Document:

Unassociated Document

     

    EXHIBIT 10.9

     

    
      THIRD
AMENDMENT TO

       

      LOAN
AND SECURITY AGREEMENT

       

      THIS
AMENDMENT, dated as of December 3, 2008, is to the Loan and Security Agreement
dated January 2, 2008 between Johnson Bank (“Bank”), and Jefferson Electric,
Inc. (“Borrower”), as amended by Amendment to Loan and Security Agreement dated
January 29, 2008 and Second Amendment to Loan and Security Agreement dated May
2, 2008 (as amended, the “Loan Agreement”).

       

      RECITAL

       

      WHEREAS, Bank and Borrower desire to
amend the Loan Agreement as provided herein.

       

      AGREEMENT

       

      1.           Definitions.

      

      (a)           Terms Defined in Loan
Agreement.  All capitalized terms used but not defined herein
shall have the meanings set forth in the Loan Agreement.

      

      (b)           Additional
Definitions.  As used in the Loan Agreement as amended hereby,
the following terms shall have the following meanings:

      

      “Collateral Shortfall”
means the difference between the Loan Amount and the Discounted Collateral
Amount, but not less than $0.00.

       

      
        	
                 
      

              	
                “Loan Amount”
      means the sum of $5,000,000 plus the outstanding balance of the Term
      Note.

              

      

      

      
        	
                 
      

              	
                “Revolving Note”
      means Borrower’s promissory note, substantially in form attached hereto as
      Exhibit
      A, as it may be amended, restated or replaced from time to
      time.

              

      

      

      2.           Revolving Loans;
Advances.  Section 2.1.1 of the Loan Agreement is amended in
its entirety to read as follows:

      

      2.1.1           “Revolving Loans;
Advances.  Subject to the terms, conditions and limitations
hereof, and provided that no Event of Default has occurred hereunder, Bank
agrees to lend (and upon repayment relend) money to Borrower in such amounts as
Borrower from time to time requests, up to the maximum amount of Five Million
Dollars ($5,000,000.00), provided that the amount available to be borrowed under
the Revolving Credit Facility shall be reduced by the amount of any Letter of
Credit Liabilities.  Advances by Bank hereunder shall be made by
deposits or transfers to Borrower’s commercial demand account number 1001368991,
maintained with Bank.  Loans so made shall be evidenced by Borrower’s
Revolving Note, and, in addition, Bank shall maintain a loan account ledger for
Borrower, the debit balance of which shall reflect the amount of Borrower’s
indebtedness to the Bank from time to time by reason of any loans, advances or
financial accommodations made in conformance with this Revolving Credit
Facility.  Each month the Bank shall render to Borrower a statement of
account, which statement shall be considered correct and accepted by Borrower
and conclusively binding upon Borrower unless Borrower notifies the Bank to the
contrary within thirty (30) days from the date of mailing of said
statement.  Borrower promises to pay to Bank the outstanding principal
and accrued and unpaid interest under the Revolving Note as
follows:  (1) monthly payments of accrued interest on the first day of
each month, and (2) a final payment of all outstanding principal and accrued but
unpaid interest on June 1, 2009.”

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.           Interest Rate on the
Revolving Note.  Section 2.3.1 of the Loan Agreement is amended
in its entirety to read as follows:

      

      “2.3.1           Interest Rate on the
Revolving Note.  The interest rate hereunder on the Revolving
Note shall be equal to (a) as to the first $4,000,000 of outstanding principal
under the Revolving Note, the greater of (i) four and one-half percentage points
(4.50%) per annum, or (ii) LIBOR Rate plus three percentage points (3.0%) per
annum, and (b) as to any principal amount outstanding under the Revolving Note
in excess of $4,000,000, the greater of (i) five percentage points (5.0%) per
annum, or (ii) LIBOR Rate plus three and one-half percentage points (3.5%) per
annum.  “LIBOR Rate” means the 30 Day London Interbank Offer Rate as
published in the Wall Street Journal on the first business day of each calendar
month and effective on the same day (the "Index").  The Index is not
necessarily the lowest rate charged by Lender on its loans.  If the
Index becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower.  Lender will tell Borrower
the current Index rate upon Borrower's request.  Borrower understands
that Lender may make loans based on other rates as well.”

