by him or under his supervision, with a view to determining whether
            the BORROWER has fulfilled all its obligations under this AGREEMENT
            and is not in default in the observance or performance of any of the
            provisions

                                       14
<PAGE>
            hereof or, if the BORROWER shall be so in default, specifying all
            such defaults and events of which he may have knowledge;

      C.    Promptly after the sending or making available of filing of the
            same, copies of all reports bearing on the financial condition of
            BORROWER, proxy statements, and financial statements that the
            BORROWER sends or makes available to its stockholders and all
            registration statements and reports that the BORROWER files with the
            Securities and Exchange Commission or any successor person;

      D.    The BORROWER will maintain its Inventory, Equipment, real estate,
            and other properties in workable and operable condition and repair,
            and will pay and discharge or cause to be paid and discharged, when
            due, the cost of repairs to, or maintenance of, the same, and will
            pay or cause to be paid in a timely manner all rental or mortgage
            payments due on such real estate. The BORROWER hereby agrees that,
            in the event it fails to pay or cause to be paid any such payment,
            it will promptly notify the BANK thereof, and the BANK may, in its
            discretion, do so and on demand be reimbursed therefor by the
            BORROWER;

      E.    The BORROWER will maintain, or cause to be maintained, public
            liability insurance (subject to a maximum of $10,000.00 in
            deductibles) and fire and extended coverage insurance on all assets
            that are of a character usually insured by corporations engaged in
            the same or similar businesses, all in form and amount sufficient to
            indemnify the BORROWER for 100% of the replacement value of any such
            asset lost or damaged (subject to any deductible customary in the
            BORROWER'S industry) or in an amount consistent with the amount of
            insurance generally carried on comparable assets within the industry
            and with such insurers rated A or higher by the latest rating
            published by A.M. Best & Co. The BORROWER will cause all such
            insurance policies to contain a standard mortgage clause and to be
            payable to the BANK as its interest may appear, and BORROWER shall
            deliver the policies of insurance to the BANK. Such policies shall
            contain a provision whereby they cannot be cancelled except after
            ten (10) days' written notice to the BANK. The BORROWER will furnish
            to the BANK such evidence of insurance as the BANK may require.

            The BORROWER will pay or cause to be paid when due, all taxes,
            assessments, and charges or levies imposed upon it or on any of its
            property on which it is required to withhold and pay except where
            contested in good faith by appropriate proceedings with adequate
            reserves therefor having been set aside on its books; provided,
            however, that the BORROWER shall pay or cause to be paid all such
            taxes, assessments, charges or levies forthwith whenever foreclosure
            on any lien that may have attached (or security therefor) appears
            imminent.

      G.    The BORROWER will maintain:

                                       15
<PAGE>
            1.    A BORROWING BASE such that the amount of the BORROWER's
                  outstanding REVOLVING LOAN will not, at any time, exceed its
                  BORROWING BASE.

            3.    A ratio of Consolidated Liabilities to Consolidated
                  Tangible Net Worth of not more than 2.3:1.0.

                  For purposes of this agreement, Consolidated Current Assets
                  and Consolidated Current Liabilities mean, at any time, all
                  assets or liabilities, respectively, that should, in
                  accordance with GAAP, be classified as current assets or
                  current liabilities, respectively, on a balance sheet of
                  BORROWER. Consolidated Net Working Capital means, at any time,
                  the amount by which Consolidated Current Assets exceed
                  Consolidated Current Liabilities. Consolidated Tangible Net
                  Worth means, at any time, Stockholders' Equity (the par value
                  of outstanding capital stock, plus capital surplus, plus
                  retained earnings), less the sum of:

                  a.    Any surplus resulting from any write up of assets
                        subsequent to December 31, 2000;

                  b.    Goodwill, including any amounts, however designated on a
                        balance sheet of the BORROWER, representing the excess
                        of the purchase price paid for assets or stock acquired
                        over the value assigned thereto on the books of the
                        BORROWER;

                  c.    Any amount reflecting value of patents, trademarks,
                        trade names, and copyrights;

                  d.    Any amount at which shares of capital stock of the
                        BORROWER appear as an asset on the BORROWER's balance
                        sheet;

                  e.    Loans and advances to stockholders, directors, officers,
                        employees, or AFFILIATES;

                  f.    Deferred expenses; and

                  g.    Any other amount in respect of an intangible that should
                        be classified as an asset on a balance sheet of the
                        BORROWER in accordance with GAAP.

