<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
-----------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
-------------------
Commission File Number: O-13715
VITRONICS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF
MASSACHUSETTS O4-2726873
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Forbes Road, Newmarket, NH 03857
- - - - ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 659-6550
--------------
NONE
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
Number of shares outstanding of each of the registrant's classes
of common stock as of May 4, 1995:
Common Stock, $.01 par value: 7,553,638 shares
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information:
- - - - -------------------------------
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
April 1, 1995 (unaudited)
and December 31, 1994 ................................... 3
Condensed Consolidated Statements of Operations (unaudited) -
Three Months Ended April 1, 1995
and April 2, 1994 ...................................... 4
Condensed Consolidated Statements of
Cash Flows (unaudited) - Three Months
Ended April 1, 1995 and April 2, 1994 .................. 5
Notes to Condensed Consolidated Financial Statements
(unaudited).............................................. 6
Calculation of Net Income Per Share........................ 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 8
Part II - Other Information:
----------------------------
Items 1 through 6.......................................... 10
Signatures................................................. 11
</TABLE>
-2-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
(Unaudited) (*)
----------- -----------
<S> <C> <C>
ASSETS
- - - - ------
Current assets:
Cash and cash equivalents $ 947 $ 671
Accounts receivable, net 2,006 2,723
Inventories 2,717 2,094
Other current assets 179 189
------- -------
Total current assets 5,849 5,677
Property and equipment, net 204 223
Other assets 152 152
------- -------
$ 6,205 $ 6,052
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - ------------------------------------
Current liabilities:
Accounts payable $ 1,602 $ 1,751
Other current liabilities 1,016 945
Current maturities of long-term liabilities 315 305
------- -------
Total current liabilities 2,933 3,001
Long-term liabilities - net of current maturities 1,283 1,323
Stockholders' Equity:
Common Stock, $.01 par value 76 76
Additional paid-in capital 5,405 5,401
Foreign currency translation adjustment (151) (184)
Accumulated deficit (3,341) (3,565)
------- -------
1,989 1,728
------- -------
$ 6,205 $ 6,052
======= =======
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part
of these condensed financial statements.
-3-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
April 1, April 2,
1995 1994
-------- --------
<S> <C> <C>
Net sales $4,853 $3,584
Cost of goods sold 2,982 2,358
-------- --------
Gross profit 1,871 1,226
Selling, general and
administrative expenses 1,215 857
Research and development costs 303 260
-------- ------
1,518 1,117
-------- ------
Income from operations 353 109
Non-operating expense - net (126) (97)
------- -----
Income before taxes 227 12
Income taxes 3 -
------- -------
Net income $ 224 $ 12
======= =======
Net earnings per common share:
Primary $ .03 $ .00
======= =======
Fully diluted $ .02 $ .00
======= =======
Weighted average number of
common and common equivalent
shares used in calculation
of earnings per common share:
Primary 8,169 7,522
====== =====
Fully diluted 10,572 9,922
====== =====
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
-4-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 1, April 2,
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 224 $ 12
Adjustments to reconcile net income to net
cash flows provided by (used for)
operating activities:
Depreciation and amortization 54 47
Provision for excess and obsolescence 54 30
Changes in current assets and liabilities:
Accounts receivable 717 (178)
Inventories (677) 241
Other current assets 10 55
Accounts payable (149) 15
Income taxes - 20
Other current liabilities 71 (163)
------ ------
Total adjustments 80 67
------ ------
Net cash provided by operating activities 304 79
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (17) (9)
Additions to other assets (18) (6)
------ ------
Net cash used for
investing activities (35) (15)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (30) (81)
Issuance of common stock 4 -
------ ------
Net cash used for financing activities (26) (81)
Foreign currency translation adjustment 33 (4)
CASH:
Net increase (decrease) 276 (21)
Balance, beginning of period 671 172
------ ------
Balance, end of period $ 947 $ 151
====== ======
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Conversion of debt to equity - $71
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements
-5-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three month period ended April 1,
1995 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1995. For further information, refer to the
Company's consolidated financial statements and notes thereto contained in
the Company's Form 10-K for the year ended December 31, 1994 filed with the
Securities and Exchange Commission (File #0-13715) on March 22, 1995.