      

      4.           Collateral Obligation
Ratio.  Section 2.6 of the Loan Agreement is amended to delete
“$4,000,000” and replace it with “$5,000,000.”

      

      5.           Cash
Equity.  Section 5.21 (Net Income) of the Loan agreement is
hereby deleted and replaced with the following:

      

      “5.21           Cash
Equity.  Borrower shall (a) on or before January 31, 2009,
provide Bank with a copy of a letter of intent from a proposed investor who is
satisfactory to Bank to make a contribution of equity to Borrower in the amount
of at least $2,500,000 on terms and conditions satisfactory to Bank, and (b) on
or before March 31, 2009, close on such transaction and obtain additional cash
equity in the amount of at least $2,500,000.”

      

      6.           Debt
Service.  Section 5.22 of the Loan Agreement is amended in its
entirety to read as follows:

       

      
        “5.22 
Debt
Service.  Borrower shall maintain as of the last day of each
fiscal month of Borrower, commencing December 31, 2008, in each case for the
period of twelve months ending on such date, a ratio of (1) Borrower’s Net Cash
Flow, to (2) the sum of Borrower’s required principal payments, plus interest
expense, of at least 1.0 to 1.0.”

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      7.           Conditions
Precedent.  This Amendment shall not be effective until Bank
has received a fully executed copy of this Amendment and each of the following
in form and substance satisfactory to the Bank, executed as
appropriate:

      

      
        	
              	
                (a) 

              	
                Revolving
      Note;

              

      

      

      
        	
              	
                (b) 

              	
                Mortgage
      on Grafton Real Estate;

              

      

      

      
        	
              	
                (c) 

              	
                Letter
      Report and Evidence of Insurance for Grafton Real
  Estate;

              

      

      

      
        	
              	
                (d) 

              	
                Corporate
      Borrowing Resolutions;

              

      

      

      
        	
              	
                (e) 

              	
                Officer’s
      Certificate;

              

      

      

      
        	
              	
                (f) 

              	
                Original
      Consent of Lessor for Borrower’s Franklin
  premises;

              

      

      

      
        	
                 
      

              	
                (g)

              	
                Collateral
      Assignment of Membership Interest in Nexus Custom Magnetics,
      L.L.C.

              

      

      

      
        	
                 
      

              	
                (h)

              	
                Debt
      Subordination Agreement; and

              

      

      

      
        	
                 
      

              	
                (i)

              	
                Fully
      executed and notarized Consent of Lessor for Borrower’s Pharr
      premises.

              

      

      

      8.           Effect of
Amendment.  Except as otherwise provided herein, the Loan
Agreement shall remain in full force and effect and Borrower shall be bound by
all of the covenants therein.

      

      9.           Law
Governing.  This Amendment shall be governed by the laws of the
State of Wisconsin.

      

      10.         Binding
Effect.  This Amendment shall be binding on and inure to the
benefit of Borrower, Bank and their respective successors and
assigns.

       

      
        	 	
                BORROWER:

                 

                Jefferson
      Electric, Inc.

              	 
	 	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/
      Thomas Klink	 
	 	 	
                Thomas
      Klink, President

              	 

      

    

    
       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	 	
                
                  BANK:

                   

                  Johnson
      Bank

                

              	 
	 	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/
      Roberta S. Cummings	 
	 	 	
                
                  Roberta
      S. Cummings, Vice President

                

              	 

      

       

      

      CONSENT
OF GUARANTORS

       

      The undersigned hereby consent to the
foregoing amendment and ratify their Guaranties of the obligations of Jefferson
Electric, Inc. to Johnson Bank.

       

      

      
        	 	/s/
      Thomas Klink
	 	
                Thomas
      Klink

              
	 	 
	 	 
	 
      	
                JEFFERSON ELECTRIC LEASING,
      LLC,

                A
      Wisconsin limited liability company

                 

              
	 
      	
                By: 

              	/s/
      Thomas Klink
	 
      	 
      	
                Thomas
      Klink, Member

              
	 
      	 
      	 
      

      

      

      

        4Unassociated Document

     

    EXHIBIT 10.10

     

    
      FORBEARANCE
AGREEMENT AND

      FOURTH
AMENDMENT TO LOAN AGREEMENT

       

      This
Forbearance Agreement and Fourth Amendment to Loan Agreement, dated August 28,
2009, is among Johnson Bank (the “Bank”), Jefferson Electric, Inc. (“Borrower”),
Thomas Klink (“Guarantor”) and Diane M. Klink (“Diane Klink,” and together with
the Borrower and Guarantor, the “Borrower Parties”).