      H.    The BORROWER will take all necessary steps to preserve its corporate
            existence and franchises and comply with all present and future laws
            applicable to it in the operation of its business, and all material
            agreements to which it is subject.

                                       16
<PAGE>
      I.    The BORROWER will give immediate notice to the BANK of (1) any
            litigation or proceeding in which it is a party if an adverse
            decision therein would require it to pay more than $25,000.00 or
            deliver assets the value of which exceeds such sum (whether or not
            the claim is considered to be covered by insurance); and (2) the
            institution of any other suit or proceeding involving it that might
            materially and adversely affect its operations, financial condition,
            property, or business prospects.

      J.    The BORROWER will pay when due all of its INDEBTEDNESS due third
            persons except when the amount thereof is being contested in good
            faith by appropriate proceedings and with adequate reserves therefor
            being set aside on its books.

      K.    The BORROWER will notify the BANK immediately 1) if it becomes aware
            of the occurrence of any EVENT OF DEFAULT or of any fact, condition,
            or event that only with the giving of notice or passage of time or
            both, could become an EVENT OF DEFAULT; 2) if it becomes aware of
            any material adverse change in the business prospects, financial
            condition (including, without limitation, proceedings in bankruptcy,
            insolvency, or reorganization), or results of operations of the
            BORROWER, or 3) upon the failure of the BORROWER to observe any of
            its respective undertakings hereunder or under the COLLATERAL
            DOCUMENTS.

      L.    The BORROWER will (1) fund any of its Employee Pension Benefit Plans
            in accordance with no less than the minimum funding standards of 29
            U.S.C. Sec. 1082 (Section 302 of ERISA); (2) furnish the BANK,
            promptly after the filing of the same, with copies of any reports or
            other statements filed with the United States Department of Labor or
            the Internal Revenue Service with respect to any such Plan; and (3)
            promptly advise the BANK of the occurrence of any Reportable Event
            or Prohibited Transaction with respect to any Employee Benefit Plan.

2.    NEGATIVE COVENANTS. The BORROWER does hereby covenant and agree with the
      BANK that, so long as any of the OBLIGATIONS remain unsatisfied or any
      commitments hereunder remain outstanding, it will comply at all times with
      the following negative covenants, unless the BANK shall otherwise have
      agreed in writing:

      A.    The BORROWER shall not change its name, enter into any merger,
            consolidation, reorganization or recapitalization, or reclassify its
            capital stock;

      B.    BORROWER will not mortgage, pledge, grant, or permit to exist a
            security interest in, or a lien upon, any of its assets of any kind,
            now owned or hereafter acquired, except for liens in favor of BANK,
            or PERMITTED LIENS;

                                       17
<PAGE>
      C.    BORROWER will not become liable, directly or indirectly, as
            Guarantor or otherwise for any OBLIGATION of any other person;

      D.    BORROWER will not declare or pay any dividends, or make any other
            payment or distribution on account of its capital stock in excess of
            fifty percent (50%) of its prior year earnings as long as BORROWER
            is in compliance with the covenants contained within this AGREEMENT;

      E.    BORROWER will form no subsidiary, make no investment in (including
            any assignment of Inventory or other property), or make any loan in
            the nature of an investment to, any PERSON, except for a $350,000.00
            investment in the BORROWER's Hong Kong subsidiary;

      F.    BORROWER will not make any loan or advance to any officer,
            shareholder, director, or employee of the BORROWER, except for
            business travel and similar temporary advances in the ordinary
            course of business;