B. Inventories
Inventories valued at the lower of cost (determined using the first-in,
first-out method) or market, were as follows (in thousands):
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
------- -------------
<S> <C> <C>
Finished goods $ 339 $ 224
Work in process 773 369
Raw materials 1,605 1,501
------ ------
$2,717 $2,094
====== ======
</TABLE>
-6-
<PAGE>
EXHIBIT 11.1
VITRONICS CORPORATION AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
<TABLE>
<CAPTION>
April 1, 1995
----------------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net income $ 224 $ 254
Weighted average shares outstanding:
Common stock 7,551,583 7,551,583
Convertible debentures 2,400,000
Warrants 220,270 220,960
Stock options 397,139 399,722
----------- -----------
Weighted averaged shares
outstanding 8,168,992 10,572,265
Earnings per share $ 0.03 $ 0.02
</TABLE>
- - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 2, 1994
-------------------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net income $ 12 $ 42
Weighted average shares outstanding:
Common stock 7,387,799 7,387,799
Convertible debentures 2,400,000
Warrants 107,449 107,449
Stock options 27,055 27,055
--------- ---------
Weighted averaged shares
outstanding 7,522,303 9,922,303
Earnings per share $ 0.00 $ 0.00
</TABLE>
-7-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
- - - - --------------------
Sales for the quarter ended April 1, 1995 increased 35% to $4,853,000 from
$3,584,000 for the same period in 1994. Bookings for the three months ended
April 1, 1995 were $5,333,000 versus $3,628,000 for the same period in 1994, an
increase of 47%. The increase in bookings and revenues were a result of
increased demand for IsothermTM, UnithermR and Unitherm II products, along with
recapture of market share lost in 1991-1993. The Company does not anticipate
that the percentage increase in net revenues and bookings for the three months
ended April 1, 1995 is necessarily indicative of the percentage increase in net
revenues to be expected for the entire fiscal year. Backlog as of April 1, 1995
was $3,068,000 versus $2,589,000 at December 31, 1994 and $2,177,000 as of April
2, 1994.
Gross margin for the three months ended April 1, 1995 increased to 39% from
34% for the same period in 1994. The increased margin is due to a significantly
higher volume of sales, reduced overhead spending and reduced material costs.
Operating expenses for the three months ended April 1, 1995 were $1,518,000
versus $1,117,000 for the same period of 1994, an increase of 36%. Operating
expenses as a percentage of sales for such periods were 31% and 31%,
respectively. The increase in actual spending is partially the result of the
increased sales which resulted in increased staffing levels, commission and
marketing expenses.
For the first quarter of 1995, selling, general and administrative expenses
as a percentage of sales were 25% versus 24% in 1994. This increase is the
result of the increased sales volume which resulted in higher commission and
marketing expenses. Research and development expenses as a percentage of sales
for such periods were 6% in 1995 versus 7% in 1994.
The Company had non-operating expenses of $126,000 for the three months
ended April 1, 1995 compared with $97,000 for the comparable period in 1994. The
non-operating expenses for the first quarter of 1995 include patent defense
costs of $75,000 and interest expense, net $32,000. During the first quarter of
1994, patent defense costs were $31,000 and interest expense, net was $42,000.
Patent defense costs are continuing to increase as the suit approaches trial
which is expected to occur in June 1995.
-8-
<PAGE>
Net income for the first quarter of 1995 was $224,000 compared to $12,000 for
the comparable period of 1994. For the first quarter of 1995, net income was
$.03 per primary share, and $.02 per fully diluted share. For the comparable
1994 period, net income per share was $.00.
Liquidity and Capital Resources
- - - - -------------------------------
The Company continues to monitor its operational spending levels very
closely with the goal of cash conservation. During the quarter ended April 1,
1995, cash increased $276,000 to $847,000.
