<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
OR
[_] 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 0-20229
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RF POWER PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEW JERSEY 22-2361086
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1007 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 627-6100
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
COMMON STOCK, $.01 PAR VALUE PER registered
SHARE AMERICAN STOCK EXCHANGE PRIMARY LIST
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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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on February 10, 1997 (based on the closing price on such date as
reported on the American Stock Exchange was $21,172,416.(/1/)
As of February 10, 1997, 12,123,140 shares of Common Stock, $.01 par value
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III--Portions of the Registrant's definitive Proxy Statement with respect
to the Registrant's 1997 Annual Meeting of Shareholders, to be filed not
later than 120 days after the close of the Registrant's fiscal year.
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(1) Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers, directors and five percent shareholders of
the Registrant, without conceding that all such persons are "affiliates"
of the Registrant for purposes of the Federal securities laws.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
RF Power Products, Inc. (the "Company") designs, manufactures and markets
radio frequency ("RF") power delivery systems, consisting of generators and
matching networks. The generator provides the radio frequency power and the
matching network provides the power flow control to the customer's equipment.
The Company's products are sold principally to semiconductor capital equipment
manufacturers. The Company's power delivery systems are a critical component
of the process chambers of semiconductor manufacturing equipment. RF Power
offers semiconductor capital equipment manufacturers power delivery systems
that cover a wide range of power and frequency levels and are adjustable to
the precise power and frequency levels required by the manufacturers. The
Company believes that the wide range and adjustability of its power delivery
systems, together with their high reliability, enables semiconductor capital
equipment manufacturers to increase throughput, improve yields and decrease
manufacturing expenses and cost of ownership. The Company's products are also
sold to capital equipment manufacturers in the flat panel display and thin
film disk media industries.
The Company's products are flexible and the Company offers specialized
design engineering to its customers in order to integrate the Company's
products into specific applications. The Company believes its products may
have applications in a number of other industries, including medical and
surgical instrumentation, food processing and preparation and materials
processing.
The Company's power delivery systems incorporate a microprocessor into the
power generator, enabling the Company and the customer to have the benefit of
performance and application enhancements. The benefits to the Company include
the ability to perform self diagnosis during final testing and during first
service procedures. The benefits to the customer include the ability to
program the generator through a wide range of performance specifications as
well as to communicate with the generator from a central controller via
communication ports. In addition, the cluster tool systems used in computer
integrated manufacturing production lines enable the customer to command,
control and communicate with the power source. The Company believes that this
ability is a valuable asset in production control. The microprocessor
controlled power delivery system enables the Company to customize the software
included in its generators to the specific needs of a customer.
The Company markets and sells its products in three principal markets: the
United States, Europe and Asia Pacific. The Company markets its products
through a direct sales force in the United States from its headquarters in
Voorhees, New Jersey and its regional offices in Santa Clara, California and
Austin, Texas. The European market is supported directly through the Company's
United Kingdom office. In the Asia Pacific market, the Company markets its
products through technical sales representatives in Korea and Taiwan and
through a distributor in Japan. The Company has an employee in Korea to
provide technical support to current and potential Korean customers.
The Company's strategy is to (i) maintain and enhance its position as a
technology leader in the application of power delivery systems in the
semiconductor capital equipment market (ii) leverage its technology into new
applications and new markets, (iii) expand its product offerings by providing
"complete power solutions" to its customers and focusing on design wins, and
(iv) increase the use of modular components in its products and enhance and
refine its manufacturing processes.
RECENT DEVELOPMENTS
Contracts. In June 1996, the Company was awarded a contract with Lam
Research Corporation ("Lam Research") estimated at $6.0 million annually to
supply the entire radio frequency power delivery system, including generators
and matching networks, for use in their new line of oxide etch systems. Lam
Research has the option to renew the contract annually.
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Bank Loans. In May 1996, the Company established a new banking relationship
with a local commercial bank and terminated its relationship with its prior
bank. The Company repaid it's prior bank's term loan and the outstanding
balance on its line of credit from a new credit facility provided by the
Company's new bank. The new credit facility is for a $1,400,000 term loan and
a $4,000,000 revolving line of credit. This increases the Company's lines of
credit from $1,500,000 to $4,000,000. The rate of interest for both the term
loan and revolving line of credit are based on current Libor rates plus a
variable percentage based on the Company's quarterly cash flow performance.
The Company has the option to term out a portion of the line of credit, which
if exercised, reduces the line of credit by the amount termed out. In February
1997, the Company exercised this option for a $1,000,000 term loan. On January
17, 1997, the Company signed an amendment to the credit facility that revised
a financial covenant in order to satisfy the Company's compliance with such
covenant at November 30, 1996
In December 1996, the Company entered into a $500,000 loan agreement with
the New Jersey Economic Development Authority to finance certain purchases of
equipment for its new facility. The loan is for a five year term at an
interest rate of 5% with principal and interest paid monthly. The loan is
secured by the equipment purchased with the proceeds of the loan.
ISO 9001 Certification. In December 1996, the Company became certified and
registered to meet the ISO 9001 Quality System Standard. The Quality
Management System is applicable to the design, manufacture, and service of
radio frequency power systems, matching networks and other peripheral
products. This certification covers all activities at the Company's Voorhees,
NJ facility.
PRODUCTS
Solid-State and Tube-Type Generators
The Company manufactures a line of solid-state, computer-controlled radio
frequency generators and a line of high-power tube-type generators. Solid-
state generators are presently available for power requirements of up to 5,000
watts and are sold primarily to Capital Equipment Manufacturers in the
semiconductor equipment, flat panel, thin film and analytical equipment
markets. The solid-state generators are designed to be compact in size and
reliable in performance. For the fiscal year ended November 30, 1996, ("fiscal
1996") and the fiscal year ended November 30, 1995 ("fiscal 1995"), shipments
of solid-state generators accounted for 71% and 78% of sales, respectively.
Tube-type generators are available at power levels from 10,000 to 25,000 watts
and are primarily sold to capital equipment manufacturers ("Capital Equipment
Manufacturers") in the film disc media market. For both fiscal 1996 and fiscal
1995, shipments of tube-type generators accounted for 4% of net sales.
Matching Networks
The Company also manufactures matching networks, which are systems composed
primarily of variable inductors and capacitors with application-specific
circuits that can be designed to a customer's specific power requirements.
Matching networks are designed to optimize the power flow from a generator to
a process chamber by changing (i.e. tuning) the inductor and capacitor values.
The Company manufactures general purpose matching networks and matching
networks that are designed for a customer's specific model of equipment. For
fiscal 1996 and fiscal 1995, matching networks accounted for 22% and 14%,
respectively, of the Company's net sales.
MARKET OVERVIEW
The Company's products are sold for use in equipment used to manufacture
semiconductor products and flat-panel displays for use in equipment used in
the film and media markets and for use in analytical instruments. The
Company's net sales during fiscal 1996 in the semiconductor equipment, flat-
panel displays, film disc media and analytical instruments markets were
approximately 66%, 14%, 14% and 6%, respectively.
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A primary focus of the Company's current marketing efforts is the
semiconductor equipment market. Capital Equipment Manufacturers in the
semiconductor equipment market typically purchase solid-state generators
because the power requirements for the equipment they manufacture are
typically 5,000 watts or less. These semiconductor products are the building
blocks for computers, including personal, workstations and mainframes,
automotive electronics, telecommunications and consumer electronics. The
Company's power systems are used in semiconductor equipment to provide the
precise excitation required to achieve the plasma processes of deposition and
etching of thin films. The dielectric and metal thin film layers are key
technologies in the manufacture of advanced integrated circuits, which are the
building blocks for microprocessors, memories and logic elements.
Flat-panel display, such as active matrix liquid crystal displays, field
emission displays and plasma displays, are making strong inroads into the
traditional cathode ray tube (CRT) market, particularly in the computer
display area, and are expected to expand their penetration in the laptop,
desktop, and workstation, automotive, avionics and consumer electronics
markets. The Company is a Capital Equipment Manufacturer supplier to many key
flat-panel equipment manufacturers.
Management of the Company estimates the flat-panel display market to be
approximately the same size as the semiconductor market. However, since most
of the growth potential in this market is expected to come from equipment
manufacturers in the Far East, the Company's growth potential is dependent on
its relationship with its distributor and sales representatives in Asia. See
"Business--Marketing, Sales and Service."
In the film disc media market, the Company is currently a niche supplier of
high-power tube-type generators of at least 10,000 watts. Typical applications
of the Company's products by manufacturers in the film disc media market
include magnetic disc, disc drive and head manufacturing. Management of the
Company believes that the manufacturers in the film disc media market are
moving towards radio frequency technology, even though the majority of
manufacturers in the film disc media market currently use direct current
technology. Management of the Company believes that since the Company is one
of the few manufacturers of high-power products that offers service and
support in all of its sales areas, the Company is in a position to take
advantage of the anticipated growing demand for higher throughput equipment.
The Company also expects to maintain its position in the portion of the
analytical instruments market that uses solid-state technology for inductively
coupled plasma sources in instruments that are used for elemental analysis of
materials. Typical applications of inductively coupled plasma type analytical
instruments include mass spectroscopy of soils, solids and liquid chemicals as
used in the chemical, pharmaceutical, electronics, toxic waste and
agricultural industries.
Management of the Company believes there is significant opportunity for the
Company to expand into new markets; however, there can be no assurance that
the Company will be able to enter any new markets successfully.
RESEARCH AND PRODUCT DEVELOPMENT
The market for radio frequency power systems has been characterized by
moderate technological change and rapid product innovation. In many instances,
the high-end tube-type products utilize technology that is over twenty years
old. Accordingly, the Company is engaged in a research and product development
program directed toward improving existing products and developing new
products and a more moderate technological research and development program
directed toward updating its technology in the high-end radio frequency power
supply industry. The Company's current production includes new lines of low
frequency and high frequency generators and matching networks.
The Company maintains an engineering and technical staff of 37 people, a
majority of whose time is spent in research and development. The Company has
increased product development activity and is supplementing existing
engineering experience with outside professionals. The Company uses technical
consultants to assist
4
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with product development and has expanded such use in developing strategic
relations with some universities, research centers and customers with
specialized engineering capabilities.
Research and product development costs are expensed as incurred. During the
fiscal year ended November 30, 1996 ("fiscal 1996"), fiscal 1995 and fiscal
1994, the Company spent approximately $3,528,000, $2,343,000 and $1,340,500,
respectively, for research and product development.
There can be no assurance that the Company's research and product
development efforts will be successful or that such efforts will not be
rendered obsolete by the research efforts and technological advances made by
others.
MARKETING, SALES AND SERVICE
The Company markets and sells its products in three principal markets: the
United States, Europe and Asian Pacific.
In the United States and Europe, the Company sells and services its products
directly through its own sales personnel. In addition, in December of 1995 the
Company established a Korean office to provide technical support in the Korean
market. Elsewhere, the Company uses distributors or sales representatives.
In the United States and United Kingdom offices, the Company's direct sales
force works with the Company's existing Capital Equipment Manufacturer
customers to integrate the Company's products with the customers' product
development. The direct sales force also works with end users that are either
retrofitting existing equipment or developing specifications for equipment
orders. In addition, the Company offers technical assistance to its Capital
Equipment Manufacturer customers during the customers' product development
phase in order to encourage the use of the Company's products. The Company has
a New Product Development Team that focuses its efforts on working directly
with key customers to address their next generation requirements.
In fiscal 1993, the Company entered into an exclusive distributorship
agreement with Astech Corporation, a Japanese distributor ("Astech") and
related party to the Company, to distribute the Company's products in Japan.
The agreement commenced in August 1993 and terminates in August 1998. Astech
manufactures a line of radio frequency products that is complementary to the
Company's product line. As a result, Astech can provide not only sales and
service support but also technical input on product design and development.
The Company and Astech are combining forces to secure new accounts by offering
to the customer a total power system, i.e., a low frequency generator
(provided by the Company) and a matching network (provided by Astech). This
combined cooperative effort has resulted in establishing new relationships
with key customers in Japan.
During fiscal 1996, approximately 85% of the Company's sales were in the
domestic market, 8% in Europe, 6% through its distributor and sales
representatives in the Asian Pacific region and 1% in other foreign markets.
The Company has one distributor in Japan (described above) and sales
representatives in six countries. Net sales in Europe for fiscal 1996 were
approximately $2,437,000. Net sales in the Asian Pacific market for fiscal
1996 were approximately $1,790,000 (of which $1,615,000 were in the Japanese
market).
During fiscal 1996, the contracts that the Company entered into with Applied
Materials, Inc. ("Applied Materials") in fiscal 1995, and the contract entered
in fiscal year 1996 into with Lam Research and the distribution agreement with
Astech accounted for 35% and 5% of the Company's net revenues, respectively.
5
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The following table sets forth the approximate percentages and amounts of
net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Area Net Sales
Domestic........................................ 85% 82% 75%
Europe.......................................... 8% 11% 13%
Asia Pacific.................................... 6% 6% 10%
Other Foreign................................... 1% 1% 2%
------- ------- -------
Total......................................... 100% 100% 100%
======= ======= =======
Area Net Sales ($000's)
Domestic........................................ $26,383 $21,642 $12,277
Europe.......................................... 2,437 2,777 2,175
Asia Pacific.................................... 1,790 1,727 1,651
Other Foreign................................... 469 221 199
------- ------- -------
Total......................................... $31,079 $26,367 $16,302
======= ======= =======
</TABLE>
BACKLOG
The Company had backlog believed to be firm as of February 11, 1997 and
February 7, 1996 of approximately $6,800,000 and approximately $8,400,000,
respectively. All of the backlog as of February 11, 1997 is expected to be
filled by the end of the fiscal year ending November 30, 1997.
COMPETITION
The Company's products are sold in highly competitive markets. The Company
competes in these markets by emphasizing product quality, state-of-the-art
technology in its third generation of power supply products, support and
service and competitive pricing. The Company believes that it offers a greater
range of power levels and a wider range of frequencies for its radio frequency
generators and a more complete package of radio frequency peripheral equipment
than any other competitor in its field. However, there can be no assurance
that levels of competition in the Company's particular product markets will
not intensify or that the Company's technological advantages will not be
reduced or lost as a result of technological advances by competitors or
changes in radio frequency generator technology. Many of the Company's
competitors may have greater financial and other resources than the Company.
The Company's primary competition consists of (i) major suppliers of power
systems that service several market segments, (ii) suppliers that service
niche markets and (iii) captive manufacturers that manufacture their own power
supplies. The Company's primary competition comes from Advanced Energy
Industries, Inc. and ENI, Inc. Management of the Company believes that the
modular manufacturing process it employs permits production efficiencies
through incremental volume additions to the production line. Management of the
Company believes its modular assembly of products, which uses common
components in the Company's products, provides it with a current market
advantage over its competition.
MANUFACTURING AND ASSEMBLY
The Company currently purchases from suppliers the majority of the
components used in the assembly process. In an effort to maximize its
efficiency and product quality, the Company continues its efforts to outsource
substantially all subassemblies so that the Company will be able to
concentrate on final assembly and testing. In addition, the Company currently
adopted a series of internationally accepted technical standards known as ISO
9001, which were established by the International Organization for
Standardization to determine
6
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whether manufacturing plants, regardless of national origin, implement sound,
basic-quality procedures. The guidelines were designed to be shared by many
industrialized nations. The Company has also installed a comprehensive and
integrated MRP II based manufacturing system.
The Company has multiple commercial sources for the components and supplies
it acquires from outside sources. The Company carries a significant amount of
supplies and inventory because of the production time required for certain
products, the lead time needed to acquire certain components parts to meet the
delivery requirements of its customers and the Company's desire to provide
quality service on its systems in the field.
For all of its solid-state generator products, the Company employs a modular
assembly process that uses common components to enable the Company to provide
flexibility in design and efficiency in production. Specifically, there are
typically five building blocks for each solid-state generator: an exciter, a
power amplifier; a control system (microcontroller); an interconnecter; and a
filter/combiner. The first three items are common modules that are used in all
of the Company's solid-state generators. For example, because the basic design
for both air- and water-cooled power generators are similar, the components
are used the same way in both types of generators. The common module approach
to product assembly provides flexibility in manufacturing, which reduces the
assembly time for each product. This approach to product assembly also
provides the Company with a more efficient inventory system by reducing the
number and types of components the Company must purchase and stock.
PATENTS
The Company currently holds no patents. The Company believes that its
success is generally less dependent upon patent protection than on the
scientific and engineering skills that are applied to its products.
EMPLOYEES
As of February 10, 1997, the Company had 148 employees, of whom 17 were in
administration, 37 in engineering, 15 in sales and marketing, 12 in field
service and 67 in manufacturing.
The Company is not subject to any collective bargaining agreements and
believes that its relations with its employees are good.
GOVERNMENT REGULATIONS
The Federal Communications Commission ("FCC") regulates companies that
manufacture radio frequency products in order to prevent interference with
authorized radio communication services. The regulations are industry
standards and require manufacturers of radio frequency products to construct
their products in accordance with good engineering practice with sufficient
shielding and filtering to provide adequate suppression of emissions on
frequencies outside the approved radio frequency bands. Management believes
the Company's products are designed and manufactured to comply with the FCC
regulations.
ITEM 2. PROPERTIES
The Company's new principal executive, administrative and manufacturing
operations are located in an approximately 78,000 square foot facility in
Voorhees, New Jersey. The facility is leased by the Company for a ten year
term ending in December 2006. The lease provides for current monthly payment
of $51,750. The Company's future obligations over the term of the lease total
approximately $6,210,000. In addition to the annual rentals, the Company pays
taxes, insurance and maintenance relating to the leased property. The Company
continues to be responsible for the sublease of its old facility in Voorhees,
New Jersey which term ends in October 1997. The Company has established a
reserve in fiscal year 1996 for the rent and other expenses related to its old
facility.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Executive Officers of the Registrant
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph Stach............... 58 President, Chief Executive Officer and Chairman
of the Board
Domenic Golato............. 41 Treasurer and Chief Financial Officer
Christopher Ben............ 36 Secretary and Chief Operating Officer
</TABLE>
Joseph Stach has been President, Chief Executive Officer and Chairman of the
Board of the Company since April 1992. Dr. Stach joined the Company as
President in July 1991. From April 1991 to July 1991, Dr. Stach was Executive
Vice President of Plasma-Therm and from March 1988 until he joined Plasma-
Therm, Dr. Stach was the director of the Center for Microelectronics Research
at the University of South Florida.
Domenic Golato has been Treasurer of the Company since April 1993. From
April 1993 to February 1994, Mr. Golato was Controller of the Company, and in
March, 1994 Mr. Golato was appointed Chief Financial Officer. From October
1992 to April 1993, Mr. Golato was a self-employed consultant and from
February 1988 to October 1992, he was the National Assistant Controller for
Silo, Inc.
Christopher Ben has been Chief Operating Officer of the Company since March
1994. From September 1987 to February 1994 Mr. Ben was General Manager of the
Company. Mr. Ben was appointed Secretary of the Company in December 1992.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock was listed on the American Stock Exchange
Emerging Company Marketplace ("AMEX/ECM") on April 29, 1994. On June 29, 1995
the Company's stock graduated to the primary list on the American Stock
Exchange (AMEX) where it is traded under the symbol RFP. As of February 10,
1997 there were 618 record holders of the shares of Common Stock. There have
been no dividends declared during the past three fiscal years with respect to
the Company's Common Stock and the Company anticipates that for the
foreseeable future, any net earnings will be retained by the Company as
working capital and no dividends will be paid. In addition, the Company's term
loan with a commercial bank prohibits the payment of cash dividends.