       

      RECITALS

       

      WHEREAS,
Bank and Borrower are parties to that certain Loan and Security Agreement dated
January 2, 2008, as amended by the Amendment to Loan and Security Agreement
dated January 29, 2008, Second Amendment to Loan and Security Agreement dated
May 2, 2008 and Third Amendment to Loan and Security Agreement dated December 3,
2008 (as amended, the “Loan Agreement”); and

       

      WHEREAS,
Borrower is in material default under the Loan Agreement, including but not
limited to failure to pay the Obligations at maturity; and

       

      WHEREAS,
Borrower has informed Bank that it is pursuing certain alternatives for
recapitalizing the Borrower and increasing Borrower’s profitability;
and

       

      WHEREAS,
Bank is entitled to exercise its rights and remedies upon default, including but
not limited to its right to demand payment of the Obligations and realize on its
collateral for the Obligations; and

       

      WHEREAS,
the Bank has agreed to forbear from exercising its rights and remedies upon the
terms and conditions set forth herein, provided that Bank has not agreed to
continue financing Borrower beyond December 31, 2009.

       

      AGREEMENT

       

      NOW,
THEREFORE, the parties hereto hereby agree as follows:

       

      1.      Definitions.  (a)  Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in the Loan Agreement.

       

      (b)           As
used herein and in the Loan Agreement as amended hereby, the following terms
shall have the following meanings:

       

       “Additional
Advance Amount” means $700,000; provided that such amount shall be reduced to
$0.00 on the earliest of (i) September 5, 2009 if Borrower has not as of such
date met the requirements of Sections 6(c)(i) and 6(c)(ii) hereof or (ii) the
date of Borrower’s receipt of the Recapitalization Funds.

       

      “Excluded
Mexican Inventory” means Borrower’s Inventory that is located in
Mexico.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Forbearance
Event of Default” means (a) Bank obtaining knowledge of or the occurrence of any
default or Event of Default under the Loan Agreement not now known to Bank, (b)
any default or Event of Default under the Loan Agreement now known to Bank
increasing in scope or magnitude, or (c) the occurrence of any default under
this Agreement.

       

      “Recapitalization
Funds” means amounts received by Borrower as a result of the transactions
contemplated by Section 6(a) hereof.

       

      2.      Interest Rate on the
Revolving Note.  Section 2.3.1 of the Loan Agreement is amended
in its entirety to read as follows:

       

      “2.3.1           Interest Rate on the
Revolving Note.  The interest rate hereunder on the Revolving
Note shall be equal to 8.00% per annum.

       

      3.      Collateral-Obligation
Ratio.  Section 2.6.2 of the Loan Agreement is amended in its
entirety to read as follows:

       

      
        “2.6.2           the sum
of (i) Fifty percent (50%) of Qualified Inventory at cost (determined in
accordance with GAAP) or wholesale market value, whichever is lower, plus (ii)
the Additional Advance Amount; less”

      

       

      4.      Borrowing Base
Certificates.  Section 5.1.3 of the Loan Agreement is amended
in its entirety to read as follows:

       

      “5.1.3           On
Monday of each week, based on Qualified Accounts and Qualified Inventory figures
as of the end of the day on the prior Friday, and at such other times as
requested by Bank, a report in the form of the attached Exhibit A, or as
otherwise required by Bank, reflecting the Collateral-Obligation Ratio, showing
the value of the Collateral without the Excluded Mexican Inventory, together
with such information relating to the Collateral as Bank may request, certified
by an authorized signatory of Borrower.”

       

      5.      Prepayment
Premium.  If, on or before December 31, 2009, Borrower pays the
Obligations in full and in good funds on or before December 31, 2009 and the
Revolving Credit Facility is terminated, Bank shall waiver the prepayment
premium set forth in section 2.9 of the Loan Agreement.