During March 1995, the Company obtained a $500,000 revolving line of credit
with First National Bank of Portsmouth. The Company believes this funding
source, combined with its existing cash balances and anticipated cash flow from
operations, will be adequate to meet its working capital requirements for the
remainder of the year.
-9-
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Items 1 through 4: Not applicable
Item 5: Other Information
On April 25, 1995, the Company filed a Registration Statement on Form S-3
with the Securities and Exchange Commission covering 2,888,225 shares of its
common stock which includes 2,400,000 shares reserved for issuance upon
conversion of the Company's outstanding $1.2 million subordinated convertible
debenture dated October 1, 1993, 346,225 shares issuable upon exercise of
outstanding warrants held by the underwriter for the Company's 1992 Right's
Offering and 142,000 shares sold to a vendor of the Company in 1992. The Company
filed the Registration Statement due to the exercise of registration rights
previously granted to the holders of the Company's underwriter warrants and
subordinated convertible debenture. The Company will incur the cost of the
registration. However, the Company will not receive any proceeds from the sale
of the stock by the selling stockholders.
Item 6:
(a). Exhibits
10.33 Business Loan Agreement between the Company and First National
Bank of Portsmouth dated March 22, 1995
10.34 Promissory Note of the Company to First National Bank of
Porstmouth dated March 22, 1995
10.35 Commercial Security Agreement between the Company and First
National Bank of Portsmouth dated March 22, 1995
27 Financial Data Schedule.
(b). Reports on Form 8-K
None
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VITRONICS CORPORATION
Date: May 8, 1995 By:/s/ James J. Manfield, Jr.
--------------------------
James J. Manfield, Jr.
Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer,
and Treasurer
Date: May 8, 1995 /s/ Ronald W. Lawler
--------------------------
Ronald W. Lawler,
President and
Chief Operating Officer
Date: May 8, 1995 By:/s/ Daniel J. Sullivan
--------------------------
Daniel J. Sullivan,
Controller and
Principal Accounting Officer
-11-
<PAGE>
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- - - - -------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-22-1995 04-30-1995 09400156 3 700 TFD
- - - - -------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- - - - --------------------------------------------------------------------------------
Borrower: VITRONICS CORPORATION
FORBES ROAD, NEWMARKET INDUSTRIAL PARK
NEWMARKET, NH 03857
Lender: First National Bank of Portsmouth
488 Central Avenue
Dover, NH 03820
- - - - --------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between VITRONICS CORPORATION ("Borrower") and
First National Bank of Portsmouth ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement;
(b) the granting, renewing, or extending of any Loan by Lender at all times
shall be subject to Lender's sole judgment and discretion; and (c) all such
Loans shall be and shall remain subject to the following terms and conditions of
this Agreement.
TERM. This Agreement shall be effective as of March 22, 1995, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
Borrower. The word "Borrower" means VITRONICS CORPORATION. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means First National Bank of Portsmouth, its
successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing
note or notes therefor.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
<PAGE>
03-22-1995 BUSINESS LOAN AGREEMENT Page 2
(Continued)
================================================================================
agreement to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of
the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
Organization. Borrower is a corporation which is duly organized, validity
existing, and in good standing under the laws of the Commonwealth of
Massachusetts. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that:
(a) During the period of Borrower's ownership of the properties, there has
been no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any person on,
under, or about any of the properties. (b) Borrower has no knowledge of, or
reason to believe that there has been (i) any use, generation, manufacture,
storage, treatment, disposal, release, or threatened release of any
hazardous waste or substance by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of any
kind by any person relating to such matters. (c) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, or about any of the properties; and
any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including
without limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties to
make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous
waste. Borrower hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or
should have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment
of the indebtedness and the termination or expiration of this Agreement and
shall not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. All tax returns and reports of Borrower that are or were required to
be filed, have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those presently being
or to be contested by Borrower in good faith in the ordinary course of
business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security interest on or affecting
any of the Collateral directly or indirectly securing repayment of
Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
Location of Borrower's Offices and Records. The chief place of business of
Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at FORBES ROAD, NEWMARKET INDUSTRIAL
PARK, NEWMARKET, NH 03857.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated thereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be,
<PAGE>
03-22-1995 BUSINESS LOAN AGREEMENT Page 3
(Continued)
- - - - --------------------------------------------------------------------------------
true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading.