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The following table sets forth the high and low sales prices (as reported by
the AMEX) for the Company's Common Stock for fiscal years 1996 and 1995:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter............................................... 6 1/4 4 3/4
Second Quarter.............................................. 8 1/8 4 5/8
Third Quarter............................................... 7 5/8 3
Fourth Quarter.............................................. 3 3/4 2 1/4
1995
First Quarter............................................... 4 1/16 2 3/8
Second Quarter.............................................. 3 3/16 2
Third Quarter............................................... 8 3/8 2 1/2
Fourth Quarter.............................................. 7 3/4 4 3/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of selected financial data of the Company for
each of the five years ended on the dates set forth below, which should be
read in conjunction with the financial statements of the Company and the notes
thereto.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................... $ 31,079 $ 26,367 $ 16,302 $ 10,930 $ 8,468
Income (loss) before extra-
ordinary credit and
cumulative effect of change
in accounting for income
taxes...................... 1,227 1,517 1,095 245 (567)
Extraordinary credit--tax
benefit of operating loss
carryforwards.............. -- -- -- 58 --
--------- --------- --------- --------- --------
Income (loss) before
cumulative effect of change
in accounting for income
taxes...................... 1,227 1,517 1,095 303 (567)
Cumulative effect of change
in accounting for income
taxes...................... -- -- 275 -- --
--------- --------- --------- --------- --------
Net income (loss)........... $ 1,227 $ 1,517 $ 1,370 $ 303 $ (567)
========= ========= ========= ========= ========
Per share data:
Income (loss) before
extraordinary credit and
cumulative effect of change
in accounting for income
taxes...................... $ .10 $ .12 $ .10 $ .03 $ (.07)
Extraordinary credit........ -- -- -- .01 --
Cumulative effect of change
in accounting for income
taxes...................... -- -- .03 -- --
--------- --------- --------- --------- --------
Net income (loss)........... $ .10 $ .12 $ .13 $ .04 $ (.07)
========= ========= ========= ========= ========
<CAPTION>
NOVEMBER 30,
-------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets................ $ 12,048 $ 12,915 $ 6,683 $ 4,254 $ 3,153
Long-term debt, less current
portion.................... 904 310 621 722 525
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company designs, manufactures and markets radio frequency power delivery
systems. A power delivery system consists of a generator, which provides radio
frequency power, and, in many cases, a matching network, which controls the
flow of power into the customer's equipment. The Company's products are sold
principally to semiconductor capital equipment manufacturers, which use them
as a critical component of the process chambers of the semiconductor
manufacturing equipment. The Company's products are also sold to capital
equipment manufacturers in the flat panel display and thin film disk media
industries.
The semiconductor equipment industry accounted for approximately 66% and 65%
of the Company's sales in 1996 and 1995, respectively. Over the past few years
the semiconductor industry has experienced strong growth which has benefited
the Company. In the second half of the 1996 fiscal year there has been a
significant decrease in spending in the semiconductor equipment industry. This
impacted the Company's second half fiscal year operations, most notably, the
Company's net sales and gross profit. Due to this slowdown the Company has
implemented a cost reduction program. The future growth of the Company will
depend in substantial part on continued growth of the semiconductor equipment
industry. To date the Company has been successful in achieving a number of
"design wins" which have resulted in the Company obtaining new customers and
expanding relationships with existing customers. The Company believes that its
ability to continue to achieve design wins with existing and new customers
will be critical to its future success.
Over fiscal years 1995 and 1994, the Company had experienced significant
sales growth. This growth has outpaced increases in operating expenses,
resulting in significant increases in gross margins during this period. In
fiscal year 1996, more specifically in the second half of fiscal year 1996,
sales in the semiconductor capital equipment market decreased significantly.
This affected the Company's results, especially in operating expenses, which
resulted in unabsorbed labor and overhead costs which are expensed as
incurred. The Company has taken steps to reduce fixed costs and to bring
variable expenses into line with the current pace of operations.
The Company feels it is important to continue investing in the development
of new products for the next generation of semiconductor and flat panel
display manufacturing equipment, as well as for new applications of radio
frequency technology in medical devices, food and material processing. This is
reflected in the research and development expenses incurred in fiscal year
1996.
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Results of Operations
The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of operations as a percentage of net
sales.
PERCENTAGE OF SALES
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0%
Cost of products sold.............................. 64.3 59.5 62.2
------- ------- -------
Gross profit................................... 35.7 40.5 37.8
Research and development........................... 11.4 8.9 8.2
Selling and administrative......................... 17.5 17.8 18.5
Compensation from stock purchase agreements........ -- 3.0 --
------- ------- -------
Income from operations............................. 6.8 10.8 11.1
Interest, net...................................... .3 .2 .4
------- ------- -------
Income before income taxes and cumulative effect of
change in accounting for income taxes............. 6.5 10.6 10.7
Income tax expense................................. 2.6 4.9 4.0
------- ------- -------
Income before cumulative effect of change in
accounting for income taxes....................... 3.9 5.7 6.7
Cumulative effect of change in accounting for
income taxes...................................... -- -- 1.7
------- ------- -------
NET INCOME..................................... 3.9% 5.7% 8.4%
======= ======= =======
</TABLE>
Net Sales
Net sales were $31.1 million, $26.4 million and $16.3 million for the years
ended November 30, 1996, 1995 and 1994, respectively, which represents an
increase of 18% from 1995 to 1996 and an increase of 62% from 1994 to 1995.
The increase is the result of continued growth in the unit volume of sales to
capital equipment manufacturers in the semiconductor and flat panel display
industries. Net sales to these industries increased 16% for 1996 and 85% for
1995. Applied Materials and Lam Research accounted for 35% and 37% of net
sales for 1996 and 1995, respectively.
Gross Profit
The Company's gross profit expressed as a percentage of sales was 36%, 40%
and 38% for the years ended November 30, 1996, 1995 and 1994, respectively.
The decrease in gross profit in 1996 is the result of the decline in sales to
the semiconductor market which resulted in under absorbed labor and overhead
costs and the additional inventory obsolescence reserves. The increase in
gross profit percentage, for years 1995 and 1994, is due primarily to lower
material costs and production efficiencies. Production efficiencies resulted
from full integration of a computerized manufacturing system. Volume
purchasing and lower costs resulted in a reduced cost of product.
Research and Development
The Company's research and development expenses are associated with
developing new products and improving existing product designs. Research and
development expenses were $3.5 million, $2.3 million and $1.3 million for the
years ended November 30, 1996, 1995, and 1994, respectively, which represents
an increase of 51% from 1995 to 1996 and 77% from 1994 to 1995. Research and
development expenses increased primarily due to the purchase of technology for
the next generation of radio frequency power supplies and additional
11
<PAGE>
engineering staff to support the Company's development program. The Company's
ability to increase its research and development efforts is dependent upon its
ability to continue to attract or train radio frequency engineers. The Company
can not be assured of finding experienced radio frequency engineers because of
their scarcity and the competitiveness of the market for these individuals.
Selling and Administrative
Selling and administrative expenses were $5.4 million, $4.7 million and $3.0
million for the fiscal years 1996, 1995 and 1994, respectively. This
represents 18% of sales for the years ended November 30, 1996, 1995 and 1994.
This represents a 15% increase from 1995 to 1996 and a 57% increase from 1994
to 1995.
Selling and administrative expenses rose $.7 million in 1996 and as a
percent of sales was comparable to 1995. The increase is the result of costs
related to the opening of a Korean office and for its staff, a reserve for
rent and other expenses for the Company's old facility, write-off of expenses
related to a terminated secondary offering of the Company's stock and
professional fees related to a medical joint venture. The increase of $1.7
million in 1995 is the result of increased personnel in sales, marketing and
service, increase in commissions resulting from increased sales levels and
bonuses to Company personnel based on profitability.
Compensation from Stock Purchase Agreements
Compensation from stock purchase agreements of $784,000 in fiscal 1995
resulted from settlement agreements entered into by the Company, its former
legal counsel and three of its executives to correct unintended tax
consequences of these executives' stock purchase agreements. The settlement
and compensation charge had no effect on cash, working capital or equity over
what would have occurred had the unintended tax consequences not resulted.
Income Taxes
In 1996, the effective tax rate was 39% which increased over the past year
due primarily to an increase in state taxes. Excluding the $784,000
adjustment, representing a permanent difference, the effective rate for 1995
was 36%. The Company's effective tax rate was 37% for 1994. In the year ended
November 30, 1994, the Company changed its method of accounting for income
taxes in accordance with SFAS No. 109, resulting in a cumulative effect
adjustment which increased income by $275,000.
Liquidity and Capital Resources
The Company's cash requirements are currently being funded through
operations coupled with the proceeds of stock options and bank financing.
Funding in 1994 was provided from operations of $470,000, long and short term
debt of $515,000, and proceeds from the exercise of stock options and warrants
of $212,000. The increase in capital expenditures of $633,000 in 1994 resulted
from the purchase of machinery and equipment, computer software and hardware
and leasehold improvements. Also, $255,000 was spent in 1994 for a technology
purchase consisting of the design for a switching system for the next
generation of radio frequency power supplies. In 1995 funds were provided
primarily from operations of $1,776,000 and $571,000 of debt. Approximately
$1,074,000 of funds were used for the purchase of machinery and equipment and
computer equipment and an additional $155,000 was expended for a technology
purchase discussed above. Excess funds were used to repay $697,000 of debt. In
1996 funds were provided primarily from operations of $369,000 and $2,386,000
of debt. Approximately $1,384,000 was used for the purchase of machinery and
equipment, computer equipment and transportation vehicles. Additional funds
were used to repay $1,671,000 of debt.
In May 1996, the Company established a new banking relationship with a local
commercial bank and terminated its relationship with its prior bank. The
Company repaid it's prior bank's term loan and the outstanding balance on its
line of credit from a new credit facility provided by the Company's new bank.
The new credit facility is for a $1,400,000 term loan and a $4,000,000
revolving line of credit. This increases the
12
<PAGE>
Company's lines of credit from $1,500,000 to $4,000,000. As of November 30,
1996, approximately $3,600,000 is available through May 1998. On January 17,
1997 the Company signed an amendment to the credit facility that revised a
financial covenant in order to satisfy the Company's compliance with such
covenant at November 30, 1996.
The Company has the option to term out a portion of the line of credit,
which if exercised, reduces the line of credit by the amount termed out. In
February 1997, the Company exercised this option for a $1,000,000 term loan.
In December 1996, the Company entered into a $500,000 loan agreement with
the New Jersey Economic Development Authority to finance certain purchases of
equipment for its new facility. The loan is for a five year term at an
interest rate of 5% with principal and interest paid monthly. The loan is
secured by the equipment purchased with the proceeds of the loan.
The decrease in the Company's trade receivables and inventories coupled with
the related decrease in accounts payable and accrued expenses are the result
of the decreased sales volume to the semiconductor capital equipment
manufacturers.
The Company believes that funds generated from operations, in addition to
its current banking line of credit, should be sufficient to meet the Company's
capital requirements for the immediate future.
The Company requires substantial capital for research and development and
inventories. However, the Company's capital equipment requirements, although
significant this year and also for the first quarter of fiscal 1997, which
will approximate $1,140,000 related to its new facility, will not continue to
be substantial. Management of the Company believes that the aforementioned
funding, coupled with working capital generated by operations and the
Company's cost reduction program should be sufficient to meet the Company's
capital requirements for the immediate future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements are set forth in this report beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company terminated the engagement of Grant Thornton, LLP ("Grant
Thornton") as independent accountant to audit and certify the Company's
financial statements, effective on the filing of its fiscal year ended
November 30, 1995 Form 10-K. The decision to terminate Grant Thornton was
approved by the Board of Directors.
The audit reports of Grant Thornton on the financial statements of the
Company for the fiscal years ended November 30, 1995 and 1994, did not contain
an adverse opinion or a disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope, or accounting principles except for
an explanatory paragraph that referred to a change in accounting for income
taxes.
There were no disagreements with Grant Thornton during the fiscal years
ended November 30, 1994 and November 30, 1995, or in any subsequent interim
period through the filing of this Form 10-K on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Grant Thornton, would
have caused Grant Thornton to make reference to such disagreement in
connection with its opinion on the Company's financial statements.
Effective upon the filing of last year's Form 10-K, the Company engaged KPMG
Peat Marwick LLP to serve as independent accountant to audit the Company's
financial statements.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated above
reference thereto.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements.
Independent Auditors' Report--KPMG Peat Marwick LLP
Independent Auditors' Report--Grant Thornton LLP
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
2. Financial Statement Schedule.
Schedule II--Valuation and Qualifying Accounts
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1* Agreement and Plan of Reorganization dated July 13, 1992 between
Registrant and Plasma-Therm, Inc. (Exhibit 2 filed July 14, 1992, to
the Registrants Form 8 amendment to the Registrant's Form 10
Registration Statement filed May 19, 1992 No. 0-020229 [the "1992
Registration Statement"]).
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended.
3.2 Amended and Restated By-laws of the Registrant.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.1* 1992 Stock Option Plan, as amended, of the Registrant dated March 24,
1993 (Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended November 30, 1993 [the "1993 Form 10-K"]).
4.2* 1993 Non-Employee Directors Stock Option Plan of the Registrant dated
March 24, 1993 (Exhibit 4.2 to the 1993 Form 10-K).
10.1* Employment Agreement dated December 1, 1993 between the Registrant and
Joseph Stach and amendment to Employment Agreement dated January 19,
1994 (Exhibit 10.1 to the 1993 Form 10-K).
10.2* Sublease Agreement dated November 1, 1992 between the Registrant and
Test Technology, Inc. for office, manufacturing and warehouse space at
502 Gibbsboro-Marlton Road, Voorhees, New Jersey 08043 (Exhibit 10.2
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended November 30, 1992 [the "1992 Form 10-K"]).
10.3* License Agreement dated May 13, 1992 between the Registrant and
Plasma-Therm, Inc. (Exhibit 10E to the 1992 Registration Statement).
10.4* Distribution Agreement dated August 10, 1993 between the Registrant
and Astech Corporation (Exhibit 10.10 to the 1993 Form 10-K).
10.5* Stock Purchase and Subscription Agreement dated July 16, 1993 by and
between the Registrant and Mitsuyuki Umino (Exhibit 10.11 to the 1993
Form 10-K).
10.6* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Joseph Stach
(Exhibit 10.12 to the 1993 Form 10-K).
10.7* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Christopher Ben (Exhibit 10.13 to the 1993 Form 10-K).
10.8* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Domenic Golato (Exhibit 10.14 to the 1993 Form 10-K).
10.9* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Arthur Zafiropoulo (Exhibit 10.15 to the 1993 Form 10-
K).
10.10* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Gerald M. Starek (Exhibit 10.16 to the 1993 Form 10-K).
10.11* Master Purchase Order and Sales Agreement dated May 1994 between the
Registrant and Applied Materials, Inc. and Master Purchase Order and
Sales Agreement Revision I dated November 9, 1994 between the
Registrant and Applied Materials, Inc. (Exhibit 10.17 to the 1994 Form
10-K).
10.12* Purchase Agreement dated October 14, 1994 between the Registrant and
Plasma Therm Incorporated (Exhibit 10.18 to the 1994 Form 10-K).
10.13* Purchase Agreement dated October 28, 1994 between the Registrant and
Plasma Etch, Inc. (Exhibit 10.19 to the 1994 Form 10-K).
10.14* Technology Transfer, License and Sales Agreement between the
Registrant and Brounley Associates, Inc. (Exhibit 10.20 to the 1994
Form 10-K).
10.15* Purchase Agreement dated November 9, 1995 between the Registrant and
Plasma and Material Technology, Inc. (Exhibit 10.20 to the 1995 Form
10-K).
10.16* Purchase Agreement dated October 16, 1995 between the Registrant and
Plasma Therm, Incorporated. (Exhibit 10.25 to the 1995 Form 10-K).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.17* Purchase Agreement dated June 5, 1995 between the Registrant and
Mattson Technology. (Exhibit 10.26 to the 1995 Form 10-K).
10.18 Lease Agreement dated March 18, 1996 and amendments dated June 21,
1996 and August 30, 1996 between the Registrant and Laurel Oak Road,
L.L.C. for office, manufacturing and warehouse space at 1007 Laurel
Oak Road, Voorhees, N.J. 08043.
10.19 Revolving Line of Credit Agreement ($4,000,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A.
10.20 Note and Security Agreement ($4,000,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A.
10.21 Note and Security Agreement ($1,400,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A.
10.22 Loan Agreement ($1,400,000) dated May 24, 1996 and amendment dated
January 17, 1997 between the Registrant and Mellon Bank, N.A.
10.23 Direct Loan Agreement dated December 20, 1996 between the Registrant
and the New Jersey Economic Development Authority.
10.24 Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and Joseph
Stach.
10.25 Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and
Christopher Ben.
10.26 Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and Domenic
Golato.
11* See Note 1 to the Financial Statements.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Grant Thornton LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
November 30, 1995.
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED.
RF Power Products, Inc.
/s/ Joseph Stach
By: _________________________________
JOSEPH STACH,
CHAIRMAN OF THE BOARD AND
PRESIDENT
Date: February , 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Joseph Stach Chairman of the February , 1997
- ------------------------------------- Board and President
JOSEPH STACH (Chief Executive
Officer)
/s/ Arthur Zafiropoulo Director February , 1997
- -------------------------------------
ARTHUR ZAFIROPOULO
/s/ Gerald Starek Director February , 1997
- -------------------------------------
GERALD STAREK
/s/ Domenic Golato Treasurer and CFO February , 1997
- ------------------------------------- (Principal
DOMENIC GOLATO Accounting Officer
and CFO)
/s/ Christopher Ben Secretary and Chief February , 1997
- ------------------------------------- Operating Officer
CHRISTOPHER BEN
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE
----
Financial Statements:
Independent Auditors' Report--KPMG Peat Marwick LLP...................... F-1
Report of Independent Certified Public Accountants--Grant Thornton LLP... F-2
Consolidated Balance Sheets as of November 30, 1996 and 1995............. F-3
Consolidated Statements of Earnings for the Years ended November 30,
1996, 1995, and 1994.................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years ended
November 30, 1996, 1995, and 1994....................................... F-5
Consolidated Statements of Cash Flows for the Years ended November 30,
1996, 1995, and 1994.................................................... F-6
Notes to consolidated financial statements............................... F-7
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
RF Power Products, Inc.:
We have audited the accompanying consolidated balance sheet of RF Power
Products, Inc. and subsidiary as of November 30, 1996, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
the year then ended. In connection with our audit of these consolidated
financial statements, we also have audited the consolidated financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of RF Power
Products, Inc. and subsidiary as of November 30, 1996, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
January 17, 1997
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
RF Power Products, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of RF Power
Products, Inc. and Subsidiary as of November 30, 1995, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the two years in the period ended November 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RF Power
Products, Inc. and Subsidiary as of November 30, 1995, and the consolidated
results of their operations and their consolidated cash flows for each of the
two years in the period ended November 30, 1995 in conformity with generally
accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1994.