       

      6.      Additional
Covenants.  Borrower and Guarantor shall comply with the
following covenants:

       

      (a)           Recapitalization.  Borrower
shall diligently pursue recapitalization of the Borrower and (i) on or before
September 30, 2009, provide Lender with a pro forma showing proposed use of the
funds received in such recapitalization, including payment of amounts
satisfactory to Bank on the Revolving Note, (ii) on or before October 31, 2009,
provide Bank with a copy of a letter of intent from a proposed investor who is
satisfactory to Bank reflecting an intent to make a contribution of equity to
Borrower in the amount of at least $3,000,000 on terms and conditions
satisfactory to Bank, and (iii) on or before December 31, 2009, close on such
transaction, obtain additional cash equity in the amount of at least $3,000,000
and make payment on the Revolving Note in the amount of not less than
$700,000.   Upon payment of the $700,000 to Bank as required in
this section 6(a), on and after the date of such payment, Borrower must be in
compliance with Section 2.6 of the Loan Agreement as amended hereby, calculated
with the Additional Advance Amount at $0.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (b)           Additional
Notices.  Borrower shall notify Bank promptly, and in any event
within one business day, if Borrower, in its good faith judgment, at any time
believes that Borrower will not be able to close in its recapitalization on or
before December 31, 2009.

       

      (c)           Mexican
Documentation.  Borrower and Guarantor shall

       

      (i) on or
before August 31, 2009, provide to Bank all of the following, in  a
form that is executed, and if required by Bank or otherwise required, with
appropriately completed notary acknowledgement, apostille and
authentication,  and otherwise suitable for registration in Mexico:
all documents, filings, recordings, certifications and other documents as Bank
may request to perfect and protect Bank’s interest in property of Borrower and
its affiliates that may from time to time be located in Mexico; and

       

      (ii) on
or before September 5, 2009, pay all taxes, fees, costs and expenses, make all
filings, and provided all certifications and other documents and actions as Bank
may request to perfect and protect Bank’s interest in the such
property.  Borrower shall, from time to time, take such additional
action as Bank may request with respect to the perfection and protection of
Bank’s interest in such property.

       

      (d)           Inventory
Levels.  Borrower shall at all times limit the amount of
inventory located in Mexico to the amount reasonably necessary for the operation
of Borrower’s business.  Without limitation of the foregoing, Borrower
shall not at any time transfer any inventory to Mexico (i) if Borrower is not in
compliance with Section 2.6 of the Loan Agreement as amended hereby or if such
transfer will cause Borrower to be out of compliance with Section 2.6 of the
Loan Agreement as amended hereby, or (ii) if after such transfer the value of
inventory located in Mexico will exceed $1,600,000.

       

      (e)           Facility
Fee.  In addition to all other amounts owing by Borrower to
Bank, Borrower shall pay to Bank a facility fee of $25,000.00 (the “Facility
Fee”).  The Facility Fee shall be deemed fully earned and owing to
Bank upon execution of this Agreement.  The Facility Fee shall be due
and payable on the earlier of the Forbearance Termination Date (as defined
below) or the date of payment in full of the Obligations and termination of the
Revolving Credit Facility.

       

      (f)           Debt
Service.  Borrower shall maintain for each fiscal month of
Borrower, commencing June, 2009, a ratio of (i) Borrower’s Net Cash Flow, to
(ii) the sum of Borrower’s required principal payments, plus interest expense,
of at least 1.0 to 1.0.

       

      7.      Defaults; No
Waiver.  Material Events of Default have occurred under the
Loan Agreement and are continuing.  Bank has agreed that, subject to
the terms hereof, notwithstanding the existing defaults known to Bank, Bank will
forbear from exercising its rights and remedies and continue to advance funds
under the Revolving Credit Facility prior to the earlier of December 31, 2009 or
the occurrence of any Forbearance Event of Default, provided that Bank shall not
at any time be required to advance any amount in excess of the amount permitted
to be advanced under Section 2.6 of the Loan Agreement as amended
hereby.  Bank does not waive any Events of Default.  Bank’s
agreement to forbear under this Forbearance Agreement shall terminate on the
earlier of (a) December 31, 2009, or (b) the occurrence of any Forbearance Event
of Default (the earlier to occur of the foregoing, the "Forbearance Termination
Date").  Borrower expressly acknowledges that subject to the terms of
the Loan Agreement as amended hereby, Bank has agreed to forbear exercising its
rights and remedies until the earlier of December 31, 2009 to occurrence of any
Forbearance Event or Default, but in any event, Bank has not agreed to, and is
not obligated to, continue to provide financing to Borrower beyond such
date.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      8.       
Effect of Forbearance
Agreement on Loan Documents.  Except as amended hereby, the
Loan Documents remain in full force and effect.