Survival of Representation and Warranties. Borrower understands and agrees
that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the
foregoing representations and warranties shall be continuing in nature and
shall remain in full force and effect until such time as Borrower's Loan
and Note shall be paid in full, or until this Agreement shall be terminated
in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all litigation and
claims and all threatened litigation and claims affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower
or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean
Borrower's total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements) less
total Debt. The term "Debt" shall mean all of Borrower's liabilities
excluding Subordinated Debt. The term "Subordinated Debt" shall mean
indebtedness and liabilities of Borrower which have been subordinated by
written agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender. The term "Working Capital" shall mean
Borrower's current assets, excluding prepaid expenses, less Borrower's
current liabilities. The term "Liquid Assets" shall mean Borrower's cash on
hand plus Borrower's receivables. The term "Cash Flow" shall mean net
income after taxes, and exclusive of extraordinary gains and income, plus
depreciation and amortization. Except as provided above, all computations
made to determine compliance with the requirements contained in this
paragraph shall be made in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as
being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least twenty (20) days' prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act, omission or default
of Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in all other instruments and agreements
between Borrower and Lender in a timely manner, and promptly notify Lender
if Borrower learns of the occurrence of any event which constitutes an
Event of Default under this Agreement.
Operations. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent manner
and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with
the Americans With Disabilities Act and with all minimum funding standards
and other requirements of ERISA and other laws applicable to Borrower's
employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws,
<PAGE>
03-22-1995 BUSINESS LOAN AGREEMENT Page 4
(Continued)
================================================================================
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part or
on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets,
or (c) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income tax
payments to satisfy their liabilities under federal and state law which
arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of stock of Borrower, or
(d) purchase or retire any of Borrower's outstanding shares or alter or
amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral securing any Loan;
(d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such Guarantor's guaranty or the Loan or any other loan with Lender; or (e)
Lender in good faith deems itself insecure, even though no Event of Default
shall have occurred.
SCHEDULE "A". An exhibit, titled "SCHEDULE "A"," is attached to this Agreement
and by this reference is made a part of this Agreement just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in this
Agreement.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on the indebtedness against any and all such
accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security interest) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceedings, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent or any Guarantor revokes any guaranty of the
indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Insecurity. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of New Hampshire. If there is a
<PAGE>
03-22-1995 BUSINESS LOAN AGREEMENT Page 5
(Continued)
===============================================================================
lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Strafford County, the State of New Hampshire. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
Hampshire.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against Lender
or against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of any holder of any
interest in the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal
claims or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including without limitation attorneys' fees. Incurred
in connection with the preparation, execution, enforcement and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
Notices. All notices required to be given under this Agreement shall be given in
writing and shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose or the notice is to change the party's address. To
the extent permitted by applicable law, if there is more than one Borrower,
notice to any Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower's
current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE>
03-22-1995 BUSINESS LOAN AGREEMENT Page 6
(Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MARCH
22, 1995.
BORROWER:
VITRONICS CORPORATION
By: /s/ JAMES J. MANFIELD, JR
-------------------------------------------
JAMES J. MANFIELD, JR., CHAIRMAN & CEO
ATTEST:
- - - - ---------------------------------------------- (Corporate Seal)
Secretary or Assistant Secretary
LENDER:
First National Bank of Portsmouth
By: /s/ Timothy F. Dargan
-------------------------------------------
Authorized Officer
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.16(c) 1995 CFI ProServices, Inc.