      G.    BORROWER will not make payments on account of the purchase or lease
            of fixed assets that, in the aggregate, in any fiscal year
            (commencing with the current fiscal year) cannot exceed the amount
            of depreciation expense taken during the fiscal year;

      H.    BORROWER will not redeem, purchase, or retire any of its capital
            stock or grant or issue, or purchase or retire for any
            consideration, any warrant, right or option pertaining thereto, or
            permit any redemption, retirement, or other acquisition by BORROWER
            of the ownership of the outstanding capital stock of the BORROWER;

      I.    BORROWER shall not furnish the BANK any certificate or other
            document that will contain any untrue statement of material fact or
            that will omit to state a material fact necessary to make it not
            misleading in light of the circumstances under which it was
            furnished; and

      J.    BORROWER will not directly or indirectly apply any part of the
            proceeds of the OBLIGATIONS to the purchasing or carrying of any
            "margin stock" within the meaning of Regulation U of the Board of
            Governors of the Federal Reserve System, or any regulations,
            interpretations, or rulings thereunder.

Section VII. DEFAULT.

1.    EVENTS OF DEFAULT. The occurrence of any one or more of the following
      events shall constitute an EVENT OF DEFAULT hereunder:

      A.    The BORROWER shall fail to perform any covenant, promise, or payment
            obligation made in this AGREEMENT or any COLLATERAL DOCUMENTS;

                                       18
<PAGE>
      B.    Any financial statement, representation, warranty, or certificate
            made or furnished by or with respect to the BORROWER to the BANK in
            connection with this AGREEMENT, or as an inducement to the BANK to
            enter into this AGREEMENT, or in any separate statement or document
            to be delivered to the BANK hereunder, shall be materially false,
            incorrect, or incomplete when made.

      C.    Any financial statement, representation, warranty, or certificate
            made or furnished by or with respect to the BORROWER to the BANK in
            connection with this AGREEMENT, or as an inducement to the BANK to
            enter into this AGREEMENT, or in any separate statement or document
            to be delivered to the BANK hereunder, shall be materially false,
            incorrect, or incomplete when made;

      D.    The BORROWER shall admit its inability to pay its debts as they
            mature or shall make an assignment for the benefit of itself or any
            of its creditors;

      E.    Proceedings in bankruptcy, or for reorganization of the BORROWER, or
            for the readjustment of debt under the Bankruptcy Code, as amended,
            or any part thereof, or under any other laws, whether state or
            federal, for the relief of debtors, now or hereafter existing, shall
            be commenced against or by the BORROWER, shall not be discharged
            within thirty (30) days of their commencement;

      F.    A receiver or trustee shall be appointed for the BORROWER or for any
            substantial part of its respective assets, or any proceedings shall
            be instituted for the dissolution or the full or partial liquidation
            of the BORROWER, and expect with respect to any such appointments
            requested or instituted by the BORROWER, such receiver or trustee
            shall not be discharged within thirty (30) days of his appointment,
            and except with respect to any such proceedings instituted by the
            BORROWER, such proceedings shall not be discharged within thirty
            (30) days of their commencement, or the BORROWER shall discontinue
            business or materially change the nature of its business, or the
            COLLATERAL becomes, in the reasonable judgment of the BANK,
            insufficient in value to satisfy the OBLIGATIONS, or the BANK
            otherwise reasonably finds itself insecure as to the prompt and
            punctual payment and discharge of the OBLIGATIONS;

      G.    The BORROWER shall suffer final judgments for payment of money
            aggregating in excess of $25,000.00 and shall not discharge the same
            within a period of thirty (30) days unless, pending further
            proceedings, execution has not been commenced or, if commenced, has
            been effectively stayed;

                                       19
<PAGE>
      H.    A judgment creditor of the BORROWER shall obtain possession of any
            of the COLLATERAL by any means, including (without implied
            limitation) levy, distraint, replevin, or self-help.

2.    ACCELERATION. At the option of the BANK upon the occurrence of any EVENT
      OF DEFAULT, all OBLIGATIONS, whether hereunder or otherwise, shall
      immediately become due and payable.