Grant Thornton LLP
Philadelphia, Pennsylvania
January 10, 1996
F-2
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 546,984 $ 689,757
Accounts receivable, net of allowance of $140,000--
1996;
$106,000-- 1995................................... 4,815,182 5,131,379
Inventories........................................ 3,474,689 4,440,375
Prepaid expenses and other......................... 370,461 123,293
Deferred income taxes.............................. 410,395 709,210
----------- -----------
9,617,711 11,094,014
----------- -----------
Property and equipment............................... 2,221,312 1,472,995
Other assets......................................... 208,501 347,984
----------- -----------
$12,047,524 $12,914,993
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable....................................... $ 434,663 $ 500,000
Current portion of long-term debt.................. 350,000 164,153
Accounts payable................................... 1,163,698 2,573,716
Accrued expenses................................... 512,323 1,959,107
Accrued payroll.................................... 250,921 437,701
----------- -----------
2,711,605 5,634,677
----------- -----------
Long-term debt, less current portion................. 904,167 310,225
----------- -----------
Commitments (note 11)
Shareholders' equity:
Common stock; $.01 par value; authorized--
19,000,000 shares: issued and outstanding: 1996--
12,123,140 shares; 1995--12,050,243 shares........ 121,231 120,502
Additional paid-in capital......................... 6,372,235 6,215,271
Retained earnings.................................. 2,015,286 788,318
Less: Notes receivable from shareholders........... (77,000) (154,000)
----------- -----------
8,431,752 6,970,091
----------- -----------
$12,047,524 $12,914,993
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net sales................................... $31,079,249 26,366,607 16,301,766
Cost of products sold....................... 19,999,113 15,689,472 10,139,688
----------- ---------- ----------
Gross profit................................ 11,080,136 10,677,135 6,162,078
Research and development.................... 3,527,673 2,343,009 1,340,500
Selling and administrative.................. 5,436,591 4,689,791 3,009,409
Compensation from stock purchase agreements
(note 9)................................... -- 784,000 --
----------- ---------- ----------
Income from operations...................... 2,115,872 2,860,335 1,812,169
Interest expense, net....................... 88,904 59,634 71,238
----------- ---------- ----------
Income before income taxes and cumulative
effect of change in accounting for income
taxes...................................... 2,026,968 2,800,701 1,740,931
Income tax expense.......................... 800,000 1,283,673 646,150
----------- ---------- ----------
Income before cumulative effect of change in
accounting for income taxes................ 1,226,968 1,517,028 1,094,781
----------- ---------- ----------
Cumulative effect of change in accounting
for income taxes........................... -- -- 275,508
----------- ---------- ----------
Net income.................................. $ 1,226,968 1,517,028 1,370,289
=========== ========== ==========
Per share data:
Income before cumulative effect of change
in accounting for income taxes........... $ .10 .12 .10
Cumulative effect of change in accounting
for income taxes......................... -- -- .03
----------- ---------- ----------
Net income.................................. $ .10 .12 .13
----------- ---------- ----------
Weighted average number of shares
outstanding................................ 12,336,322 12,253,460 10,557,125
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
COMMON STOCK RETAINED NOTES
------------------- ADDITIONAL EARNINGS RECEIVABLE
SHARES PAID-IN (ACCUMULATED FROM
ISSUED AMOUNT CAPITAL DEFICIT) SHAREHOLDERS
---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at November 30,
1993................... 8,943,561 $ 89,436 3,841,016 (2,098,999) --
Notes receivable from
shareholders........... -- -- -- -- (231,000)
Sale of common stock,
primarily under stock
option, warrants and
subscription
agreements............. 2,057,753 20,577 500,412 -- --
Net income.............. -- -- -- 1,370,289 --
---------- -------- --------- ---------- --------
Balance at November 30,
1994................... 11,001,314 110,013 4,341,428 (728,710) (231,000)
Issuance of stock on
exercise of options and
warrants............... 1,048,929 10,489 90,143 -- --
Tax benefit related to
shares acquired by
employees under stock
compensation plans..... -- -- 1,783,700 -- --
Net income.............. -- -- -- 1,517,028 --
Repayment of notes
receivable............. -- -- -- -- 77,000
---------- -------- --------- ---------- --------
Balance at November 30,
1995................... 12,050,243 120,502 6,215,271 788,318 (154,000)
Issuance of stock on
exercise of options.... 72,897 729 8,981 -- --
Tax benefit related to
shares acquired by
employees under stock
compensation plans..... -- -- 147,983 -- --
Net income.............. -- -- -- 1,226,968 --
Repayment of notes
receivable............. -- -- -- -- 77,000
---------- -------- --------- ---------- --------
Balance at November 30,
1996................... 12,123,140 $121,231 6,372,235 2,015,286 (77,000)
========== ======== ========= ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................... $1,226,968 1,517,028 1,370,289
Adjustments to reconcile net income to
net cash provided by operating
activities
Cumulative effect of change in
accounting principle.................. -- -- (275,508)
Depreciation and amortization.......... 694,725 548,663 173,978
Compensation from stock purchase
agreements............................ -- 784,000 --
Deferred income taxes.................. 298,815 (586,830) 158,150
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable.......................... 316,197 (2,309,596) (1,085,235)
Decrease (increase) in inventories... 965,686 (2,021,528) (419,369)
Increase in prepaid expenses and
other............................... (247,168) (22,676) (97,967)
(Decrease) increase in accounts
payable and accrued liabilities..... (2,966,582) 3,956,295 632,731
Decrease (increase) in other......... 79,975 (89,328) 13,242
---------- ---------- ----------
Net cash provided by operating activities.. 368,616 1,776,028 470,311
---------- ---------- ----------
Cash flows from investing activities
Capital expenditures..................... (1,383,534) (1,073,867) (633,478)
Technology purchase...................... -- (155,000) (255,167)
Other.................................... -- -- (12)
---------- ---------- ----------
Net cash used in investing activities...... (1,383,534) (1,228,867) (888,657)
---------- ---------- ----------
Cash flows from financing activities
Short-term (repayments) borrowings, net.. (65,337) 250,000 250,000
Proceeds from issuance of long-term
debt.................................... 2,386,005 320,767 265,264
Payments of long-term debt............... (1,606,216) (697,053) (302,234)
Proceeds from sale of common stock under
stock option plan....................... 157,693 100,632 212,989
Other.................................... -- -- 4,200
---------- ---------- ----------
Net cash provided by (used in) financing
activities................................ 872,145 (25,654) 430,219
---------- ---------- ----------
Net increase (decrease) in cash............ (142,773) 521,507 11,873
Cash and cash equivalents at beginning of
year...................................... 689,757 168,250 156,377
---------- ---------- ----------
Cash and cash equivalents at end of year... $ 546,984 689,757 168,250
========== ========== ==========
</TABLE>
Noncash financing activities:
A stock purchase of $308,000 in 1994 was financed by shareholders' notes
receivable of $231,000. The notes have been reduced by accrued compensation of
$77,000, $33,000 and $77,000 in 1996, 1995 and 1994, respectively.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996, 1995, AND 1994
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
RF Power Products, Inc. and Subsidiary (the Company) designs, manufactures
and markets radio frequency power delivery systems, consisting of generators,
matching networks and peripheral equipment primarily for original equipment
manufacturers in the semiconductor, analytical instrument and thin film disc
media markets. The Company's business depends substantially on the capital
expenditures of semiconductor manufacturers, which, in turn, depend upon the
current and anticipated market demand for semiconductors. Approximately 66% of
the Company's sales for the year ended November 30, 1996 were made to
semiconductor capital equipment manufacturers.
Basis of Presentation
The consolidated financial statements include the accounts of RF Power, Inc.
and its wholly-owned subsidiary, RFPP Foreign Sales Corporation. All
intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for allowance for uncollectible accounts receivable,
slow moving and obsolete inventory and product warranty.
Concentration of Credit Risk
The Company's revenues generally are concentrated among a small number of
customers, the majority of which are in the semiconductor industry. Accounts
receivable from companies operating in the semiconductor industry at November
30, 1996 totaled approximately $2,348,000 or 49% of total accounts receivable.
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and
cash equivalents at November 30, 1996 consist of cash and money market funds.
Accounts Receivable and Bad Debts
The Company grants credit to customers and generally requires no collateral.
To minimize its risk, the Company performs ongoing credit evaluations of its
customers' financial condition. Bad debt expense charged to operations was
approximately $52,400, $16,600, and $58,400 in fiscal years 1996, 1995, and
1994, respectively.
Inventories
Inventories are stated at the lower of standard cost which approximates
actual cost (first-in, first-out method), or market. Cost includes material,
labor, and manufacturing overhead.
F-7
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided by
generally using the straight-line method over the useful lives of the related
assets or, for leasehold improvements, the lesser of the useful life or the
related lease term. The estimated useful lives used in computing depreciation
of machinery and equipment, and transportation equipment is 3-5 years,
respectively. In fiscal 1996, the Company wrote off approximately $61,000 in
leasehold improvements in connection with its move to a new facility (note
11).
Intangibles and Research and Development
Certain technology rights which have been acquired by purchase are
capitalized at cost and amortized on a straight-line basis over 5 years.
Accumulated amortization on such technology rights is $247,421 and $187,913 at
November 30, 1996 and 1995, respectively. Research and development costs are
expensed as incurred.
Warranty Policy
The Company estimates the anticipated costs of repairing products under
warranty based on the historical average cost of the repairs and provides for
this cost on the accrual basis. The Company offers warranty coverage for its
systems primarily for one year.
Revenue Recognition
The Company recognizes revenue when product is shipped, except for
occasional situations where terms are FOB-destination, in which case revenue
is recognized upon delivery.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No.109, Accounting for Income Taxes
which it adopted, effective December 1, 1993. Under the liability method
specified by SFAS No.109, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense (benefit) is the
result of changes in deferred tax assets and liabilities.
Previously, the Company had used the deferred method under Accounting
Principles Board Opinion No. 11. The cumulative effect of the change in
accounting for income taxes resulted in an increase to net earnings for 1994
of $275,508 or $.03 per share. Years prior to 1994 were not restated.
Per Share Data
Per share data is computed based upon the weighted average number of shares
of common stock, adjusted for the potential conversion of dilutive common
stock equivalents. The fully dilutive earnings per share data is not shown
since the dilution is not material.
Financial Instruments
The Company's financial instruments, principally accounts receivable,
accounts payable and debt, are carried at cost which approximates fair value.
Reclassifications
Certain reclassifications have been made to conform to the current year's
presentation.
F-8
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1996 1995
---------- ---------
<S> <C> <C>
Raw materials, net of reserve of $305,081--1996;
$101,575--1995 ......................................... $1,668,762 3,195,340
Work-in-process.......................................... 265,232 330,165
Finished goods, net of reserve of $247,143--1996; $0--
1995.................................................... 1,540,695 914,870
---------- ---------
$3,474,689 4,440,375
========== =========
</TABLE>
Inventory reserves have been provided for obsolete and excess parts relating
to previous generations of equipment, inventory assessed as slow-moving and
evaluation units. The charge to operations amounted to approximately $606,000,
$21,500, and $72,000 in fiscal years 1996, 1995, and 1994, respectively.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1996 1995
---------- ---------
<S> <C> <C>
Property and equipment, at cost:
Machinery and equipment.................................. $3,524,535 2,454,224
Transportation equipment................................. 54,641 18,196
Leasehold improvements................................... 437,201 160,423
---------- ---------
4,016,377 2,632,843
Less: accumulated depreciation and amortization............ 1,795,065 1,159,848
---------- ---------
$2,221,312 1,472,995
========== =========
</TABLE>
The Financial Accounting Standards Board (FASB) issued a new standard, SFAS
No.121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which provides guidance on when to recognize and how
to measure impairment losses of long-lived assets and certain identifiable
intangibles and how to value long-lived assets to be disposed of. The adoption
of this new statement is not expected to have a material impact on the
Company's financial position or results of operations. The Company is required
to adopt this new standard for its fiscal year ended November30, 1997.
(4) RELATED PARTY TRANSACTIONS
In August 1993, the Company entered into a five-year exclusive
distributorship agreement with Astech to distribute the Company's products in
Japan. The President and Chief Executive Officer of Astech was a member of the
Company's Board of Directors prior to his resignation in December of 1996.
Sales to Astech represented approximately 5%, 6%, and 9% of net sales by the
Company in fiscal years 1996, 1995, and 1994, respectively.
Included in accounts receivable of the Company at November 30, 1996 are net
amounts due from related parties of $37,495. Included in accounts payable of
the Company at November 30, 1995 are net amounts due to related parties of
$550,407. Transactions with affiliates consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Sales to related parties......................... $1,614,943 3,506,634 2,157,670
Purchases from related parties................... 1,316,888 2,779,986 1,412,626
</TABLE>
F-9
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In December 1993, the Company entered into an employment agreement (the
"Employment Agreement") with Dr. Stach, Chief Executive Officer and President
of the Company, which was amended in February 1994 and October 1994. The
Employment Agreement is for a five-year term ending November 1998, and
provides for an annual base salary and a bonus based on the Company's after-
tax net income, with both the annual salary and the bonus to be as determined
annually by the Company's Compensation Committee. The Employment Agreement
provides that Dr. Stach may be terminated at any time, with or without cause.
If Dr. Stach is terminated for cause, the Company must pay Dr. Stach's salary
and benefits for one year. If Dr. Stach is terminated without cause, the
Company must pay Dr. Stach's compensation and benefits for the balance of the
term of the Employment Agreement.
See note 9 for affiliated transactions with respect to a loan agreement.
(5) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1996 1995
-------- ---------
<S> <C> <C>
Rent and other expenses for idle facility (note 11).......... $217,385 --
Settlement agreement (note 9)................................ -- 784,000
Bonuses...................................................... -- 598,250
Other........................................................ 294,938 576,857
-------- ---------
$512,323 1,959,107
======== =========
</TABLE>
(6) CREDIT ARRANGEMENTS
In May 1996, the Company signed a new credit facility (the Credit Facility)
with a commercial bank and terminated the credit agreement with its prior
bank. The Company repaid the term loan and the outstanding balance on its line
of credit with its prior bank with funds from the Credit Facility. The Credit
Facility is for a $1,400,000 four-year term loan (note 7) and a $4,000,000
revolving line of credit. The rate of interest for both the term loan and
revolving line of credit is based on current LIBOR rates plus a variable
percentage based on the Company's quarterly cash flow performance. The term
loan contains an option to convert to a fixed rate of interest. Borrowings
under the term loan and revolving line of credit are secured by substantially
all of the Company's assets and borrowings under the revolving line of credit
are subject to a percentage of eligible accounts receivable. Borrowings under
the revolving line of credit are $434,663 at an interest rate of 6.625% on
November 30, 1996. At November 30, 1996 $3,565,337 of the revolving line of
credit was available. The Company has the option to term out a portion of the
revolving line of credit, which if exercised, reduces the revolving line of
credit by the amount termed out. Under the terms of the Credit Facility, the
Company is required to maintain certain minimum financial ratios as defined in
the Credit Facility agreement and is prohibited from paying dividends. The
Company was not in compliance with one of these financial covenants at
November 30, 1996. On January 17, 1997, the Company signed an amendment to the
Credit Facility that revised this financial covenant in order to satisfy the
Company's compliance with such covenant at November 30, 1996.
F-10
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1996 1995
---------- -------
<S> <C> <C>
Note payable to a financial institution with interest
at the LIBOR rate, plus 1.50% (6.875% at November 30,
1996). Principal interest are paid monthly for a four-
year term commencing June 1, 1996..................... $1,254,167 --
Note payable to a financial institution with interest
at the LIBOR rate. In 1995, interest only was paid
monthly. The note was repaid in full in May 1996...... -- 299,378
Note payable to former parent that was repaid in full
in August, 1996....................................... -- 50,000
Notes payable to a financial institution with interest
at 8.07% per annum. This note was repaid in full in
May, 1996............................................. -- 125,000
---------- -------
1,254,167 474,378
Less current portion................................... 350,000 164,153
---------- -------
$ 904,167 310,225
========== =======
</TABLE>
Principal payments on long-term debt in 1997 through 2001 are $350,000,
$350,000, $350,000, $204,167 and $0, respectively.
In December1996, the Company entered into a $500,000 loan agreement with the
New Jersey Economic Development Authority to finance certain purchases of
equipment. The loan is for a five-year term at an interest rate of 5% with
principal and interest payable monthly. The loan is secured by the equipment
purchased with the proceeds from the loan.
(8) OPTIONS AND WARRANTS
In July 1992, the Company authorized the 1992 Stock Option Plan (1992 Plan).
In March 1993, the Company authorized the 1993 Non-employee Directors Stock
Option Plan (1993 Plan) and increased the authorized options available for
granting in the 1992 Plan. The 1992 Plan authorizes the granting of both
incentive stock options and nonqualified stock options to employees,
consultants and advisors of the Company to purchase up to a total of 1,200,000
shares of the Company's common stock. The exercise price of incentive stock
options may not be less than 100% of the fair market value on the date of
grant. Nonqualified options may be granted at less than the fair market value
of the Company's common stock. No options may be granted after July 10, 2002.
The 1993 Plan authorizes the granting of nonqualified stock options to
nonemployee directors to purchase up to a total of 180,000 shares of the
Company's common stock. In May 1996, the shareholders agreed to increase the
authorized options available for granting under the 1993 Plan to 330,000
shares of the Company's common stock. Nonqualified options may not be less
than 100% of the fair market value on the date of grant. No options may be
granted after March 23, 2003.
The Company had previously issued to each holder of a Plasma-Therm (a former
parent) a warrant to purchase that number of shares of its common stock equal
to the number of shares of Plasma-Therm common stock issuable upon the
exercise of the corresponding Plasma-Therm warrant. A warrant to purchase
500,000 shares of the Company's common stock at a purchase price per share of
$.1029 was issued to the Company's former president and was exercised in July
1995. A warrant to purchase 150,000 shares of the Company's common stock at a
purchase price per share of $.1471 was exercised in January 1994. There are no
warrants outstanding at November 30, 1996.
F-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ----
<C> <S> <C>
2.1* Agreement and Plan of Reorganization dated July 13, 1992
between Registrant and Plasma-Therm, Inc. (Exhibit 2 filed
July 14, 1992, to the Registrant's Form 8 amendment to the
Registrant's Form 10 Registration Statement filed May 19, 1992
No. 0-020229 [the "1992 Registration Statement"]).
3.1* Amended and Restated Certificate of Incorporation of the
Registrant, as amended (Exhibit 3A to the 1992 Registration
Statement)
3.2* Amended and Restated By-laws of the Registrant (Exhibit 3B to
the 1992 Registration Statement).
4.1* 1992 Stock Option Plan, as amended, of the Registrant dated
March 24, 1993 (Exhibit 4.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended November 30, 1993 [the
"1993 Form 10-K"]).
4.2* 1993 Non-Employee Directors Stock Option Plan of the
Registrant dated March 24, 1993 (Exhibit 4.2 to the 1993 Form
10-K).
4.3* Warrant dated July 13, 1992 between the Registrant and Ronald
Deferrari (Exhibit 4B to the 1992 Registration Statement).
4.4* Warrant dated July 13, 1992 between the Registrant and Atlanta
Investment Company, Inc. (Exhibit 4C to the 1992 Registration
Statement).
10.1* Employment Agreement dated December 1, 1993 between the
Registrant and Joseph Stach and amendment to Employment
Agreement dated January 19, 1994 (Exhibit 10.1 to the 1993
Form 10-K.
10.2* Sublease Agreement dated November 1, 1992 between the
Registrant and Test Technology, Inc. for office, manufacturing
and warehouse space at 502 Gibbsboro-Marlton Road, Voorhees,
New Jersey 08043 (Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended November 30,
1992 [the "1992 Form 10-K"]).
10.3* Loan Agreement dated April 24, 1992 between the Registrant and
PlasmaTherm, Inc. (Exhibit 10C to the 1992 Registration
Statement).
10.4* Letter Agreement dated October 23, 1992 between the Registrant
and Banque Indosuez and Letter Agreement to extend the Loan
Agreement dated February 25, 1993 (Exhibit 10.4 to the 1992
Form 10-K).