ALL rights reserved. [NH-C40 VITRONIC.LN Cl.OVL)
<PAGE>
SCHEDULE A
This Schedule "A" is attached to and by this reference made a part of each
Business Loan Agreement or Negative Pledge Agreement, dated March 22, 1995, and
executed in connection with a loan or other financial accommodations between
First National Bank of Portsmouth and Vitronics Corporation.
First and future disbursements, if any, shall be pursuant to the banks
satisfactory review of the financial condition of the borrower. Conditions
precedent to disbursement, at a minimum include:
a) Liquidity: Liquidity, as measured by current assets divided by
current liabilities, should be no less than 1.7x.
b) Leverage: Minimum net worth plus subordinated debt no less than
$2,550,000. Leverage, as measured by total liabilities
divided by net worth plus subordinated debt no higher
than 2.0x. ------
c) Debt service coverage minimum 1.2x.
This Schedule "A" is executed on March 22, 1995.
BORROWER:
VITRONICS CORPORATION
BY: /s/ James J. Manfield
-----------------------------------
James J. Manfield, Jr., Chairman & CEO
ATTEST:
- - - - ------------------------------------- (Corporate Seal)
Secretary or Assistant Secretary
LENDER:
First National Bank of Portsmouth
BY: /s/ Timothy F. Dargan
-------------------------------------
Timothy F. Dargan, Vice President
<PAGE>
SCHEDULE B
This Schedule "B" is attached to and by this reference made a part of the
Business Loan Agreement dated March 22, 1995, and executed in connection with a
loan or other financial accommodations between First National Bank of Portsmouth
and Vitronics Corporation.
1. That page 3 of the Business Loan Agreement in the section entitled,
"Compliance Certificate" is amended so as to delete the following language,
"annually and at the time of each disbursement of loan proceeds" and replace
said language with the following "quarterly or at the Lender's request".
2. That page 4 of the agreement in the section entitled, "Negative Covenants"
is amended so as to provide in the subsection entitled, "Indebtedness and
Liens", "That the Borrower shall be permitted to have a carve out up to
$400,000.00 for capital expenditures including capital leases".
3. That page 5 of the Business Loan Agreement in the subsection entitled,
"Consent to Loan Participation" is hereby amended to contain the following
language at the end of said paragraph, "The Lender will not sell or transfer the
within loan to Fleet National Bank or its affiliates".
4. That page 5 of the Business Loan Agreement in the section entitled, "Costs
and Expenses" shall be amended so as to provide that wherever the term
"attorneys' fees" appears therein that said two words shall be proceeded by the
word "reasonable".
In Witness Whereof, the parties have executed the within Schedule "B" on the
22nd day of March, 1995.
BORROWER:
VITRONICS CORPORATION
BY: /s/ James J. Manfield, Jr.
-----------------------------------------
James J. Manfield, Jr., Chairman & CEO
LENDER:
FIRST NATIONAL BANK OF PORTSMOUTH
BY: /s/ Timothy F. Dargan
-------------------------------------
Timothy F. Dargan, Vice President
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
- - - - -------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-22-1995 04-30-1995 09400156 3 700 TFD
- - - - -------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- - - - --------------------------------------------------------------------------------
Borrower: VITRONICS CORPORATION
FORBES ROAD, NEWMARKET INDUSTRIAL PARK
NEWMARKET, NH 03857
Lender: First National Bank of Portsmouth
488 Central Avenue
Dover, NH 03820
================================================================================
Principal Amount: $500,000.00 Initial Rate: 10.000% Date of Note: March 22, 1995
PROMISE TO PAY. VITRONICS CORPORATION ("Borrower") promises to pay to First
National Bank of Portsmouth ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Five Hundred Thousand & 00/100
Dollars ($500,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one
payment of all outstanding principal plus all accrued unpaid interest on April
30, 1995. In addition, Borrower will pay regular monthly payments of accrued
unpaid interest beginning April 13, 1995, and all subsequent interest payments
are due on the same day of each month after that. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown above
or at such other place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Bank of
Boston Prime (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. The
interest rate change will not occur more often than each day. The Index
currently is 9.000% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.000 percentage point over
the Index, resulting in an initial rate of 10.000% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
6.000% of the unpaid portion of the regularly scheduled payment of $100.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on or
in which Lender has a lien or security interest. This includes a garnishment of
any of Borrower's accounts with Lender. (f) Any of the events described in this
default section occurs with respect to any guarantor of this Note. (g) Lender in
good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will pay
Lender that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of New Hampshire. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Stratford County, the State of New Hampshire. This Note shall be
governed by and construed in accordance with the laws of the State of New