3.    REMEDIES. After any acceleration, as provided for in Section VII. 2., the
      BANK shall have, in addition to the rights and remedies given it by this
      AGREEMENT and the COLLATERAL DOCUMENTS, all those allowed by all
      applicable LAWS, including, but without limitation, the Uniform Commercial
      Code as enacted in the applicable jurisdiction in which any COLLATERAL may
      be located. The rights of the BANK under this Section VII. 3. are in
      addition to the other rights and remedies (including, without limitation,
      other rights of set-off) which the BANK may have.

4.    RIGHT OF SET-OFF. Upon the occurrence of any EVENT OF DEFAULT, the BANK
      may, and is hereby authorized by the BORROWER, at any time and from time
      to time, to the fullest extent permitted by applicable LAWS, without
      advance notice to the BORROWER (any such notice being expressly waived by
      the BORROWER), set-off and apply any and all deposits (general or special,
      time or demand, provisional or final) at any time held and any other
      indebtedness at any time owing by the BANK, to, or for the credit or the
      account of, the BORROWER against any or all of the OBLIGATIONS of the
      BORROWER now or hereafter existing, whether or not such OBLIGATIONS have
      matured and irrespective of whether the BANK has exercised any other
      rights that it has or may have with respect to such OBLIGATIONS, including
      without limitation any acceleration rights. The BANK agrees promptly to
      notify the BORROWER after any such set-off and application, provided that
      the failure to give such notice shall not affect the validity of such
      set-off and application. The rights of the BANK under this Section VII.4.
      are in addition to the other rights and remedies (including, without
      limitation, other rights of set-off) which the BANK may have.

Section VIII. MISCELLANEOUS.

1.    CONSTRUCTION. Nothing herein contained shall prevent the BANK from
      enforcing any or all other guaranty, pledge or security agreements, notes,
      mortgages, deeds of trust, other evidences of liability, or other
      COLLATERAL DOCUMENTS in accordance with their respective terms.

2.    ENFORCEMENT AND WAIVER BY THE BANK. The BANK shall have the right at all
      times to enforce the provisions of this agreement and the COLLATERAL
      DOCUMENTS in strict accordance with the terms hereof and thereof,
      notwithstanding any conduct or custom on the part of the BANK in
      refraining from so doing at any time or times to enforce its rights under
      such provisions, strictly in accordance with the same, shall not be
      construed as having created a custom in any way or manner contrary to
      specific provisions of this

                                       20
<PAGE>
      AGREEMENT or as having in any way or manner modified or waived the same.
      All rights and remedies of the BANK are cumulative and concurrent and the
      exercise of one right or remedy shall not be deemed a waiver or release of
      any other right or remedy.

3.    RENEWAL. On the existing LOAN TERMINATION DATE, all of the OBLIGATIONS
      become due, and the BANK's commitment to lend shall terminate. BORROWER
      may request an amendment of the LOAN TERMINATION DATE and a renewal, in
      some form, of the commitment. BANK agrees to consider such request when
      made, using as a basis for its decision all of the FINANCIAL STATEMENTS
      furnished by BORROWER, together with any other information available to
      BANK. BANK may make such renewal or amendment if, in BANK'S sole
      discretion, such renewal or amendment is warranted in the exercise of
      sound banking practices.

4.    EXPENSE OF THE BANK. The BORROWER will, on demand, reimburse the BANK for
      all expenses, including the reasonable fees and expenses of legal counsel
      for the BANK, incurred by the BANK in connection with the preparation,
      administration, amendment, modification, or enforcement of this AGREEMENT,
      the COLLATERAL DOCUMENTS, and the collection or attempted collection of
      the OBLIGATIONS.