10.5* Revolving Credit Agreement dated January 3, 1994 between the
Registrant and Banque Indosuez and Waiver dated February 24,
1994 from National Westminster Bank NJ (Exhibit 10.5 to the
1993 Form 10-K).
10.6* Term Note dated March 26, 1993 between the Registrant and
National Westminster Bank NJ and Guarantee Agreement dated
March 26, 1993 by and between the Registrant and the New
Jersey Economic Development Authority (Exhibit 10.6 to the
1993 Form 10-K).
10.7* Interest Bearing Grid Note dated September 9, 1993 between the
Registrant and National Westminster Bank NJ (Exhibit 10.7 to
the 1993 Form 10-K).
10.8* License Agreement dated May 13, 1992 between the Registrant
and Plasma-Therm, Inc. (Exhibit 10E to the 1992 Registration
Statement).
10.9* Sublease Agreement dated January 1, 1991 between the
Registrant and Plasma-Therm, Inc. (Exhibit 10G to the 1992
Registration Statement).
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ----
<C> <S> <C>
10.10* Distribution Agreement dated August 10, 1993 between the
Registrant and Astech Corporation (Exhibit 10.10 to the 1993
Form 10-K).
10.11* Stock Purchase and Subscription Agreement dated July 16, 1993
by and between the Registrant and Mitsuyuki Umino (Exhibit
10.11 to the 1993 Form 10-K).
10.12* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Joseph Stach and Promissory Note and Security
Agreement dated February 11, 1994 between the Registrant and
Joseph Stach (Exhibit 10.12 to the 1993 Form 10-K).
10.13* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Christopher Ben and Promissory Note and
Security Agreement dated February 11, 1994 between the
Registrant and Christopher Ben (Exhibit 10.13 to the 1993 Form
10-K).
10.14* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Domenic Golato and Promissory Note and Security
Agreement dated February 11, 1994 between the Registrant and
Domenic Golato (Exhibit 10.14 to the 1993 Form 10-K).
10.15* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Arthur Zafiropoulo (Exhibit 10.15 to the 1993
Form 10-K).
10.16* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Gerald M. Starek (Exhibit 10.16 to the 1993
Form 10-K).
10.17* Master Purchase Order and Sales Agreement dated May 1994
between Registrant and Applied Materials, Inc. and Master
Purchase Order and Sales Agreement Revision I dated November
9, 1994 between Registrant and Applied Materials, Inc.
(Exhibit 10.17 to the 1994 Form 10-K).
10.18* Purchase Agreement dated October 14, 1994 between the
Registrant and Plasma Therm Incorporated (Exhibit 10.18 to the
1994 Form 10-K).
10.19* Purchase Agreement dated October 28, 1994 between the
Registrant and Plasma Etch, Inc. (Exhibit 10.19 to the 1994
Form 10-K).
10.20* Technology Transfer, License and Sales Agreement between the
Registrant and Brounley Associates, Inc. (Exhibit 10.20 to the
1994 Form 10-K).
10.21* Interest Bearing Grid Note dated April 22, 1994 between the
Registrant and National Westminster Bank NJ (Exhibit 10.21 to
the 1994 Form 10-K).
10.22* Fixed Rate Term Note dated April 22, 1994 between the
Registrant and National Westminster Bank NJ and Continuing
General Security Agreement dated April 22, 1994 between the
Registrant and National Westminster Bank NJ (Exhibit 10.22 to
the 1994 Form 10-K).
10.23* Interest Bearing Grid Notes dated February 6, 1995 between the
Registrant and National Westminster Bank NJ; Master Guarantee
Agreement dated October 1, 1994 among the Registrant, NatWest
Bank, N.A. and the Export-Import Bank of the United States;
and Borrower Agreement dated October 1, 1994 between the
Registrant and the Export-Import Bank of the United States
(Exhibit 10.23 to the 1994 Form 10-K).
10.24 Purchase Agreement dated November 9, 1995 between Registrant
and Plasma and Material Technology, Inc.
10.25 Purchase Agreement dated October 16, 1995 between Registrant
and Plasma Therm Incorporated.
10.26 Purchase Agreement dated June 5, 1995 between Registrant and
Mattson Technology.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ----
<C> <S> <C>
10.27 Revolving Credit Note (Demand) dated July 31, 1995 between the
Registrant and NatWest Bank, N.A.; Revolving Credit and Term
Loan Agreement dated August 31, 1995 between Registrant and
NatWest Bank N.A.; First Amendment to Loan Documents dated
January 23, 1996 between the Registrant and NatWest Bank,
N.A.; and Amended and Restated Term Note dated January 23,
1996 between the Registrant and NatWest Bank N.A.
11.* See Note 1 to the Financial Statements.
21. Subsidiaries of the Registrant.
23.1 Consent of Grant Thornton LLP.
</TABLE>
- --------
* Incorporated by reference.
iii
<PAGE>
CERTIFICATE OF INCORPORATION
OF
RF PLASMA PRODUCTS, INC.
To: The Secretary of State
State of New Jersey
THE UNDERSIGNED, of the age of eighteen years or over, for the purpose
of forming a corporation pursuant to the provisions of Title 14A, Corporations,
General, of the New Jersey Statutes, does hereby execute the following
Certificate of Incorporation:
FIRST: The name of the corporation is:
RF PLASMA PRODUCTS, INC.
SECOND: The purpose or purposes for which the corporation is organized
are:
To manufacture radio frequency generators and electronic and matching
network assemblies and to engage in any activity within the lawful business
purposes for which corporations may be organized under the New Jersey Business
Corporation Act.
THIRD: The aggregate number of shares which the corporation shall have
authority to issue is One Thousand (1,000), par value $.01 per share.
FOURTH: The address of the corporation's initial registered office is
Route 73, Kresson, N.J. 08053, and the name of the corporation's registered
agent at such address is Ronald Deferrari.
FIFTH: The number of directors constituting the initial Board of
Directors shall be four (4) and the names and addresses
<PAGE>
Names Addresses
----- ---------
Ronald Deferrari Route 73
Kresson, New Jersey 08053
Leonard West Route 73
Kresson, New Jersey 08053
Stephen Duly 26 Chestnut Street
Andover, MA 01810
Dennis Dribin Route 73
Kresson, New Jersey 08053
SIXTH: The name and address of the incorporator is as follows:
Names Addresses
----- ---------
Rebecca Erb Ingerman Two Girard Plaza, Thirteenth Floor
Philadelphia, PA 19102
In Witness Whereof, the incorporator of the above named corporation, has
hereunto signed this Certificate of Incorporation of the 11th day of May 1981.
/s/ Rebecca Erb Ingerman
------------------------------------------
Rebecca Erb Ingerman
<PAGE>
I, The Secretary of State of the State of New Jersey, DO
HEREBY CERTIFY that the foregoing is a true copy of CERTIFICATE OF Incorporation
and the endorsements thereon, as the same is taken from and compared with the
original filed in my office on the 22nd day of May, A.D. 1981 and now remaining
on file and of record therein.
[SEAL APPEARS HERE] IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my Official Seal at Trenton, this 22nd
day of May 1981, A.D.
SECRETARY OF STATE
DONALD LAN
<PAGE>
CERTIFICATE REQUIRED TO BE FILED WITH THE FILED
RESTATED CERTIFICATE OF INCORPORATION JUL 17, 1992
OF DANIEL J. DALTON
RF POWER PRODUCTS, INC. Secretary of State
-----------------------------------------------
Pursuant to the provisions of Section 14A:9-5(5), Corporations, General,
of the New Jersey Statutes, the undersigned corporation hereby executes the
following certificate:
FIRST: The name of the corporation is RF POWER PRODUCTS, INC.
---------------------------------
SECOND: The Restated Certificate of Incorporation was adopted on the
13th day of July, 1992.
- ---- ---- --
(Use the following clause if the Restated Certificate was adopted by the
shareholders.)
THIRD: At the time of the adoption of the Restated Certificate of
Incorporation, the number of shares outstanding was -100- . The total of such
---------
shares entitled to vote thereon, and the vote of such shares was:
<TABLE>
<CAPTION>
Total Number of Shares Number of Shares Voted
Entitled to Vote For Against
---------------------- --- -------
<S> <C> <C>
-100- -100- -0-
</TABLE>
At the time of the adoption of the Restated Certificate of
Incorporation, the number of outstanding shares of each class or series entitled
to vote thereon as a class and the vote of such shares, was: (if inapplicable,
insert "none".)
Class or Series Number of Shares Number of Shares Voted
--------------- Entitled to Vote For Against
---------------- --- -------
(Use the following if: the Restated Certificate does not amend the
Certificate of Incorporation.)
FOURTH: This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or
<PAGE>
supplemented and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation.
(Use the following if the Restated Certificate further amends the
Certificate of Incorporation.)
FIFTH: This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of this corporation by: *
Amending Articles SECOND, THIRD, FOURTH AND FIFTH and adding Articles
SIXTH, SEVENTH AND EIGHTH.
(* Insert amendment or amendments adopted. If such amendment is intended
to provide for an exchange, reclassification or cancellation of issued shares,
Insert a statement of the manner in which the name shall be effected.)
(Use the following only if an effective date, not later than 30 days
subsequent to the date of filing is desired.)
SIXTH: The effective date of this amendment shall be Upon Filing Dated
this 17 day of July 1992.
RF DENVER POWER INC.
-----------------------------------
(Corporate Name)
By /s/ Joseph Stach
--------------------------------
Joseph Stach/Chairman of the Board
--------------------------------
(Type or Print Name and title)
(*May be executed by the chairman of the board, or the president, or a
-- --
vice president.)
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RF POWER PRODUCTS, INC.
Pursuant to Section 14A:9-5 of the New Jersey
Business Corporation Act
---------------------------------------------
RF Power Products, Inc., a corporation organized and
existing under the laws of the State of New Jersey amends,
restates and integrates its Certificate of Incorporation to read
in full as herein set forth.
FIRST: The name of the Corporation is RF Power Products, Inc.
SECOND: The Corporation may engage in any activity within the
purposes for which corporations may be organized under the New Jersey Business
Corporation Act, as amended from time to time.
THIRD: The authorized capital of the Corporation consists of
19,000,000 shares of Common Stock, par value $.01 per share.
FOURTH: The address of the Corporation's current registered
office is 136 Route 73, Voorhees, New Jersey 08043. The name of the
Corporation's registered agent at such address, upon whom process against the
Corporation may be served, is Joseph Stach.
FIFTH: The number of directors of the Corporation as of July
13, 1992 is one. The name and address of the member of said board is as follows:
Joseph Stach 7 Chelmsford Court
Marlton, New Jersey 08053
SIXTH: The duration of the Corporation is perpetual.
SEVENTH: The vote of shareholders of Corporation required to
approve any Business Combination shall be as set forth in this Article SEVENTH.
The term "Business Combination" shall have the meaning ascribed to it in (i) (B)
of this Article; each other capitalized term used in this Article shall have the
meaning ascribed to it in paragraph (iii) of this Article.
(i) (A) In addition to any affirmative vote required by
law or the Certificate of Incorporation, and except as otherwise expressly
provided in paragraph (ii) of this Article SEVENTH, a Business Combination shall
not be consummated without the affirmative vote of the holders of at least 80
percent of the
<PAGE>
combined voting power of the then outstanding shares of stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors ("Voting Stock"), in each case voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or by the
Certificate of Incorporation or in any agreement with any national securities
exchange or otherwise.
(B) The term "Business Combination" as used in this Article
SEVENTH shall mean:
(1) any merger or consolidation of the Corporation or
any Subsidiary with (i) any Interested Shareholder or (ii) any other corporation
or entity (whether or not itself an Interested Shareholder) which is, or after
each merger or consolidation would be, an Affiliate of an Interested
Shareholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions)
to or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of all or a Substantial Part of the assets of the Corporation or any
Subsidiary; or
(3) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate
of any Interested Shareholder in exchange for cash, securities or other property
(or a combination thereof), other than the issuance of securities upon the
conversion of convertible securities of the Corporation or any Subsidiary which
were not acquired by such Interested Shareholder (or such Affiliate) from the
Corporation or a Subsidiary; or
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate of any Interested Shareholder; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Shareholder) which in any such case has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class or
series of stock or securities convertible into stock of the Corporation or any
Subsidiary which
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<PAGE>
is directly or indirectly beneficially owned by any Interested Shareholder or
any Affiliate of any Interested Shareholder;
(ii) The provisions of paragraph (i) of this Article SEVENTH
shall not be applicable to any Business Combination in respect of which all of
the conditions specified in either of the following paragraphs (A) and (B) are
met, and such Business Combination shall require only such affirmative vote as
is required by law and any other provision of the Certificate of Incorporation;
(A) Such Business Combination shall have been
approved by a majority of the Disinterested Directors, or
(B) Each of the six conditions specified in the
following clauses (1) through (6) shall have been met:
(1) the aggregate amount of the cash and
the Fair Market Value as of the date of the consummation of the Business
Combination (the "Consummation Date") of any consideration other than cash to be
received by holders of Common Stock in such Business Combination shall be at
least equal to the higher of the following:
(i) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any shares of Common Stock beneficially
owned by the Interested Shareholder which were acquired beneficially by such
Interested Shareholder (x) within the two-year period immediately prior to the
Announcement Date or (y) in the transaction in which it became an Interested
Shareholder, whichever is higher (adjusted to reflect the occurrence of any
reclassification, recapitalization, stock split, reverse stock split, stock
dividend or other adjustment in the number of outstanding shares of Common Stock
between the date of acquisition by the Interested Shareholder and the
Consummation Date); or
(ii) the Fair Market Value per share
of Common Stock on the Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the Determination Date), whichever
is higher; and
(2) the aggregate amount of the cash and the
Fair Market Value as of the Consummation Date of any consideration other than
cash to be received per share by holders of shares of any other class or series
of Voting Stock shall be at least equal to the highest of the following (it
being intended that the requirements of this clause (B) (2) shall be required to
be met with respect to every class and series of such outstanding Voting Stock,
whether or not the Interested Shareholder
-3-
<PAGE>
beneficially owns any shares of a particular class or series of Voting Stock):
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of such class or series of Voting
Stock beneficially owned by the Interested Shareholder which were acquired
beneficially by such Interested Shareholder (x) within the two-year period
immediately prior to the Announcement Date or (y) in the transaction in which it
became an Interested Shareholder, whichever is higher;
(ii) (if applicable) the highest preferential
amount per share to which the holders of shares of such class or series of
Voting Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and
(iii) the Fair Market Value per share of such
class or series of Voting Stock on the Announcement Date or the Determination
Date, whichever is higher; and
(3) the consideration to be received by holders of a
particular class or series of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as was previously paid in order to acquire
beneficially shares of such class or series of Voting Stock that are
beneficially owned by the Interested Shareholder and if the Interested
Shareholder beneficially owns shares of any class or series of Voting Stock that
were acquired with varying forms of consideration, the form of consideration to
be received by holders of such class or series of Voting Stock shall be either
cash or the form used to acquire beneficially the largest number of shares of
such class or series of Voting Stock beneficially acquired by it prior to the
Announcement Date; and
(4) after such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of, such Business
Combination:
(i) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare and pay at
the regular dates therefor the full amount of any dividends (whether or not
cumulative) payable on any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation;
(ii) there shall have been (x) no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the
-4-
<PAGE>
Common stock), except as approved by a majority of the Disinterested Directors,
and (y) an increase in such annual rate of dividends (as necessary to prevent
any such reduction) in the event of any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the Common stock,
unless the failure so to increase such annual rate was approved by a majority of
the Disinterested Directors; and
(iii) such Interested Shareholder shall not have
become the beneficial owner of any additional shares of Voting Stock except as
part of the transaction in which it became an Interested Shareholder; and
(5) after such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder) of any
loans, advances, guarantees, pledges or other financial assistance or tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise;
and
(6) a proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be mailed
to public shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
(iii) For the purposes of this Article SEVENTH:
(A) A "person" shall mean any individual, firm, corporation
or other entity.
(B) "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary and except as provided below) who or
which:
(1) is the beneficial owner, directly or indirectly,
of more than 20 percent of the combined voting power of the then outstanding
shares of Voting Stock; or
(2) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in question, except as
provided below, was the beneficial owner, directly or indirectly, of 20 percent
or more
-5-
<PAGE>
of the combined voting power of the then outstanding shares of Voting Stock; or
(3) is an assignee of any shares of Voting Stock that
were at any time within the two-year period immediately prior to the date in
question, except as provided below, beneficially owned by any Interested
Shareholder, if such assignment shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
Notwithstanding the above, a person who is or
which would otherwise be an Interested Shareholder within the meaning of
subparagraphs (1), (2) or (3) of this paragraph (B), shall not be deemed to be
an Interested Shareholder if that person was the beneficial owner of 20 percent
or more of the combined voting power of the then outstanding shares of voting
stock on the effective date of this Article SEVENTH.
(C) A person shall be a "beneficial owner" of any Voting
Stock:
(1) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(2) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote or direct
the vote pursuant to any agreement, arrangement or understanding; or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(D) For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph (iii) (B) of this Article SEVENTH,
the number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of paragraph (iii) (C) of this Article
but shall not include any other shares of Voting Stock that may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
-6-
<PAGE>
(E) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on July 13,
1992.
(F) "Subsidiary" means any corporation of which more than
50 percent of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors is owned, directly or
indirectly, by the Corporation or by a Subsidiary or by the Corporation and one
or more Subsidiaries; provided, however, that for the purposes of the definition
of Interested Shareholder set forth in paragraph (iii) (B) of this Article
SEVENTH, the term "Subsidiary" shall mean only a corporation of which a majority
of the combined voting power of the then outstanding shares of stock entitled to
vote generally in the election of directors is owned, directly or indirectly, by
the Corporation.
(G) "Disinterested Director" means any member of the Board
of Directors of the Corporation who is unaffiliated with, and not a nominee of,
the Interested Shareholder and was a member of the Board prior to the time that
the Interested Shareholder became an Interested Shareholder, and any successor
of a Disinterested Director who is unaffiliated with, and not a nominee of, the
Interested Shareholder and who is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
(H) "Fair Market Value" means: (1) in the case of stock,
the highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing sales price or bid quotation with respect to a
share of such stock during the 30-day period preceding the date in question as
quoted by the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Disinterested Directors in good faith;
and (2) in the case of stock of any class or series which is not traded on any
United States registered securities exchange nor in the over-the-counter market
or in the case of property other than cash or stock, the fair market value of
such property on the date in question as determined by a majority of the
Disinterested Directors in good faith. The Fair Market Value of stock of any
class of the Corporation shall be adjusted to reflect the occurrence of any
reclassification, recapitalization, stock split, reverse stock split, stock
dividend or other adjustment in the number of shares
-7-
<PAGE>
outstanding between the date in question and the Consummation Date.
(I) In the event of any Business Combination in which the
Corporation survives, the phase "other consideration to be received" as used in
paragraphs (ii) (B) (1) and (2) of this Article SEVENTH shall include the shares
of Common Stock and/or the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
(J) "Announcement Date" means the date of first public
announcement of the proposed Business Combination.
(K) "Determination Date" means the date on which the
Interested Shareholder became an interested Shareholder.
(L) "Substantial Part" means more than 10 percent of the
book value of the total assets of the entity in question, as of the end of its
most recent fiscal year ending prior to the Consummation Date.
(iv) A majority of The Disinterested Directors of the Corporation
shall have the right and power to determine, on the basis of information known
to them after reasonable inquiry, all facts necessary to determine compliance
with this Article SEVENTH, including, without limitation (A) whether a person
is an Interested Shareholder, (B) the number of shares of Voting Stock
beneficially owned by any person (C) whether a person is an Affiliate or
Associate of another person and (D) whether the requirements of paragraph (ii)
of this Article SEVENTH have been met with respect to any Business Combination.