Hampshire.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns,conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
COLLATERAL. This Note is secured by FIRST SECURITY INTEREST ON ALL ACCOUNTS
RECEIVABLE, INVENTORY, FURNITURE, FIXTURES AND EQUIPMENT NOW OWNED AND HEREAFTER
ACQUIRED AND THE PROCEEDS THEREOF.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. All
oral requests shall be confirmed in writing on the day of the request. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: JAMES J. MANFIELD, JR., CHAIRMAN & CEO. Borrower
agrees to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credit to any of Borrower's accounts
with Lender. The unpaid principal balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default under the
terms of this Note or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this
Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
<PAGE>
03-22-1995 PROMISSORY NOTE Page 2
(Continued)
=============================================================================
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether
as maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
Borrower expressly agrees that the interest rates specified in this Note shall
be the applicable interest rates due (a) on amounts outstanding during the
term of this Note, notwithstanding the rate of interest prescribed by statute
from time to time, and (b) with respect to any amounts outstanding on and
after the maturity date of this Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:
VITRONICS CORPORATION
By: /s/ James J. Manfield, Jr.
---------------------------------------
JAMES J. MANFIELD, JR., CHAIRMAN & CEO
ATTEST:
------------------------------------------- (Corporate Seal)
Secretary or Assistant Secretary
LENDER:
First National Bank of Portsmouth
By: /s/ Timothy F. Dargan V.P.
---------------------------------------
Authorized Officer
================================================================================
<PAGE>
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-22-1995 04-30-1995 09400156 3 700 TFD
- - - - ------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- - - - -------------------------------------------------------------------------------
Borrower: VITRONICS CORPORATION
FORBES ROAD, NEWMARKET INDUSTRIAL PARK
NEWMARKET, NH 03857
Lender: First National Bank of Portsmouth
488 Central Avenue
Dover, NH 03820
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between VITRONICS
CORPORATION (referred to below as "Grantor"); and First National Bank of
Portsmouth (referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the
indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, contract rights, equipment,
general intangibles and fixtures, together with the following
specifically described property: FIRST SECURITY INTEREST ON ALL
ACCOUNTS RECEIVABLE, INVENTORY, FURNITURE, FIXTURES AND EQUIPMENT NOW
OWNED AND HEREAFTER ACQUIRED AND THE PROCEEDS THEREOF.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising,
and wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, contract rights, general intangibles, instruments,
rents, monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in this
Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest, in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Fixtures are and will be located on the following described real estate:
FORBES ROAD, NEWMARKET INDUSTRIAL PARK, NEWMARKET, NH COUNTY OF
ROCKHINGHAM.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means VITRONICS CORPORATION, its successors
and assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
Indebtedness. The word "indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
Lender. The word "Lender" means First National Bank of Portsmouth, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated March 22,
1995, in the principal amount of $500,000.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or
credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding however all IRA, Keogh, and trust accounts.
Grantor authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Grantor, file a carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing statement.
Grantor will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the Indebtedness is paid in full and
even though for a period of time Grantor may not be indebted to Lender.
<PAGE>
03-22-1996 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
================================================================================
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts,
contract rights, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear to
be on the Collateral. At the time any account becomes subject to a security
interest in favor of Lender, the account shall be a good and valid account
representing an undisputed, bona fide indebtedness incurred by the account
debtor, for merchandise held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale, or for services theretofore
performed by Grantor with or for the account debtor; there shall be no setoffs
or counterclaims against any such account; and no agreement under which any
deductions or discounts may be claimed shall have been made with the account
debtor except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the Collateral from
its existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Some or all of the Collateral may be
located at the real property described above. Except in the ordinary course of
its business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of New
Hampshire, without the prior written consent of Lender.