5.    NOTICES. Any notice or consents required or permitted by this AGREEMENT
      shall be in writing and shall be deemed delivered if delivered in person
      or if sent by certified mail, postage prepaid, return receipt requested,
      or telegraph, as follows, unless such address is changed by written notice
      hereunder:

      A.    If to the BORROWER:     M-Tron Industries, Inc.
                                    ATTN:  Mr. David Rein
                                    P.O. Box 630
                                    Yankton, South Dakota 57078-0630

      B.    If to the BANK:         First National Bank of Omaha
                                    1620 Dodge St. STOP 4250
                                    Omaha, NE 68197-4250
                                    ATTN:  Mr. Mark McMillan

6.    WAIVER AND RELEASE BY THE BORROWER. To the maximum extent permitted by
      applicable laws, the BORROWER:

      A.    Waives notice of acceleration and of intention to accelerate; and
            notice and opportunity to be heard, after acceleration in the manner
            provided in Section VII., before exercise by the BANK of the
            remedies of self-help, set-off, or of other summary procedures
            permitted by any applicable laws or by any agreement with the
            BORROWER, and, except where required hereby or by any applicable
            law, notice of any other action taken by the BANK; and

                                       21
<PAGE>
      B.    Releases the BANK and its officers, attorneys, agents, and employees
            from all claims for loss or damage caused by any act or omission on
            the part of any of them except willful misconduct or gross
            negligence.

7.    APPLICABLE LAW. This AGREEMENT is entered into and performable in Omaha,
      Douglas County, Nebraska and shall be subject to and construed and
      enforced in accordance with the laws of the State of Nebraska.

8.    BINDING EFFECT, ASSIGNMENT, AND ENTIRE AGREEMENT. This AGREEMENT shall
      inure to the benefit of, and shall be binding upon, the respective
      successors and permitted assigns of the parties hereto. The BORROWER has
      no right to assign any of its rights or OBLIGATIONS hereunder without the
      prior written consent of the BANK. This AGREEMENT, including the Exhibits
      hereto, all of which are hereby incorporated herein by reference, and the
      documents executed and delivered pursuant hereto, constitute the entire
      agreement between the parties and may be amended only by a writing signed
      on behalf of each party.

9.    SEVERABILITY. If any provision of this AGREEMENT shall be held invalid
      under any applicable law, such invalidity shall not affect any other
      provision of this AGREEMENT that can be given effect without the invalid
      provision, and, to this end, the provisions hereof are severable.

10.   PARTICIPATIONS. Notwithstanding any other provision of this AGREEMENT, the
      BORROWER understands that the BANK may enter into participation agreements
      with other lenders whereby the BANK will allocate a certain percentage of
      the OBLIGATIONS to them. The BORROWER specifically permits and authorizes
      the BANK to exchange financial information about the BORROWER with actual
      or potential participants. The BORROWER acknowledges that, for the
      convenience of all parties, this AGREEMENT is being entered into with the
      BANK only and that its obligations under this AGREEMENT are undertaken for
      the benefit of, and as an inducement to, each of the Participating Lenders
      as well as the BANK, and the BORROWER hereby grants to each of the
      Participating Lenders to the extent of its participation in the
      OBLIGATIONS, the right to set off deposit accounts maintained by the
      BORROWER with such BANK. The BORROWER understands that the terms of such
      participation agreements with any of the participants will limit the
      BANK's rights to amend, waive or modify the terms and conditions of this
      Agreement without the express written consent of all or a designated
      percentage of such participants.

      IN WITNESS WHEREOF, the parties hereto have duly executed this AGREEMENT
as of the day and year first above written.

                                       22
<PAGE>
                                         FIRST NATIONAL BANK OF OMAHA

                                         By /s/ Mark McMillan
                                            -----------------

                                         Title  Vice President
                                                --------------

                                         M-TRON INDUSTRIES, INC.,

                                         By /s/ David Rein
                                            --------------

                                         Title  VP and CFO
                                                ----------

                                       23
<PAGE>
Exhibit I.6.            Borrowing Base Certificate
Exhibit I.19.E.         Permitted Liens
Exhibit II.2.A.         Term Promissory Note
Exhibit II.3.B          Revolving Promissory Note

                                       24

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