The good faith determination of a majority of the Disinterested Directors on
such matters shall be conclusive and binding for all purposes of this Article
SEVENTH.
(v) Nothing contained in this Article SEVENTH shall be construed
to relieve any Interested Shareholder from any fiduciary obligation imposed by
law.
(vi) Notwithstanding anything contained in the Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80 percent of the voting power of the Voting Stock, voting together as a single
class, shall be required to alter, amend, or repeal this Article SEVENTH or to
adopt any provision inconsistent herewith.
EIGHTH: To the fullest extent permitted by the laws of the State of
New Jersey, as they exist on the date hereof or may hereafter be amended,
directors or officers of the Corporation shall not be personally liable to the
Corporation or
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<PAGE>
its shareholders for damages for breach of any duty owed to the Corporation or
its shareholders, except that no director or officer shall be relieved from
liability for any breach of duty based upon act or omission (a) in breach of
such person's duty of loyalty to the Corporation or its shareholders, (b) not
in good faith or involving a knowing violation of law or (c) resulting in
receipt by such person of an improper personal benefit. Nothing in this Article
shall directly or indirectly increase the liability of any such person based
upon acts or omissions occurring before the adoption hereof. No amendment,
modification or repeal of the New Jersey Business Corporation Act or of this
Article shall adversely affect any right or protection of any director or
officer that exists at the time of such change.
IN WITNESS WHEREOF, RF Power Products, Inc. has caused this Restated
Certificate of Incorporation to be duly executed this 13th day of July, 1992.
RF Power Products, Inc.
By: /s/ Joseph Stach
-------------------
Joseph Stach
Chairman of the Board
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE FILED
CERTIFICATE OF INCORPORATION OF JUN 17 1994
RF POWER PRODUCTS, INC. LONNA R. HOOKS
---------------------------------------- Secretary of State
(For Use by Domestic Corporation Only)
To: The Secretary of State "FEDERAL EMPLOYER IDENTIFICATION NO."
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statues, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
1. The name of the corporation is RF POWER PRODUCTS, INC.
2. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the shareholders of the
corporation on the 28th day of April, 1994:
Resolved, that Article FIFTH of the Certificate of Incorporation be
amended to read as follows:
(SEE ATTACHED RIDER)
3. The number of shares outstanding at the time of the adoption of the
amendment was 10,909,561. The total number of shares entitled to vote thereon
was 10,909,561.
If the shares of any class or series are entitled to vote thereon as a class,
set forth below the designation and number of outstanding shares entitled to
vote thereon of each such class or series. (Omit if not applicable.)
4. The number of shares voting for and against such amendment is as
follows: (If the shares of any class or series are entitled to vote as
a class, set forth the number of shares of each such class and series
voting for and against the amendment, respectively.)
Number of Shares Voting For Amendment Number of Shares Voting Against Amendment
- ------------------------------------- -----------------------------------------
7,313,974 Voting against - 346,895
In absentia - 14,924
(If the amendment is accompanied by a reduction of stated capital, the following
- --------------------------------------------------------------------------------
clause may be inserted in the Certificate of Amendment, in lieu of filing a
- --------------------------------------------------------------------------------
Certificate of Reduction under Section 14A:7-19, Corporations, General, of the
- --------------------------------------------------------------------------------
New Jersey Statutes. Omit this clause if not applicable.)
- ----------------------------------------------------------
5. The stated capital of the corporation is reduced in the following
amount: ___________________. The manner in which the reduction is effected is
as follows:
The amount of stated capital of the corporation after giving effect to the
reduction is $__________. (Must be set forth in dollars.)
<PAGE>
6. If the amendment provides for an exchange, reclassification or
cancellation of issued shares, set forth a statement of the manner in which the
same shall be effected.(Omit if not applicable.)
(Use the following only if an effective date, not later than 30 days
subsequent to the date of filing is desired.)
7. The effective date of this Amendment to the Certificate of Incorporation
shall be upon filing .
------------------------
Dated this 16th day of June , 1994 .
------------- ----------------------- ------
RF POWER PRODUCTS, INC.
----------------------------------
(Corporate Name)
By /s/ Domenic N. Golato .
--------------------------------
(Signature)
Domenic N. Golato-Vice President &
----------------------------------
Chief Financial Officer
----------------------------------
(Type or Print Name and Title)
(*May be executed by the chairman of the board, or the president, or a
vice-president of the corporation.)
Return to Secretary of State, CN 300, Trenton, N.J. 08625, Attn:
Corporation Filing.
Filing Fee $50.00
NOTE: No recording fees will be assessed.
FOLDER NO.:
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
RECORDED AND FILED:
RF POWER PRODUCTS INC.
---------------------------------
(Domestic Corporation Only)
FILED BY: Deborah Rappaport, Corporate Services Dept.
Wolf, Block, Scher & Solis-Cohen
12th floor Parkard Building
15th & Chestnut Streets
Phila. PA 19102
-------------------
Recorder's Initials
TRANSACTION NO.:
--------------
<PAGE>
R I D E R
- - - - -
RF POWER PRODUCTS, INC.
-----------------------
"FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of a Board of Directors. The number of directors shall be
fixed from time to time in the manner provided in the Bylaws of the corporation
and may be increased or decreased as therein provided. The directors shall be
divided, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the 1995 annual meeting of
shareholders, the term of office of the second class to expire at the 1996
annual meeting of shareholders and the term of office of the third class to
expire at the 1997 annual meeting of shareholders; provided, however, that each
director shall hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of shareholders, commencing with
the 1995 annual meeting, any director or directors elected to succeed a director
or directors whose terms then expire shall be elected for a term of office to
expire at the annual meeting of shareholders held in the third year following
the year of the annual meeting at which they were elected; provided, however,
that each director shall hold office until his or her successor shall have been
duly elected and qualified."
<PAGE>
AMENDED AND RESTATED
--------------------
BY-LAWS
-------
OF
--
RF POWER PRODUCTS, INC.
-----------------------
ARTICLE I
---------
OFFICE
------
Section I-1. Registered Office and Registered Agent. The corporation
------------ --------------------------------------
shall continuously maintain a registered office and a registered agent having a
business office identical with such registered office, within the State of New
Jersey. The registered office and/or registered agent may be changed by the
Board of Directors from time to time.
Section I-2. Other Offices. The corporation may also have offices at
------------ -------------
such other places, within or without the State of New Jersey, as the Board of
Directors may from time to time determine.
ARTICLE II
----------
SHAREHOLDERS' MEETINGS
----------------------
Section II-1. Place of Shareholders' Meetings. Meetings Of
------------- -------------------------------
shareholders may be held at such place, within or without the State of New
Jersey, as may be fixed by the Board of Directors from time to time. If no such
place is designated by the Board of Directors, all meetings of the shareholders
shall be held at the registered office of the corporation.
<PAGE>
Section II-2. Annual Meeting. A meeting of the shareholders shall be
------------- --------------
held in each calendar year, commencing with the year 1993, at such time as the
Board of Directors may determine, or if the Board of Directors fails to set a
time, on the First Monday of March at 10:00 o'clock A.M., if not a legal
holiday, and if such day is a legal holiday, then such meeting shall be held on
the next business day.
At each annual meeting beginning in 1995, the successors of the class
of Directors whose terms expires at that meeting shall be elected to hold office
for a term to expire at the annual meeting of shareholders held in the third
year following the year of the annual meeting at which they were elected.
Section II-3. Special Meetings. Except as otherwise specifically
------------- ----------------
provided by law, special meetings of the shareholders may be called at any time:
(a) By the President of the corporation; or
(b) By a majority of the Board of Directors.
Section II-4. Notice of Shareholders' Meetings. Written notice of
------------- --------------------------------
the time, place and purpose or purposes of every meeting of the shareholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, to each shareholder of record
entitled to vote at the meeting.
When a meeting is adjourned to another time or place, it shall not be
necessary to give notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which the
2
<PAGE>
adjournment is taken and at the adjourned meeting only such business is
transacted as might have been transacted at the original meeting. However, if
after the adjournment the Board of Directors fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record on the new record date entitled to notice thereof.
Section II-5. Waiver of Notice; Waiver of Lapse of Time. Notice of a
------------- -----------------------------------------
meeting need not be given to any shareholder who signs a waiver of such notice,
in person or by proxy, whether before or after the meeting. The attendance of
any shareholder at a meeting, in person or by proxy, without protesting prior to
the conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by him.
Whenever shareholders are authorized to take any action after the
lapse of a prescribed period of time, the action may be taken without such lapse
if such requirement is waived in writing, in person or by proxy, before or after
the taking of such action, by every shareholder entitled to vote thereon as at
the date of the taking of such action.
Section II-6. Quorum. Unless otherwise provided in the Certificate
------------- ------
of Incorporation or by law, the presence, in person or by proxy, of the holders
of shares entitled to cast the majority of the votes at a meeting shall
constitute a quorum at such meeting. Whenever the holders of any class or series
of shares are entitled to vote separately on a specified item of business, the
holders of shares entitled
3
<PAGE>
to cast the majority of the votes of such class or series shall constitute a
quorum for the transaction of such specified item of business.
Section II-7. Voting.
------------- ------
(a) Shareholders List and Voting List. The corporation shall
---------------------------------
keep at its principal office, its registered office, or at the office of its
transfer agent, a record or records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became the owners of record thereof. The Secretary or
other officer or agent having charge of the stock transfer books for shares of
the corporation shall make a complete list of the shareholders entitled to vote
at a shareholders' meeting or any adjournment thereof. Such list shall be
arranged alphabetically within each class, series or group of shareholders
maintained by the corporation for convenience of reference with the address of,
and the number of shares held by, each shareholder. The list shall be produced
(or be available by means of a visual display) at the time and place of the
meeting, be subject to the inspection of any shareholder for reasonable periods
during the meeting and be prima facie evidence as to who are the shareholders
entitled to examine such list or to vote at any meeting.
(b) Voting of Shares. Unless otherwise provided by the Certificate of
----------------
Incorporation or by law, whenever any action, other than the election of
directors, is to be taken by vote of the shareholders, it shall be
4
<PAGE>
authorized by a majority of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
(c) Proxies. Every shareholder entitled to vote at a meeting of
-------
shareholders or to express consent without a meeting may authorize another
person or persons to act for him by proxy. Every proxy shall be executed in
writing by the shareholder or his agent, except that a proxy may be given by a
shareholder or his agent by telegram or cable or by any means of electronic
communication which results in a writing. No proxy shall be valid for more than
eleven (11) months unless a longer time is expressly provided therein. Unless a
proxy states that it is irrevocable and it is coupled with an interest, such
proxy shall be revocable at will. A proxy shall not be revoked by the death or
incapacity of the shareholder but the proxy shall continue to be in force until
revoked by the personal representative or guardian of the shareholder. The
presence at any meeting of any shareholder who has given a proxy does not revoke
the proxy unless the shareholder files written notice of the revocation with the
Secretary of the meeting prior to the voting of the proxy or votes the shares
subject to the proxy by written ballot. A person named in a proxy as the
attorney or agent of a shareholder may, if the proxy so provides, substitute
another person to act in his place, including any other person named as an
attorney or agent in
5
<PAGE>
the same proxy. The substitution shall not be effective until an instrument
effecting it is filed with the Secretary of the corporation.
(d) Election of Directors. At each election of Directors, every
---------------------
shareholder entitled to vote at such election shall have the right to vote the
number of shares owned by him for as many persons as there are Directors to be
elected and for whose election he has a right to vote. Directors shall be
elected by a plurality of the votes cast at an election. All vote shall be
taken by voice unless a shareholder demands before the election begins that they
be taken by ballot, in which event the vote shall be taken by written ballot.
(e) Inspectors of Election. The Board of Directors may, in advance of
----------------------
any shareholders' meeting, or of the tabulation of written consents of
shareholders without a meeting, appoint one or more inspectors to act at the
meeting or any adjournment thereof or to tabulate such consents and make a
written report thereof. If an inspector to act at any meeting of shareholders
is not so appointed by the Board of Directors or shall fail to qualify, the
person presiding at a shareholders' meeting may, and on the request
of any shareholder entitled to vote thereat, shall, make such appointment. In
case any person appointed as inspector fails to appear or act, the vacancy may
be filled by appointment made by the Board of Directors in advance of the
meeting or at the meeting by the person presiding at the meeting. Each
inspector, before entering upon the discharge
6
<PAGE>
of his duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability. No
person shall be elected a director in an election for which he has served as an
inspector.
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. If there are three or more inspectors, the act of
a majority shall govern. On request of the person presiding at the meeting or
any shareholder thereat, the inspectors shall make a report in writing of any
challenge, question or matter determined by them. Any report made by them shall
be prima facie evidence of the facts therein stated, and such report shall be
filed with the minutes of the meeting.
Section II-8. Action by Unanimous Consent of Shareholders. Any action
------------- -------------------------------------------
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if all the shareholders entitled to vote thereon consent
thereto in writing, except that in the case of any action to be taken pursuant
to Chapter 10 of the New Jersey Business Corporation Act (relating to mergers,
consolidation,
7
<PAGE>
acquisition of all capital shares of a corporation and sale of assets), such
action may be taken without a meeting only if all shareholders consent thereto
in writing or if all shareholders entitled to vote thereon consent thereto in
writing and the corporation provides to all other shareholders notice at least
twenty (20) days in advance of the proposed effective date of such action.
Section II-9. Action by Less than Unanimous Consent of Shareholders.
------------- -----------------------------------------------------
(a) General Rule. Any action required or permitted to be taken
------------
at a meeting of shareholders, other than the annual election of Directors, may
be taken without a meeting upon the written consent of shareholders who would
have been entitled to cast the minimum number of votes which would be necessary
to authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting. Any action taken pursuant to Section 2-9 or 2-
10 hereof, shall have the same effect for all purposes as if such action had
been taken at a meeting of the shareholders.
(i) If any shareholder shall have the right to dissent from a
proposed action, pursuant to Chapter 11 of the New Jersey Business Corporation
Act (relating to rights of dissenting shareholders), the Board of Directors
shall fix a date on which written consents are to be tabulated; in any other
case, it may fix a date for tabulation. If no date is fixed, consents may be
tabulated as they are received. No consent shall be counted which is
8
<PAGE>
received more than sixty (60) days after the date of the Board of Director's
action authorizing the solicitation of consents or, in a case in which consents,
or proxies for consents, are solicited from all shareholders who would have been
entitled to vote at a meeting called to take such action, more than sixty (60)
days after the date of mailing of solicitation of consents, or proxies for
consents.
(ii) Except as provided in subsection 2-10(a)(iii) hereof,
the corporation, upon receipt and tabulation of the requisite number of written
consents, shall promptly notify all non-consenting shareholders, who would have
been entitled to notice of a meeting to vote upon such action, of the action
consented to, the proposed effective date of such action, and any condition
precedent to such action. Such notification shall be given at least twenty (20)
days in advance of the proposed effective date of such action in the case of any
action taken pursuant to Chapter 10 of the New Jersey Business Corporation Act
(relating to merger, consolidation, acquisition of all capital shares of a
corporation and sale of assets), and at least ten (10) days in advance in the
case of any other action.
(iii) The corporation need not provide the notification
required to be given by subsection 2-10(a)(ii) hereof if it:
(A) solicits written consents or proxies for consents
from all shareholders who would have
9
<PAGE>
been entitled to vote at a meeting called to take such action, and at the same
time give notice of the proposed action to all other shareholders who would have
been entitled to notice of a meeting called to vote upon such action;
(B) advises all shareholders, if any, who are entitled to dissent
from the proposed action, as provided in Chapter 11 of the New Jersey Business
Corporation Act (relating to rights of dissenting shareholders), of their right
to do so and to be paid the fair value of their shares; and
(C) fixes a date for tabulation of consents not less than twenty
(20) days, in the case of any proposed action to be taken pursuant to Chapter 10
of the New Jersey Business Corporation Act (relating to merger, consolidation,
acquisition of all capital shares of a corporation and sale of assets), or not
less than ten (10) days in the case of any other proposed action, and not more
than sixty (60) days after the date of mailing of solicitations of consents or
proxies for consents.
(iv) Any consent obtained pursuant to subsection 2-10(a)(iii) hereof
may be revoked at any time prior to the day fixed for tabulation of consents.
Any other consent may be revoked at any time prior to the day on which the
proposed action could be taken upon compliance with subsection 2-10(a)(ii)
hereof. No revocation shall be effective unless in writing and until received
by the corporation at the place fixed for receipt of consents or,
10
<PAGE>
if none, at the main business office or headquarters of the corporation.
(b) Filing of Report Upon Taking Action and Effect of Action.
--------------------------------------------------------
Whenever action is taken pursuant to Section 2-9 or 2-10 hereof, the written
consents of the shareholders consenting thereto or the written reports of
inspectors appointed to tabulate such consents shall be filed with the minutes
or proceedings of shareholders.
(c) Certification of Action. If a certificate is required by law or
-----------------------
by these By-laws to be filed upon the taking of an action by shareholders, and
such action is taken in the manner authorized by Section 2-9 or 2-10 hereof,
such certificate shall state that such action was taken without a meeting
pursuant to the written consents of the shareholders and shall set forth the
number of shares represented by such consents.
Section 2-11. Business at Meetings of Shareholders. Except as otherwise
------------ ------------------------------------
provided by law or in these By-laws, or except as permitted by the presiding
officer of the meeting in the exercise of such officer's sole discretion in any
specific instance, the business which shall be conducted at any meeting of the
shareholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the corporation, or (b) be brought before
the meeting at the direction of the Board of Directors or the presiding officer
of the meeting, or (c) have been specified in a written notice (a "Shareholder
Meeting Notice") given to the corporation, in accordance
11
<PAGE>
with all of the following requirements, by or on behalf of any shareholder who
shall have been a shareholder of record on the record date for such meeting and
who shall continue to be entitled to vote thereat.
Each Shareholder Meeting Notice must be delivered personally to, or be
mailed to and received by, the corporation, addressed to the attention of the
President at the principal executive offices of the corporation ten (10) days
prior to the date of the meeting, or if less than ten (10) days notice of the
meeting is provided, on the third day prior to the meeting. Each Shareholder
Meeting Notice shall set forth a general description of each item of business
proposed to be brought before the meeting, the name and address of the
shareholder proposing to bring such item of business before the meeting and a
representation that the shareholder intends to appear in person or by proxy at
the meeting. The presiding officer of the meeting may refuse to consider any
business that shall be brought before any meeting of shareholders of the
corporation otherwise than as provided in this Section 2-11.
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
Section III-1.
--------------
(a) General Powers. The business and the affairs of the corporation
--------------
shall be managed by or under the direction of its Board of Directors.
(b) Number. The Board of Directors shall consist of such number of
------
Directors as is set by the Board
12
<PAGE>
of Directors from time to time, but shall not consist of fewer than three nor
more than twelve directors.
(c) Classification. The Directors, shall be divided, with respect to
--------------
the time for which they severally hold office, into three classes, as nearly
equal in number as is possible, with the term of office of the first class to
expire at the 1995 annual meeting of shareholders, the term of office of the
second class to expire at the 1996 annual meeting of shareholders and the term
of office of the third class to expire at the 1997 annual meeting of
shareholders; provided, however, that each Director shall hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of shareholders, commencing with the 1995 annual meeting, (i) any
Director or Directors elected to succeed a Director or Directors whose terms
then expire shall be elected for a term of office to expire at the annual
meeting of shareholders held in the third year following the year of the annual
meeting at which they were elected; provided, however, that each Director shall
hold office until his or her successor shall have been duly elected and
qualified, and (ii) if authorized by a resolution of the Board of Directors,
Directors may be elected to fill any vacancy on the Board of Directors
regardless of how such vacancy shall have been created.