       

      9.       
Effect of Forbearance
Agreement on Guaranty.  Guarantor hereby consents to this
Agreement, and Guarantor hereby ratifies  his Guaranty of the
Obligations and all documents by which any of them has granted collateral for
any such Guaranty or any Obligations.

       

      10.      Effect of Forbearance
Agreement on Mortgage.  Guarantor and Diane Klink hereby ratify
the Real Estate Mortgage securing the Obligations dated December 3, 2008 (the
"Klink Mortgage").  In the event Borrower and Guarantor timely
satisfy, to the satisfaction of Bank, the conditions set forth in sections
6(c)(i) and 6(c)(ii) of this Agreement, Bank shall release the Klink
Mortgage.

       

      11.      Release of
Bank.  Borrower acknowledges that its obligations under the
Loan Documents exist and are enforceable in accordance with their
terms.  Each of the Borrower Parties, for themselves and all of their
respective past and present principals, officers, directors, members,
shareholders, employees, affiliated entities, guarantors, heirs, successors and
assigns and all persons acting by, through, under, or in concert with any of
them (the “Releasing
Parties”) do hereby release and discharge Bank and all of the Bank’s
officers, directors, managers, employees, successors, predecessors, and assigns
(each a "Released Party")), of and from any and all manner of action or actions,
cause or causes of action, suits, claims, counterclaims, demands, and expenses
(including attorneys’ fees and costs) whatsoever in law or equity, whether known
or unknown, which they have had, now have, or may in the future have against any
Released Party arising out of or relating to any act or omission by Bank or any
other Released Party, on or before the date of this Agreement.

       

      12.      Conditions
Precedent.  This Forbearance Agreement shall not be effective
until (a) it shall have been executed and delivered by the parties hereto, (b)
Bank shall have received from Borrower (i) fully executed documentation in form
and substance satisfactory to Bank requiring prefunding of all of Borrower’s ACH
transfers, (ii) a copy, certified by the secretary of Borrower to be true and
correct and in full force in effect on the date hereof, of the resolutions
Borrower's board of directors authorizing the execution and delivery of this
Agreement and all documents required to be executed and delivered in connection
herewith and (iii) documentation satisfactory to Bank evidencing the merger of
Jefferson Electric Leasing, LLC into Borrower prior to the date hereof and (c)
Borrower shall have received from Bank an executed consent related to the sale
of certain of Borrower's accounts receivable from Siemens Energy &
Automation, in the form of Exhibit B attached hereto.

       

      13.      Attorneys’
Fees.  The Borrower agrees to pay all reasonable attorneys’
fees of Bank relating to this Forbearance Agreement and all amendments,
modifications and supplements hereto, which attorneys' fees shall be due and
payable on the earlier of (a) the Forbearance Termination Date or (b) the date
of payment in full of the Obligations and termination of the Revolving Credit
Facility.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      14.      Law
Governing.  This Forbearance Agreement shall be governed by the
laws of the State of Wisconsin.

       

      15.      Binding
Effect.  This Forbearance Agreement shall be binding upon the
parties hereto and their respective successors and assigns.

       

      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.

       

      
        	 	
                BANK:

              
	 	 
	 
      	
                JOHNSON
      BANK

              
	 	 
	 	 	 
	 
      	
                By: 

              	/s/
      Kelly Foster
	 
      	 
      	Kelly
      Foster

      

       

       

      
        	 	
                BORROWER
      PARTIES:

              
	 	 
	 
      	
                JEFFERSON
      ELECTRIC, INC.

              
	 	 
	 	 	 
	 
      	
                By: 

              	/s/
      Thomas Klink
	 
      	 
      	
                Thomas
      Klink, President

              
	 	 
	 
      	/s/
      Thomas Klink
	 
      	
                Thomas
      Klink, an individual

              
	 	 
	 
      	/s/
      Diane M. Klink
	 
      	
                Diane
      M. Klink, an individual

              

      

       

       

      
        5

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