Transactions involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent, and
location of such Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnify or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis
<PAGE>
03-22-1995 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
================================================================================
reasonably acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or
diminished without at least twenty (20) days' prior written notice to Lender and
not including any disclaimer of the insurer's liability for failure to give
such a notice. Each insurance policy also shall include an endorsement providing
that coverage in favor of Lender will not be impaired in any way by any act,
omission or default of Grantor or any other person. In connection with all
policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other
endorsements as Lender may require. If Grantor at any time fails to obtain or
maintain any insurance as required under this Agreement, Lender may (but shall
not be obligated to) obtain such insurance as Lender deems appropriate,
including if it so chooses "single interest insurance," which will cover only
Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any Insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of Insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Unit otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists. Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default. Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by the Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other claims,
at any time levied or placed on the Collateral. Lender also may (but shall not
be obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or such Grantor dies or becomes
incompetent.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the New Hampshire Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
<PAGE>
03-22-1995 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
==============================================================================
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)
days before the time of the sale or disposition. All expenses relating to
the disposition of the Collateral, including without limitation the expenses
of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b)
the receiver may be an employee of Lender and may serve without bond, and
(c) all fees of the receiver and his or her attorney shall become part of
the indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
indebtedness or apply it to payment of the indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of New Hampshire. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Strafford County, State of New Hampshire. This Agreement shall be governed
by and construed in accordance with the laws of the State of New Hampshire.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may
pay someone else to help enforce this Agreement, and Grantor shall pay the
costs and expenses of such enforcement. Costs and expenses include Lender's
attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will constitute notice
to all Grantors. For notice purposes, Grantor agrees to keep Lender informed
at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any claim
or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or advisable.
This power is given as security for the Indebtedness, and the authority
hereby conferred is and shall be irrevocable and shall remain in full force
and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Successor interests. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the
consent of Lender is
<PAGE>
03-22-1995 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
===============================================================================
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 22,
1995.
GRANTOR:
VITRONICS CORPORATION
By: /s/ James J. Manfield Jr.
-----------------------------------------
JAMES J. MANFIELD, JR., CHAIRMAN & CEO
ATTEST:
- - - - --------------------------------------------- (Corporate Seal)
Secretary or Assistant Secretary
LENDER:
First National Bank of Portsmouth
By: /s/ Timothy F. Dargan V.P.
-----------------------------------------
Authorized Officer
================================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.18(c) 1995 CFI ProServices, Inc.
All Rights reserved. [NH-E40 VITRONIC.LN C1.OVL)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM APRIL 1 1995 FROM
10-Q AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1995 JAN-01-1995
<PERIOD-END> APR-01-1995 APR-02-1994
<CASH> 947 151
<SECURITIES> 0 0
<RECEIVABLES> 2,106 1,982
<ALLOWANCES> 100 108
<INVENTORY> 2,717 1,888
<CURRENT-ASSETS> 5,849 4,099
<PP&E> 1,819 1,765
<DEPRECIATION> 1,615 1,468
<TOTAL-ASSETS> 6,205 4,575
<CURRENT-LIABILITIES> 2,933 2,041
<BONDS> 0 0
<COMMON> 76 75
0 0
0 0
<OTHER-SE> 1,913 1,003
<TOTAL-LIABILITY-AND-EQUITY> 6,205 4,575
<SALES> 4,853 3,584
<TOTAL-REVENUES> 4,853 3,584
<CGS> 2,982 2,358
<TOTAL-COSTS> 1,518 1,117
<OTHER-EXPENSES> 84 49
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 42 48
<INCOME-PRETAX> 227 12
<INCOME-TAX> 3 0
<INCOME-CONTINUING> 224 12
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 224 12
<EPS-PRIMARY> .03 .00
<EPS-DILUTED> .02 .00
</TABLE>