(d) Qualifications. Directors shall be at least 18 years old and need
---------------
not be citizens of the United States, residents of the State of New Jersey nor
13
<PAGE>
shareholders of the corporation.
Section III-2. Place of Directors Meetings. Meetings of the Board of
-------------- ---------------------------
Directors may be held at such place either within or without the State of New
Jersey as a majority of the Directors may designate from time to time or as may
be designated in the notice calling the meeting.
Section III-3. Regular Meetings. A regular meeting of the Board of
-------------- ----------------
Directors shall be held annually, immediately following the annual meeting of
shareholders, at the place where such meeting of the shareholders is held or at
such other place and time as a majority of the Directors in office after the
annual meeting of shareholders may designate. At such meeting, the Board of
Directors shall elect officers of the corporation. In addition to such regular
meetings, the Board of Directors shall have the power to fix by resolution the
place, date and hour of other regular meetings of the Board of Directors.
Section III-4. Special Meetings. Special meetings of the Board of
-------------- ----------------
Directors shall be held whenever ordered by the Chairman of the Board, if any,
by the President, by a majority of the members of the executive committee, if
any, or by a majority of the Directors in office.
Section III-5. Notices of Meetings of Board of Directors.
-------------- -----------------------------------------
(a) Regular Meetings. No notice shall be required to be given of
----------------
any regular meeting, unless the same is held at other than the place or time for
holding such
14
<PAGE>
meeting as fixed in accordance with Section 3-3 hereof, in which event a notice
complying with Article VI of these By-laws stating the place and time of such
meeting shall be given at least five (5) days in advance of such meeting.
(b) Special Meetings. Written notice stating the place and time of
----------------
any special meeting shall be given at least one (1) day in advance of the time
set for such meeting.
(c) Waiver. Notice of any meeting of the Board of Directors need not
------
be given to any director who signs a waiver of such notice, whether before or
after the meeting. The attendance of any Director at a meeting without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting shall constitute a waiver of notice by him. Notice of an adjourned
meeting of the Board of Directors need not be given if the time and place are
fixed at the meeting adjourning and if the period of adjournment does not exceed
ten (10) days in any one adjournment.
(d) Contents of Notice. Neither the business to be transacted at, nor
------------------
the purpose of, any meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section III-6. Participation in Meetings by Conference Telephone. Where
-------------- -------------------------------------------------
appropriate communication facilities are reasonably available, any or all
directors shall have the right to participate in all or any part of a meeting of
the Board of Directors or a committee thereof by
15
<PAGE>
means of conference telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
Section III-7. Quorum; Action by the Board of Directors. The participation
-------------- ------
of Directors with a majority of the votes of the entire Board of Directors, or
of any committee thereof, shall constitute a quorum for the transaction of
business. Each Director shall have one vote at meetings of the Board of
Directors, or any committee thereof. Any action approved by a majority of the
votes of Directors present at a meeting at which a quorum is present shall be
the act of the Board of the Directors or of the committee, unless the act of a
greater number is required by law, the Certificate of Incorporation or these By-
laws.
Section III-8. Action of Directors Without a Meeting. Any action required
-------------- -------------------------------------
or permitted to be taken pursuant to authorization voted at a meeting of the
Board of Directors, or any committee thereof, may be taken without a meeting if,
prior or subsequent to the action, all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing and the written
consents are filed with the minutes of the proceedings of the Board of Directors
or committee. Such consent shall have the same effect as a unanimous vote of the
Board of Directors or committee for all purposes, and may be stated as a
unanimous vote in any certificate or other document filed with the Secretary of
State.
16
<PAGE>
LEASE AGREEMENT
THIS LEASE is made on March 18, 1996, between LAUREL OAK ROAD, L.L.C. whose
office is located at 20 E. Clementon Road, Suite 201 South, Gibbsboro, New
Jersey, 08026 (hereinafter referred to as "Lessor") and R.F. POWER PRODUCTS,
whose address is 502 Gibbsboro-Marlton Road, Voorhees, New Jersey, 08043
(hereinafter referred to as "Lessee").
W I T N E S S :
The Lessor leases to the Lessee, and the Lessee leases from the Lessor the
parcel of land, more particularly described in Exhibit "A" attached hereto and
made a part of this Lease, together with a building (the "Building") consisting
of approximately 60,000 square feet, the improvements thereon and the
appurtenances (including any beneficial easements) thereto (such land and
Building and any beneficial easements, collectively, the "Demised Premises").
The Lessee shall pay to the Lessor, without any prior demand therefor and
throughout each year of the Original Term, the net annual rental, payable in
monthly installments on the first day of each month of the term pursuant to the
Rent Schedule attached hereto as Exhibit "B".
The "Original Term" of this Lease begins (the "Commencement Date") on the
earlier of: (i) the date Lessee takes possession and occupancy of the Demised
Premises; or (ii) the date the Building is substantially completed.
Substantially completed means that Lessor has completed the construction of the
building in accordance with the plans and specifications and has secured a
temporary or permanent occupancy permit from the local municipality. The only
incomplete items would be minor and unsubstantial details of construction,
mechanical adjustments or finishing such as touch up painting, all of which
Lessor agrees to promptly complete. Lessor shall use its best efforts to
substantially complete the Premises by September 30, 1996. The term shall extend
for ten (10) years after the first day of the month following the Commencement
Date. In the event that Lessor is diligently completing construction, the time
by which the Building must be substantially completed shall be extended until
November 30, 1996.
The Lessor shall receive the annual net rental free from all taxes (other
than Lessor's income taxes, franchise taxes and similar taxes), charges,
expenses, damages and deductions of every description, and Lessee shall
reimburse Lessor for all
<PAGE>
of these which, except for this Lease, would have been chargeable against the
premises and payable by the Lessor. However, nothing contained in this Lease
shall obligate the Lessee to pay any interest or principal or other amounts due
on any mortgage on the Lessor's interest.
ARTICLE 1
Rent Payments; Additional Rent
1.01 The Lessee will pay to the Lessor the rent reserved in this
Lease and all other sums that may become due or payable by the Lessee under this
Lease, at the time and in the manner provided in this Lease. All of such other
sums so to be paid may, at the Lessor's option, be deemed to be additional rent
to be added to any fixed rent then due or thereafter falling due, and in the
event of non-payment, the Lessor shall have all the rights and remedies provided
by this Lease in the case of the non-payment of rent or of a breach of
condition.
ARTICLE 2
Construction and/or Repairs
2.01 The Demised Premises, including any sidewalks, parking lot,
landscaping, drainage basin, and fencing shall be kept in good order and repair
by the Lessee at the Lessee's sole cost and expense, and the Lessee shall make
all repairs and replacements, ordinary as well as extraordinary, foreseen and
unforeseen, structural or otherwise, that may be necessary or required in or
about the same so that at all times those buildings and improvements shall be in
thorough good order, condition and repair.
2.02 Notwithstanding anything to the contrary appearing in paragraph
2.01, Lessor shall be responsible for making all structural repairs which are a
result of structural defects.
2.03 The complete architectural plans and specifications (the
"Plans") for the Building and certain other improvements to be made on the
Demised Premises are attached hereto as Exhibit "C". Lessee's acceptance of the
Plans shall not constitute an opinion or agreement by Lessee that the Building
or other improvements, including, without limitation, parking area paving, are
structurally sufficient or that the Plans are in compliance with law (it being
agreed that such compliance is solely Lessor's responsibility), nor shall such
approval impose any present or future liability on Lessee. The Plans shall not
be substantially changed by Lessor without the prior written consent of Lessee,
but Lessee shall have the right to make changes thereto. If the direct cost and
expense of constructing the Building and other improvements on the Demised
Premises is increased by any change or changes made by Lessee
-2-
<PAGE>
to the Plans, then the amount by which the costs and expenses were thereby
increased shall be adjusted between Lessor and Lessee, with Lessee paying to
Lessor only the net amount of any cost increases over cost decreases as a result
of such changes. Should there be a net decrease rather than a net increase as a
result of such changes, then Lessee shall be entitled to a credit against rent
first becoming due hereunder until Lessee shall have fully recovered the net
amount, if any, of such cost decreases. The payment provided for in the
immediately preceding sentence shall be made on the Commencement Date or, if
such increase or decrease in the cost and expenses shall not have been
determined by the Commencement Date, then within ten (10) days after such
determination, but in no event later than one hundred eighty (180) days after
the Commencement Date.
2.04 Lessor covenants and agrees to apply for all necessary building
permits and other governmental approvals necessary to construct the Building and
other improvements described in the Plans and diligently pursue such
application. Upon the issuance of such building permits and governmental
approvals, Lessor shall promptly commence and with due diligence proceed to
construct the Building and the other improvements described in the Plans,
including without limitation, utility lines, drainage, lighting facilities,
grading and paving, line striping, landscaping, sidewalks, roadways and curb
cuts. The construction required hereunder shall be done in a good and
workmanlike manner and in compliance with all applicable laws, order and
regulations of federal, state, county and municipal authorities; any direction
by any public officer pursuant to law; and all regulations of any board of fire
underwriters having jurisdiction. Lessor shall, at Lessor's sole cost and
expense, obtain all licenses, temporary and permanent certificates of occupancy
and other governmental approvals which may be required to permit the
construction of the Building and other improvements in accordance with the
Plans.
2.05 During the course of construction of the Building and the other
improvements pursuant to the Plans, Lessee may enter upon the Demised Premises
for the purposes of inspecting the work, taking measurements, making plans,
installing trade fixtures, erecting temporary or permanent signs and doing such
other work as may be appropriate or desirable without being deemed thereby to
have taken possession or obligated itself to pay rent hereunder, provided that
Lessee does not unreasonably interfere with Lessor's construction work on the
Demised Premises.
2.06 If the Building shall not have been completed on or before
September 30, 1996 (the "Completion Date") but Lessor is
-3-
<PAGE>
diligently working to complete the Building, Lessee shall extend the Completion
Date until November 30, 1996; or if Lessor is not diligently working to complete
construction, Lessee may (i) terminate this Lease by giving notice to Lessor
after the Completion Date or any extension thereof and upon the giving of such
notice, this Lease and the term hereof shall immediately cease and expire
without any liability of Lessee to Lessor as a result of such termination and
any amounts paid by Lessee to Lessor hereunder shall be refunded to Lessee upon
demand, or (ii) Lessee may commence or complete the construction work on the
Building and the other improvements set forth in the Plans after giving Lessor
notice of Lessee's intention to do so after the Completion Date, as may be
extended, and deduct the cost and expense of such construction work from the
rent due hereunder. Upon receiving notice of Lessee's intention to perform the
construction of the Building and the other improvements described in the Plans,
Lessor shall cease doing work which would in any way interfere with Lessee's
construction on the Demised Premises. Notwithstanding anything to the contrary
appearing herein, in the event Lessor does not commence development of the
parcel by June 30, 1996, Lessee may terminate this Lease by giving written
notice to Lessor by July 10, 1996.
ARTICLE 3
Compliance with Laws
3.01 Throughout the term of this Lease, the Lessee shall, at its own
cost and expense, promptly observe and comply with all laws, orders,
regulations, rules, ordinances and requirements of the federal, state, county
and local governments, and of all of their administrative departments, bureaus,
officials and of the local fire insurance rating organization, and of all
insurance companies writing policies covering the Demised Premises or any part
thereof, whether those laws, orders, regulations, rules, ordinances or
requirements relate to structural repairs, changes or alterations to or in and
about the Demised Premises or to repairs, changes or alterations incident to or
as the result of any use or occupation of the Demised Premises or use of the
adjacent sidewalks, and whether the same now are in force, or that may, at any
time in the future, be enacted or directed; and the Lessee shall pay all costs,
expenses, claims, fines, penalties and damages that may in any manner arise out
of or be imposed because of the failure of the Lessee to comply with these
covenants.
3.02 The Lessee, after notice to the Lessor, may, by appropriate
proceedings conducted promptly at its own expense, in its name or, whenever
necessary, the Lessor's name, contest in good faith the validity or enforcement
of any such law,
-4-
<PAGE>
order, regulation, rule, ordinance or requirement and may defer compliance
therewith provided that (a) such non-compliance shall not constitute a crime on
the part of the Lessor; (b) the Lessee shall diligently prosecute such contest
to final determination by the court, department or governmental authority or
body having final jurisdiction; and (c) the Lessee shall furnish the Lessor
with such security, by bond or otherwise, as the Lessor may reasonably request
in connection with that contest. The Lessor agrees to cooperate reasonably with
the Lessee and to execute any, documents or pleadings reasonably required, for
the purpose of any such contest, provided that the Lessee shall discharge any
reasonable expense or liability of the Lessor in connection therewith.
ARTICLE 4
Surrender at End of Term
4.01 The Lessee will surrender and deliver up the Demised Premises and
the buildings and improvements thereon, including, but not limited to, all
pipes, plumbing, HVAC equipment, electric wires and fixtures used in connection
with the operation of the Demised Premises (but not movable trade fixtures and
equipment of occupants in possession of the Demised Premises) at the expiration
of the term of this Lease or sooner termination of the term, in good repair and
condition, reasonable wear and tear thereof excepted, to which end the Lessee
specifically contracts under penalty of forfeiture and damage.
ARTICLE 5
Mechanics' Liens
5.01 The Lessee shall have no power to subject the Demised Premises or the
Lessor's interest in the Demised Premises to any mechanics' or other liens. If
any mechanics' or other liens or order for the payment of money shall be filed
against the Demised Premises or any building or improvement thereon by reason of
or arising out of any labor or material furnished or alleged to have been
furnished or to be furnished to or for the Lessee at the Demised Premises, or
for or by reason of any change, alteration or addition or the cost or expense
thereof or any contract relating thereto, the Lessee shall cause the same to be
cancelled and discharged of record, by bond or otherwise as allowed by law at
the expense of the Lessee, within thirty (30) days after written demand
therefor, and shall also defend on behalf of the Lessor at the Lessee's sole
cost and expense, any action, suit or proceeding that may be brought thereon or
for the enforcement of those liens, lien or orders, and the Lessee will pay any
damages and satisfy and discharge any judgment entered therein and save the
Lessor harmless from any claim or damage resulting therefrom. Failure
-5-
<PAGE>
to comply with this Article 5 shall privilege Lessor to avail itself of the
remedies in Article 14 upon the expiration of Lessor's demand, without any
additional notice under Article 14.
Article 6
Inspection by Lessor
6.01 Lessee shall permit the Lessor and Lessor's agents to enter the
Demised Premises, at reasonable hours, with reasonable prior notice, to examine
them.
Article 7
Holding Over
7.01 In the event the Lessee remains in possession of the Demised Premises
after the expiration of the Demised Term and without the execution of a new
lease, it shall be deemed to be occupying the Demised Premises as a tenant from
month-to-month, at one hundred fifty percent (150%) the rents herein specified
(prorated on a monthly basis), subject to all conditions, provisions and
obligations of this lease insofar as the same are applicable to a month-to-month
tenancy.
Article 8
Indemnification of Lessor and Lessee
8.01 The Lessee shall keep, save and hold the Lessor harmless from any and
all damages and liability for anything and everything whatsoever arising from
or out of the occupancy by or under the Lessee, the Lessee's agents or servants
and from any loss or damage arising from any fault or negligence by the Lessee
or any failure on the Lessee's part to comply with any of the covenants, terms
and conditions contained in this Lease.
8.02 The Lessor shall keep, save and hold the Lessee harmless from any and
all damages and liability from any loss or damage arising from any fault or
negligence by the Lessor, its agents, officers or employees, or any failure on
the Lessor's part to comply with any of the covenants, terms and conditions
contained in this Lease, as well as any structural defects in the Building.
Article 9
Casualty Insurance; Restoration
9.01 The Lessee shall at all times during the term of this Lease, at
Lessee's expense, insure and keep insured with responsible insurance companies
authorized to do business in the State of New Jersey, the building on the
Demised Premises against loss or damage by fire and the risks contemplated
-6-
<PAGE>
within the extended coverage endorsement (as such endorsement in the broadest
form may customarily be written in New Jersey from time to time) and against
such other risks as shall reasonably be required by the Lessor, or as shall be
reasonably required by any institutional lender (as defined in Article 27)
holding a mortgage superior to this Lease affecting the Lessor's interest in the
Premises, in amounts that may be reasonably required by the Lessor or as may be
required by the holder of such mortgage, but in no event in an amount less than
ninety percent (90%) of the replacement cost, from time to time, of the building
and improvements. Lessee agrees to pay the premiums on this insurance, as and
when those premiums become due and payable, and promptly to deliver to and
deposit with the Lessor the required premiums within fifteen (15) days after
receiving a statement from Lessor. All policies of fire and other insurance
described in this Section 9.01 shall be for the benefit of the Lessor, Lessee
and any institutional lender holding a mortgage on the Lessor's interest in the
Premises, superior to this Lease, provided that Lessee has been given prior
written notice of such lender's name and address, as their interests may appear,
but the interest of any such mortgagee shall be covered by the customary
mortgagee endorsement employed in the State of New Jersey. Lessee agrees that
Lessor will not be responsible for maintaining insurance on improvements,
alterations or fixtures installed by Lessee or at its request.
9.02 The Lessee further agrees at all times during the term, at its sole
cost and expense, to carry and pay for rental value insurance (covering loss or
damage by fire with extended coverage) in an amount equal to at least the net
rental for one (1) year, plus, for one (1) year, the reasonably estimated taxes,
assessments and other charges under Article 13. The policy shall be written in
favor of the Lessor and the Lessee, as their interests may appear, but with loss
payable to the Lessor. The original policy shall be delivered to the Lessor, and
not later than ten (10) days prior to its expiration, the Lessee will deliver
renewal policies together with due proof of payment of premiums thereon. In the
event of damage or destruction of the Premises by a risk comprehended within the
policy, the proceeds of the rental value insurance paid to the Lessor shall be
held by the Lessor as security for the payment of the rental, additional rent
and other charges due for the period of time for which the loss was paid.
9.03 If any building at any time on the Demised Premises shall be
damaged or destroyed by any cause whatsoever during the term of this Lease, the
Lessor shall, with reasonable promptness, repair and replace the same at
Lessee's expense, so that the buildings upon the Demised Premises after that
repair and replacement shall be as nearly as possible in the same
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condition they were in prior to that damage or destruction and shall do so, even
though the proceeds of any insurance policies shall be insufficient to reimburse
the Lessee therefor; provided, however, that if the proceeds of insurance are
more than sufficient to pay the cost of that rebuilding, the Lessee, as against
the Lessor, shall be entitled to retain the surplus. Notwithstanding anything to
the contrary contained herein, if the Building is substantially damaged in the
last eighteen (18) months of the term of this Lease, as may be extended by
Lessor and Lessee from time to time, Lessee shall have the option not to restore
the Building or any other building on the Demised Premises, so long as Lessee
assigns and pays over to Lessor the entire amount of the proceeds of the
insurance required under Section 9.01, in which case this Lease shall cease and
terminate as of the date of such casualty. In order to exercise the aforesaid
option, Lessee must notify Lessor of Lessee's intention to not restore the
Demised Premises within thirty (30) days of the casualty causing such damage.
9.04 The Lessee shall not be entitled to any abatement of rent, nor shall
its obligations under this Lease be terminated during the term of this Lease,
notwithstanding any destruction or damage to the Demised Premises by any cause
whatsoever.
9.05 Lessor and Lessee hereby grant to each other, on behalf of any
insurer providing fire and extended coverage insurance to either of them with
respect to the Demised Premises, a waiver of any right of subrogation which any
such insurer of one of them might acquire against the other by virtue of
payment of any loss under such insurance. Lessor and Lessee agree that in the
event of loss due to perils covered by fire and extended coverage insurance,
each of them will look solely to such insurance for recovery.
9.06 Nothing contained in this Article shall prohibit Lessee from
obtaining a policy or policies of blanket insurance provided that: (i) any such
blanket policy expressly allocates to the property hereunder to be insured by
Lessee not less than the amount of insurance required hereunder to be maintained
by Lessee; and (ii) such blanket policy shall not diminish the obligations of
Lessee so that the proceeds from such policies shall be an amount no less than
the amount of the proceeds that would be available if Lessee obtained the
required insurance under policies separately insuring the risks which this Lease
requires Lessee to insure.
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ARTICLE 10
Condemnation
10.01 If any person or corporation, municipal, public, private or
otherwise shall at any time during the term of this lease lawfully condemn and
by reason thereof acquire title to the Lessor's interest in the Demised
Premises, in or by condemnation proceedings in pursuance of the law, general,
special or otherwise, the Lessor shall be entitled to and shall, except as
hereinafter provided, receive any award that may be made, including the award,
if any, to the Lessee for the value of the unexpired term of this Lease, and the
Lessee shall and does hereby assign and transfer to the Lessor any award that
may be so made to the Lessee for any damages to the term of years set forth in
this Lease. This Assignment shall not include any award for taking of or damage
to the trade fixtures of the Lessee, or its subtenants. As between the Lessee
and any mortgagee holding a mortgage inferior to this Lease, or other inferior
lienor, this relinquishment of Lessee's interest in the award in favor of the
Lessor is not intended to lodge in that mortgage or other inferior lienor any
right to the interest so relinquished, which, in all circumstances, shall belong
absolutely to the Lessor and is made on that condition accordingly. Lessor
agrees that such award shall be disbursed to the Lessee as part of the award for
restoration as provided in this Article 10 should such restoration be made in
the circumstances set forth in this Article 10.
10.02 In the event of a taking by condemnation as described in Section
10.01, this Lease (except as hereinafter provided) shall, nevertheless,
continue, but the annual rental to be paid by the Lessee shall thereafter be
reduced by a sum equal to one hundred percent (100%) of the amount of any award
made for the Lessor's interest in that proceeding, and in such event the Lessor
will apply or cause to have applied any sum awarded for damage to the building
upon the Demised Premises (but no portion of any award made for the taking of
land) toward the cost of restoring that building as nearly as possible to the
condition, in which it was before that taking. In any event, the Lessor shall
make that restoration and the Lessor, upon payment of the award, shall apply or
cause to be applied toward the cost of that restoration the said award.
10.03 Should such taking of a portion of the Demised Premises result in
either (i) a loss of thirty-three and one-third percent (33-1/3%) of the ground
floor area of either the Demised Premises or the Building or (ii) the remaining
portion of the Demised Premises which is not so taken being insufficient in
size, irregular in shape or inaccessible in location so as to render rebuilding
of improvements (including without limitation, a building with adjacent parking
areas)
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which would allow Lessee to perform substantially the same office, warehouse
and/or manufacturing operations as Lessee conducts on the Demised Premises prior
to such condemnation to be impermissible under applicable zoning and other laws
or otherwise impractical, then, in any such case, the Lessee, at its option,
upon thirty (30) days notice in writing to the Lessor, given at any time within
sixty (60) days after the vesting of title in the condemnor, may cancel and
terminate this Lease effective as of the date of such taking.
ARTICLE 11
Curing Lessee's Defaults
11.01 Should the Lessee fail to perform any of its obligations under this
Lease within thirty (30) days after the giving of written notice to the Lessee
by certified mail, return receipt requested, with a copy to the solicitor for
the Lessee (but in any event, regardless of that notice or the lack thereof,
promptly before the accrual of any penalty as provided by law, the Lessor may
perform those obligations and add any such sum or sums paid or expended in that
performance to any rent then due or thereafter falling due under this Lease with
like effect as if an original part of that installment, and that sum or sums
shall be and become additional rent. This Article 11, however, does not grant
the Lessee any license or privilege to allow the Premises to be without the
insurance coverage provided by Article 9, or the Lessee to be without the
liability insurance protection provided by Article 18, and the failure promptly
to comply with Articles 9 and 18 shall privilege the Lessor to place immediately
the necessary insurance, and the cost thereof shall be additional rent and
collectible as such. The thirty (30) day notice provided by this Article 11 is
the same thirty (30) day notice provided by Article 14 and not an additional
one.
ARTICLE 12
Mortgaging; Assignment; Subletting
12.01 The Lessee may not mortgage this Lease in whole or in part without
the prior written consent of the Lessor.
12.02 The Lessee may sublet portions of the Demised Premises for occupancy
by subtenants, but may not sublet the whole or substantially the whole of the
Demised Premises without the prior written consent of the Lessor, which consent
the Lessor agrees not to withhold unreasonably. All subleases made by the
Lessee shall be and are assigned to the Lessor, provided, however, that the
Lessee may collect the rents and charges under those subleases so long as the
Lessee is not in default under this Lease. In no event may the Lessee collect
any advance rent for a period beyond a current month, and the
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Lessee covenants not to make any such advance collections of rent. This
assignment does not impose any liability on the Lessor in respect to the
landlord's obligations under those leases; and no such liability shall arise
unless and until the Lessor resumes possession of the Demised Premises. Any
such sublease made by the Lessee will contain a provision in substance calling
attention to the assignment of the sublease, the prohibition against the
collection of advance rent beyond the current month period and the limitation of
the Lessor's liability under the assignment, all as stated in this Section
12.02. The Lessee will execute any further instruments and assurances in
confirmation of the foregoing assignment of subleases as may be reasonably
required by the Lessor. Each sublease made by the Lessee will contain a
provision in substance that if there be any termination whatever of this Lease
between the Lessor and the Lessee, then the subtenant, at the option of the
Lessor, will attorn to the Lessor and the sublease shall continue in effect with
the Lessor, but the Lessor shall be bound under the sublease only by privity of
estate. The Lessee shall be released and discharged from any liability under
this Lease, in any event.
12.03 Except as hereinafter set forth, the Lessee may not assign this
Lease without the prior written consent of the Lessor, which consent shall not
be unreasonably withheld, delayed or conditioned. Lessee shall have the right
and privilege, without the consent of Lessor, to assign its interest in this
Lease (i) to any corporation which is a successor to Lessee either by merger or
consolidation; (ii) to a purchaser of all or substantially all of Lessee's
assets (provided such purchaser shall have also assumed substantially all of
Lessee's liabilities); or (iii) to a person or entity which shall (1) control,
(2) be under the control of, or (3) be under common control with Lessee (any
such person or entity referred to in this clause (iii) being a "Related
Entity"). Lessee also shall have the privilege, without the consent of Lessor,
to sublease all or any portion of the Premises to a Related Entity. No
assignment shall have any validity until the assignee shall, by instrument in
form sufficient for recording, assume all of the Lessee's obligations under this
Lease and a duplicate original of that assumption agreement is delivered to the
Lessor, and thereupon the Lessee shall be released or discharged from any
liability under this Lease.
ARTICLE 13
Taxes
13.01 The Lessee shall pay directly all duties, taxes, charges for water,
sewer taxes, assessments and payments, extraordinary as well as ordinary,
whether foreseen or unforeseen, as shall, during the term of this Lease, be
laid,
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levied, assessed or imposed upon the Demised Premises, or become due and
payable, or liens upon the Demised Premises, or any part thereof, or any
appurtenances thereto, the leasehold estate created by this Lease, the sidewalks
or streets in front of or adjoining the Demised Premises or any vault or vaults
under those sidewalks, streets, or the Demised Premises, by virtue of any
present or future law, order or ordinance of the United States of America, or of
the city, county or other local government, or of any department, office or
bureau thereof, or any other governmental authority. The duties, taxes,
charges, assessments and payments described in this Section 13.01 are sometimes
referred to in this Article collectively as "Impositions".
13.02 All taxes, assessments and water rents that are mentioned above to
be paid by the Lessee shall be prorated and adjusted for the fiscal years in
which the term of this Lease begins and ends.
13.03 In the case of assessments for local improvements or betterments
that are assessed or imposed during the term of this Lease and that may be
payable in installments, the Lessee shall only be obligated to pay the
installments that fall due during the term of this Lease.
13.04 The Lessee may contest or review by legal proceedings or in any
manner that Lessee, in its opinion, shall deem advisable (which proceedings or
other steps taken by the Lessee, if instituted, shall be conducted diligently at
its own expense and free of expense to the Lessor) any and all Impositions
levied, assessed or imposed upon or against the Demised Premises or taxes in
lieu thereof, required to be paid by the Lessee under this Lease. No such
contest or review shall be undertaken in a manner that exposes the Demised
Premises or the Lessor's interest therein to jeopardy.
ARTICLE 14
Defaults
14.01 Each of the following shall be deemed a default by the Lessee and a
breach of this Lease:
A. Lessee's failure to pay any installment of rent or to pay any
additional rent, which failure persists after the expiration of fifteen
(15) days from the date the Lessor gives written notice to the Lessee
calling attention to the existence of that failure;
B. Lessee's failure to observe or perform any of its obligations
under the other terms, covenants
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or conditions of this Lease, which failure persists after the expiration of
thirty (30) days from the date that the Lessor gives written notice to the
Lessee calling attention to the existence of that failure, but, if the
matter that is the subject of the notice is of such a nature that it cannot
be reasonably corrected within thirty (30) days, then no default shall be
deemed to have occurred if the Lessee promptly, upon the receipt of the
notice, commences the curing of the default and diligently prosecutes the
same to completion. However, if the default is one relating to a matter
that exposes space occupants or the public to a danger to safety or health
of which the public authorities have given due notice to the Lessee, then
such shorter notice to the Lessee, whether written or otherwise, shall be
sufficient as the circumstances demand with the responsibility of the
Lessee to take corrective measures forthwith.
C. The adjudication of the Lessee in bankruptcy; the taking by the
Lessee of the benefit of any other insolvency act or procedure, which term
includes any form of proceeding for reorganization or arrangement or
rearrangement under the Bankruptcy Code, as well as an assignment for the
benefit of creditors; or the appointment of a receiver for the Lessee and
such receiver remains undischarged for sixty (60) days.
14.02 Should the Lessee default as described in this Article 14, the
Lessor at any time thereafter may, at its option, give the Lessee five (5) days'
written notice of intention to end the term of this Lease and thereupon at the
expiration of those five (5) days the term of this Lease shall expire as
completely as if that date were the date definitely fixed in this Lease for the
expiration of the term, and the Lessee will then quit and surrender the Demised
Premises to the Lessor, but the Lessee shall remain liable as provided in this
Article 14.
14.03 If the notice provided for in Section 14.02 shall have been given
and the term of this Lease shall expire as described in that Section, or if the
Lessee shall abandon the Demised Premises, or if the Lease shall be taken from
the Lessee as a result of any execution against the Lessee in any proceeding in
which the Lessee shall have no appeal or further appeal, then the Lessor may,
without notice, re-enter the Demised Premises either by force or otherwise and
dispossess the Lessee by summary proceedings or otherwise, and the Lessee or
other occupant or occupants of the Demised Premises will
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remove their effects and hold the demised Premises as if this Lease had not been
made, and the Lessee waives the service of notice of intention to re-enter or to
institute legal proceedings to that end.
In case of any default, re-entry, expiration or dispossess by
summary proceedings or otherwise:
A. Rent shall become due thereupon and be paid up to the time of
that re-entry, dispossess or expiration, together with any expenses that the
Lessor may incur for legal expenses and attorneys' fees, including those
incident to the recovery of possession, brokerage and putting the Demised
Premises in good order, or for preparing the same for re-rental;
B. The Lessor may relet the Demised Premises or any part or parts
thereof, either in the name of the Lessor or otherwise, for a term or terms that
may, at Lessor's option, be less than or exceed the period that would otherwise
have constituted the balance of the term of this Lease and may grant
commercially reasonable concessions or free rent without thereby in any way
affecting the Lessee's liability for the rent payable under this Lease for the
period of concession or free rent; and
C. The Lessee shall also pay the Lessor as liquidated damages for
the failure of the Lessee to observe and perform the Lessee's convenants any
deficiency between the rent reserved in this Lease and the net amount, if any,
of the rents collected by reason of the reletting of the Demised Premises for
each month of the period that would otherwise have constituted the balance of
the term of this Lease.
(i) In computing liquidated damages, there shall be
added to the said deficiency any expenses that the Lessor
may incur in connection with the recovery of possession of
the premises and reletting, such as, but not limited to,
legal expenses, attorneys' fees, brokerage, for keeping
the Demised Premises in good order and for preparing the
same for reletting to the extent not paid by the Lessee
pursuant to clause A above.
(ii) Any such liquidated damages shall be paid in
monthly installments by
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the Lessee on the rent day specified in
this Lease and any suit brought to
collect the amount of the deficiency for
any month shall not prejudice in any way
the rights of the Lessor to collect the
deficiency for any subsequent month by a
similar action or proceeding.
14.05 The Lessor may make any alterations and decorations in the Demised
Premises that the Lessor, in its sole judgment, considers advisable and
necessary for the purpose of reletting the Demised Premises. The making of these
alterations or decorations shall not operate or be construed to release the
Lessee from any liability under this Article 14.
14.06 The Lessor shall in no event be liable and the Lessee's liability
under this Article 14 shall not be affected or diminished in any way whatsoever
for failure to relet the Demised Premises, or if the Demised Premises are relet,
for failure to collect the rent thereof under such reletting.
14.07 In the event of a breach or threatened breach by the Lessee of any
of the covenants or provisions of this Lease, the Lessor shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary dispossess proceedings or other remedies were not provided in
this Lease. Mention in this Lease of any particular remedy shall not preclude
the Lessor from any other remedy, in law or in equity.
14.08 Any action taken by the Lessor under this Article 14 shall not
waive any right that the Lessor would otherwise have against the Lessee for rent
reserved in this Lease or otherwise, and the Lessee shall remain responsible to
the Lessor for any loss and/or damage suffered by the Lessor by reason of the
Lessee's default or breach. The words "re-enter" and "re-entry" as used in this
Lease are not restricted to their technical legal meanings.
ARTICLE 15
Subordination
15.01 Subject to Section 15.02 hereinafter, this Lease shall be subject
and subordinate to any and all institutional mortgages (as defined in Article
27) that may now or hereafter affect the Lessor's interest in the real property
of which the Demised Premises form a part, and of all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative and no further instruments of subordination shall be required. In
confirmation of this subordination, the Lessee shall execute
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promptly any certificate that the Lessor may request. The Lessee constitutes and
appoints and the Lessor as Lessee's attorney-in-fact to execute any such
certificate or certificates for and on behalf of the Lessee.
15.02 The subordination described in Section 15.01 as it pertains to
institutional mortgages hereafter made (which term includes any agreement
modifying any institutional mortgage now in existence or hereafter made) is
conditioned upon the agreement of the institutional mortgagee, to be delivered
by it to the Lessee, in which the institutional mortgagee agrees in substance,
pursuant to a written agreement in recordable form, that so long as the Lessee
is not in default:
A. The Lessee will not be disturbed in its possession by the
holder of the mortgage;
B. The Lessee will not be joined in any action or proceeding to
foreclose the mortgage by the holder thereof; and
C. Casualty insurance proceeds and condemnation awards to which
the holder of the mortgage is entitled under the terms of the mortgage
will be applied towards restoration of the Demised Premises consistent
with Articles 9 and 10 of this Lease, respectively, and be disbursed as
provided for by those Articles.
15.03 The giving of any agreement as described in Section 15.02 by the
mortgagee may be conditioned by it on the reciprocal agreement by the Lessee to
attorn to the holder of the mortgage should it become vested with the Lessor's
interest in the premises.
ARTICLE 16
Quiet Enjoyment
16.01 The Lessee, upon paying the rent and performing its other
obligations under this Lease, shall and may at all times during the term of this
Lease, peaceably and quietly have, hold and enjoy the said Demised Premises free
of molestation by the Lessor.
ARTICLE 17
Successors and Assigns
17.01 The covenants and agreements contained in this Lease inure to
the benefit of and are binding upon the parties to this Lease, their successors
and assigns, but this Article does not modify the provisions governing
assignment, as elsewhere provided for in this Lease.
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ARTICLE 18
Liability Insurance
18.01 The Lessee will carry at all times during the Lease term, at its own
cost and expense, steam boiler and general liability insurance for the benefit
of both the Lessor and the Lessee against claims for personal injuries
sustained in or about the Demised Premises, the sidewalks adjacent thereto or
the vaults or vault spaces contiguous to the Demised Premises in an amount not
less than One Million Dollars ($1,000,000) for injuries or death to one person
and Two Million Dollars ($2,000,000) for injuries or death arising out of the
same accident when more than one person is involved, and for not less than Two
Hundred Fifty Thousand Dollars ($250,000) in respect to property damage. The
public liability insurance shall extend to any sidewalk, elevators or exterior
signs. The Lessee will deposit with the Lessor a certificate of the insurance
carrier or carriers indicating that this insurance is in full force and effect
and that the premiums therefor have been paid. If the U.S. City Average
Consumer Price Index for All Urban Consumers ("CPI") shall increase during the
Lease term by more than five percent (5%) over that index prevailing at the date
this Lease is signed, then, upon written notice thereof from Lessor, the said
limits of liability shall be increased by the same percentage amount as that
percentage increase in the CPI.
ARTICLE 19
Alterations
19.01 After construction of the new building, but not before, the Lessee
may, from time to time, make such changes and alterations, demolition or new
construction, structural or otherwise, to the improvements on the Demised
Premises as it shall deem necessary or desirable. These changes, alterations,
demolition or new construction (in this Article 19 referred to as the "work" or
collectively as "changes and alterations" or "changes or alterations") shall be
made in all cases only if the Lessee observes the following conditions:
A. No change or alteration shall be undertaken until the Lessee
shall have procured and paid for, so far as the same may be required, from
time to time, all municipal and other governmental permits and
authorizations of the various municipal departments and governmental
subdivisions having jurisdiction. The Lessor shall, but without cost and
expense to the Lessor, join in the application for those permits or
authorizations whenever necessary;
B. Any structural change or alteration shall be conducted under
the supervision of an architect or
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engineer licensed in the State of New Jersey, selected by the Lessee, and if the
estimated cost, as determined by that architect or engineer, of the work to be
performed exceeds Two Hundred Thousand Dollars ($200,000), the architect or
engineer, as well as his plans and specifications, shall be approved by the
Lessor, which approval Lessor shall not unreasonably withhold. In the case of
such alterations which are estimated to cost in excess of Two Hundred Thousand
Dollars ($200,000.00), the Lessee will reimburse the Lessor, as additional rent,
for the reasonable cost of an architect and/or for an engineer to review the
plans and specifications for the Lessor. Regardless of the estimated costs of
the alterations, Lessee shall give Lessor written notice of any such
alteration(s);
C. All changes and alterations shall be of such a kind that, when
completed, the value and utility of the improvements on the Demised Premises
shall be not less than the value and utility of the improvements immediately
before the change or alteration; except that in the case of a change or
alteration involving demolition and the construction of a new building, the new
building will be of a value not less than the value of the building to be
demolished;
D. All work done in connection with any change or alteration shall be
done in a good and workmanlike manner and in compliance with the applicable
building and zoning laws and with all laws, ordinances, orders and requirements
of all sovereign authorities and the appropriate departments, commissions,
boards and officers thereof. The cost of any change or alteration shall be paid
in cash or its equivalent, so that the fee of the Demised Premises shall at all
times be free of liens for labor and materials supplied or claimed to have been
supplied. The work of any change or alteration shall be prosecuted with
reasonable dispatch, unavoidable delays excepted. The Lessee shall procure or
cause its contractors to procure worker's compensation insurance covering all
persons employed in connection with the work before any work is begun. The
Lessee shall maintain, at its sole expense and at all times when any work is in
progress, general liability and property damage insurance for the mutual benefit
of the Lessee and the Lessor with limits of not less than those required to be
carried pursuant to Article 18; and
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E. No changes or alterations undertaken as a single project and involving
an estimated cost aggregating more than Two Hundred Thousand Dollars ($200,000)
shall be undertaken until the Lessee shall furnish the Lessor, at Lessee's
expense, with a surety company completion bond in favor of the Lessor. The bond
may include any Leasehold Mortgagee and any Fee Mortgagee.
(i) Alternatively, the Lessee may furnish a payment and performance
bond of such a surety company for performance of the work running in favor
of the Lessor and a lender that is a banking corporation, which banking
corporation is authorized to be business in the State of New Jersey having
a combined net worth of at least $100,000,000 (which commitment shall have
been duly accepted by the Lessee and which shall provide for the financing
of the cost of construction of the building) who has issued a commitment to
the Lessee to finance the Lessee's cost of the work, which commitment
requires that a payment and performance bond be delivered to the lender
before any advance will be made to the Lessee. The loan must actually close
in accordance with that commitment. The payment and performance bond must
be acceptable to the lender, must be in the amount of the entire cost of
construction of the building in accordance with the plans and
specifications as approved by the Lessor as such cost of construction is
stipulated in the construction contract between the Lessee and its general
contractor and must guarantee the full performance of the contract for the
construction of the building in accordance with the plans and
specifications as approved by the Lessor. In lieu of such a payment and
performance bond, when permissible by the mortgage commitment, the Lessee
may (1) deposit with a bank or trust company (the "Depository") designated
by the Lessee (but subject to the Lessor's approval, which approval shall
not be unreasonably withheld) a sum sufficient to pay the entire cost of
the change or alteration
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as estimated by the architect or engineer referred to in Section
19.01, which sum shall be disbursed in accordance with the
provisions of Article 10 of this Lease; (2) deliver to Lessor a
letter of credit issued by a bank or trust company in an amount to
be drawn upon in the event Lessee fails to perform such alterations
and applied to the restoration or completion thereof by Lessor; or
(3) supply the Lessor with other security in lieu of the cash
deposit described herein, which other security is reasonably
satisfactory to the Lessor, as indemnity to pay all such costs.
(ii) In case of any work falling within this Article 19, when
the work is made necessary by or is done in connection with an
insured casualty loss or a partial condemnation of the building in
eminent domain, the cash deposit or the security provided for in
subsection (i) above need not be for an amount greater than the
excess of the cost of the work, as estimated by the architect or
engineer in charge of the work, over the adjusted loss or the award
that is made, as the case may be, but the funds of the deposit or
Lessee's own funds when security is given, must first be used toward
the cost of the work before any sums are withdrawn from the
Depository's account.
ARTICLE 20
Option to Expand
20.01 Lessor and Lessee understand and acknowledge that the approvals for
the construction of the Premises provide that Lessor shall have the right to
expand the building. The parties also agree that Lessee shall be granted an
option to negotiate with Lessor in good faith to expand the building during the
term of this Lease. The terms for the payment of the cost of the expansion and
the rent to be paid for the additional space shall be negotiated between the
parties at the time the election to expand is exercised.
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ARTICLE 21
Notices
21.01 All notices to the parties shall be in writing and shall be
addressed to them at the respective addresses first given for them in this
Lease, and in the case of Lessee, with copy to Dewey Ballantine at 1301 Avenue
of the Americas, New York, New York, 10019-6092, to the attention of Paul
Mackey, Esquire, or to such other address, of which either of them, as the case
may be, shall notify the other in the manner stated in this Article for giving
notice. The notice must be given by either registered mail, return receipt
requested, or by certified mail, return receipt requested. In the case of the
former, the service of the notice shall be deemed complete upon the registration
thereof with the postal authorities, and in the case of the latter upon the due
mailing thereof. However, if in either case the notice is mailed from a place
outside of the State of New Jersey, service shall not be complete until the
notice is received.
ARTICLE 22
No Waiver
22.01 The failure of the Lessor to insist in any one or more instances
upon a strict performance of any of the covenants of this Lease, or to exercise
any option contained in this Lease, shall not be construed as a waiver of or
relinquishment for the future of the performance of that covenant, or the right
to exercise that option, but the same shall continue and remain in full force
and effect. The Lessor's receipt of net annual or additional rent, with
knowledge of the breach of any covenant of this Lease, shall not be deemed a
waiver of that breach, and no waiver by the Lessor of any provision of this
Lease shall be deemed to have been made unless expressed in writing and signed
by the Lessor.
22.02 The Lessor's receipt of any installment of the net annual rent
under this Lease or of any additional rent shall not be a waiver of any net
annual or additional rent then due. Lessor may, in its sole discretion, apply
any payments made by the Lessee to the satisfaction of any debt or obligation of
the Lessee to the Lessor, regardless of the Lessee's instructions as to the
application of those payments, whether those instructions are endorsed on the
Lessee's check or otherwise.
ARTICLE 23
Remedies Cumulative
23.01 All the rights and remedies given to the Lessor in this Lease for
the recovery of the Demised Premises because of the default by the Lessee in the
payment of any sums that may be payable pursuant to the terms of this Lease, or
upon the
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<PAGE>
breach of any of the terms of this Lease, or the right to re-enter and take
possession of the Demised Premises upon the happening of any of the defaults
or breaches of any of the covenants of this Lease, or the right to maintain
any action for rent or damages and all other rights and remedies allowed at
law or in equity, are reserved and conferred upon the Lessor as distinct,
separate and cumulative remedies, and no one of them, whether exercised by
the Lessor or not, shall be deemed to be in exclusion of any of the others.
ARTICLE 24
Entire Agreement
24.01 This Lease contains the entire agreement between the parties, and
any agreement hereafter made shall not operate to change, modify or discharge
this Lease in whole or in part unless that agreement is in writing and signed
by the party sought to be charged with it.
ARTICLE 25
No Representations
25.01 The Lessor has made no representations whatsoever in connection
with the conditions of the Demised Premises, except for the following
representations and warranties which Lessor hereby makes to Lessee: (i) The
construction of the Building and the other improvements set forth in the Plans,
as well as the use of the Demised Premises as manufacturing/warehouse and office
as contemplated by Lessee, are permitted by applicable zoning and any covenants
and restrictions affecting the Demised Premises; and (ii) Lessor shall deliver
to Lessee, prior to June 30, 1996, a recent report of title on and survey of the
Demised Premises which shall show that Lessor owns the Land and Building in fee
subject to no liens, encumbrances or physical conditions which would interfere
with the use and occupancy of the Demised Premises as contemplated hereby and
which, to the best of Lessor's knowledge, shall accurately reflect the state of
title. The parties acknowledge that, on the date hereof, Lessor does not own the
Land but has a valid contract with the current owner to purchase same.
ARTICLE 26
Estoppel Certificates
26.01 The Lessee agrees at any time and from time to time upon not less
than ten (10) days prior written request by the Lessor to execute, acknowledge
and deliver to the Lessor a statement in writing certifying that this Lease
is unmodified and in full force and effect (of if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), and the dates to which the rent and other charges have been paid
in advance, if any,
-22-
<PAGE>
it being intended that any such statement delivered pursuant to this
Article may be relied upon by prospective purchasers of the Lessor's
interest or mortgagees of Lessor's interest or assignees of any
mortgage upon Lessor's interest in the Demised Premises.
ARTICLE 27
Certain Definitions
27.01 The term "Lessor" as used in this Lease means only the owner
of the current interest of the Lessor in the Demised Premises or, as the
case may be, the successor thereto from time to time. In the event of any
transfer at any time of the interest of the Lessor, the transferor shall
be and is entirely freed and relieved of all covenants and obligations of
the Lessor under this Lease, and it shall be deemed and construed without
further agreement between the parties or their respective successors in
interest or between the parties and the transferee that the transferee of
the Lessor's interest has assumed and agreed to carry out any and all
covenants and obligations of the Lessor under this Lease.
27.02 The term "Institutional Lender" means any one of the following:
a bank; savings and loan; trust company, insurance company; any pension,
retirement or welfare fund or other non-profit organization where the
investment policy and financial condition of that fund or organization is
subject to the supervision of the state agency in the state where the
Demised Premises are situate, that has supervision of banks or, as the
case may be, supervision of insurance companies.
27.03 An "Institutional Mortgage" is a mortgage held by an
Institutional Lender on the interest of the Lessor in the real property
constituting the Demised Premises.
ARTICLE 28
Exhibits
28.01 The following is a list of Exhibits attached hereto and made
a part hereof:
Exhibit "A" Site Plan
Exhibit "B" Rent Schedule
Exhibit "C" Floor Plan
Exhibit "D" Outline Specification
ARTICLE 29
Memorandum of Lease
29.01 Lessor and Lessee have executed a Memorandum of Lease
(the "Memorandum") simultaneously herewith. Lessee shall, at Lessee's
sole cost and expense, cause the Memorandum
- 23-
<PAGE>
to be recorded in the real property records of the county where the Demised
Premises are located and returned to Lessee.
ARTICLE 30
Option to Renew
30.01 Lessor grants Lessee an option to renew this Lease for one (1)
period of ten (10) years after the expiration of its original term on the same
terms as this Lease, except that the annual net rental will be as stated in
paragraph 30.02. Lessee shall give Lessor written notice of its intention to
renew at least 365 days prior to the expiration of this Lease.
30.02 The annual net rental shall be adjusted upward in accordance with
the formula set forth below. In applying the formula, the following definitions
shall prevail:
(1) "Bureau" means the Federal Bureau of Labor Statistics or any
successor agency that shall issue the indices or data referred to in
subparagraph (2).
(2) "Price Index" means the Revised Consumer Price Index for Urban
Wage Earners and Clerical Workers for the Philadelphia Area (All Items)
issued from time to time by the Bureau in lieu of that price index. If
there is any controversy as to the measure to be substituted, then that
controversy shall be resolved by arbitration.
(3) "Average Price Index" for any yearly period is the average of
the Price Indices issued in the twelve (12) months prior to the first day
of that particular yearly period, and such average is the "Average Price
Index" for that yearly period. In making an average, there shall be
excluded any index that itself is an average so that there shall be no
averaging of averages.
(4) "Base Year Index" is the average of the Price Indices issued by
the Bureau for the twelve full months immediately preceding the
Commencement Date.
(5) The "issue" of a Price Index means the release to the public of
the Price Index, and the date of issue shall be the date it is so released,
whether or not the issued Index is for the current month or period in which
the release occurs or for a prior month or period.
If the Average Price Index for the last year of the original term period is
greater than the Base Year Index, then
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<PAGE>
the fixed annual rental for the Renewal Term, beginning with the first day of
the Renewal Term shall be increased by ninety percent (90%) of the same
proportion that the increase in the Average Price Index bears to the Base Index.
By way of example only:
1. Assume the annual rental for the Original Term of the Lease is
$450,000.00 per annum.
2. Assume the Average Price Index for the year 1995 is 159.2.
3. Assume the Average Price Index for the year 2006 is 170.2.
Then and in that event the annual net rent for each year of the Renewal
Term would be $477,990.00:
(a) 170.2 minus 159.2 = 11
(b) 11.0 divided by 159.2 = .069
(c) .069 x 100 = 6.9
(d) 6.9 x 90% = 6.22%
(e) $450,000.00 x 6.22% = $27,990.00
(f) $450,000.00 plus $27,990.00 = $477,990.00
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first above written.
Witness or Attest: R.F. POWER PRODUCTS
(Lessee)
/s/ [SIGNATURE APPEARS HERE] By: /s/ Joseph Stach
- ------------------------------- ----------------------------
Joseph Stach, CEO
Dated: 11 Mar 96
----------------------
Witness: LAUREL OAK ROAD, L.L.C.
(Lessor)
/s/ [SIGNATURE APPEARS HERE] By: /s/ M. Sean Scarborough
- ------------------------------- ----------------------------
M. Sean Scarborough
Managing Member
Dated: 3-18-96
-------------------------
-25-
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made on June 21, 1996, by and between LAUREL
OAK ROAD, L.L.C., with offices at 20 E. Clementon Road, Suite 201 South,
Gibbsboro, New Jersey, 08026 (hereinafter referred to as "Lessor") and R.F.
POWER PRODUCTS, INC., whose address is 502 Gibbsboro-Marlton Road, Voorhees, New
Jersey, 08043 (hereinafter referred to as "Lessee").
WHEREAS, Lessor and Lessee have entered into a Lease Agreement
(hereinafter referred to as the "Lease") dated March 18, 1996, leasing certain
lands and premises designated in the Lease; and
WHEREAS, certain Civil Engineering Plans designating the leased floor
space were drawn by Speitel and Speitel, Inc. and are designated as Exhibit "E"
of the Lease, said plan indicating leased space of 60,000 square feet; and
WHEREAS, said leased space now to be occupied by Lessee differs in
location and areas from that as designated in the original plans; and
WHEREAS, to memorialize the actual space to be leased and occupied, new
and final plans have been provided by Speitel and Speitel, Inc.; and
WHEREAS, the rent has changed from that as set forth on the Rent
Schedule attached to the Lease as Exhibit "B";
NOW, THEREFORE, THE LEASE IS HEREBY AMENDED:
(1) To designate the leased space as shown on drawings prepared by
Speitel and Speitel, Inc. dated May 20, 1996, designated as Site Plan and
attached hereto as Exhibit "E-1", with the new leased space to be comprised of
78,205 square feet. Any reference to 60,000 square feet of leased space is
hereby withdrawn and replaced with 78,205 square feet.
(2) To reflect a new Rent Schedule as follows:
Years 1-10 $592,794 per year ($49,399.50 per month)
<PAGE>
(3) The Last sentence of Section 9.02 shall be deleted in its entirety
and replaced with the following sentence:
In the event of damage or destruction of the Premises by a
risk comprehended within the policy, the proceeds of the rental
value insurance paid to the Lessor shall be held by the Lessor as
security for the payment of, and shall be applied to, the rental,
additional rent and other charges as they become due for the period
of time for which the loss was paid.
All other terms and conditions of the Lease shall remain in full force
and effect.
Should there be any conflict between the terms and conditions contained
in the Lease and this Amendment, this Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above written.
Witness: R.F. POWER PRODUCTS
(Lessee)
/s/ Domenic Golato By: /s/ Joseph Stach
- --------------------------- -------------------------------------
Domenic Golato Joseph Stach, CEO
Dated: 6/21/96
---------
Witness: LAUREL OAK ROAD, L.L.C.
(Lessor)
[SIGNATURE APPEARS HERE] By: /s/ M. Sean Scarborough
- --------------------------- -------------------------------------
M. Sean Scarborough
Managing Member
Dated: 6-21-96
---------
-2-
<PAGE>
SECOND AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made on August 30th, 1996, by and between LAUREL
OAK ROAD, L.L.C., with offices at 20 E. Clementon Road, Suite 201 South,
Gibbsboro, New Jersey, 08026 (hereinafter referred to as "Lessor") and R.F.
POWER PRODUCTS, INC., whose address is 502 Gibbsboro-Marlton Road, Voorhees, New
Jersey, 08043 (hereinafter referred to as "Lessee").
WHEREAS, Lessor and Lessee have entered into a Lease Agreement (hereinafter
referred to as the "Lease") dated March 18, 1996, leasing certain lands and
premises designated in the Lease, which Lease was amended by Amendment to Lease
dated June 21, 1996; and
WHEREAS, the rent has changed from that as set forth on the Rent Schedule
attached to the Lease as Exhibit "B" and as modified in Amendment to Lease dated
June 21, 1996;
NOW, THEREFORE, THE LEASE, AS AMENDED, IS HEREBY FURTHER AMENDED to
reflect a new Rent Schedule as follows:
Years 1-10 $620,948 per year ($51,745.65 per month)
All other terms and conditions of the Lease, as amended, shall remain in
full force and effect.
Should there be any conflict between the terms and conditions contained in
the Lease, as amended, and this Second Amendment, this Second Amendment shall
prevail.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.
Witness R.F. POWER PRODUCTS
(Lessee)
/s/ Domenic Golato By: /s/ Joseph Stach, CEO
- ------------------------------ ---------------------------
Domenic Golato Joseph Stach, CEO
Dated: 21 Aug, '96
----------------
Witness: LAUREL OAK ROAD, L.L.C.
(Lessor)
/s/ [SIGNATURE APPEARS HERE] By: /s/ M. Sean Scarborough
- ------------------------------ ---------------------------
M. Sean Scarborough
Managing Member
Dated: 9-6-96
----------------
<PAGE>
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Loan Agreement [LOGO OF MELLON PSFS APPEARS HERE]
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RF POWER PRODUCTS, INC.
------------------------------------------------------------------------------
(*Borrower") has requested
Mellon Bank, N.A.
------------------------------------------------------------------------------
("Bank") to make loans(s), extend discretionary line(s) of credit, or
otherwise extend credit accommodation(s) (the "Borrowings") to Borrower, and
Bank has agreed to make or extend such loan(s), discretionary line(s) of
credit or extension(s) of credit to Borrower upon the following terms and
conditions. The Borrowings shall be evidenced by such notes, instruments or
other documents ("Notes") as may be requested from time by Bank, and Borrower
agrees to comply with the terms contained herein and in any written supplement
now or hereafter executed by Borrower in which reference to this Agreement is
made.
1. Representations and Warranties. In addition to the representations and
warranties contained in the Notes, Borrower hereby makes the following
representations and warranties which shall be true and correct on the date
hereof and shall continue to be true and correct at the time of the creation
of any of the Borrowings and until the Borrowings shall have been paid in
full:
(a) Organization-Corporation and Partnership. If Borrower is a corporation or
a partnership, Borrower is duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which Borrower is incorporated
or was formed; Borrower has the power and authority to own its properties and
assets, to carry on its businesses as now being conducted and is qualified to
do business in every jurisdiction in which it is required to qualify to do
business;
(b) Validity and Binding Nature. Borrower has the power to execute, deliver
and perform this Agreement, the Notes, and to execute and deliver any other
documents evidencing or relating to the Borrowings; and when executed and
delivered, this Agreement, the Notes and such documents will be valid and
binding obligations of Borrower, enforceable in accordance with their terms;
provided, however, that this representation with respect to enforceability is
limited by bankruptcy, insolvency, or other laws of general application
relating to or affecting the enforcement of creditors' rights.
(c) Due Authorization-Corporation and Partnership. The execution, delivery and
performance of this Agreement, the Notes and any other documents evidencing or
relating to the Borrowings, have been duly authorized by all corporate or
partnership action required for the lawful creation and issuance of such
documents and will not violate any provisions of law, any order or any court
or governmental agency, the charter documents and by-laws of, or partnership
agreement of Borrower.
(d) Conflicting Instruments. The execution, delivery and performance of this
Agreement, the Notes and any other documents evidencing or relating to the
Borrowings will not violate any provisions of any indenture, agreement, or
other instrument to which Borrower or any of Borrower's properties or assets
are bound, and will not be in conflict with, result in a breach of, or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon
any of the properties or assets of Borrower.
(e) Authorization and Consents. No authorization, consent, approval, license
or exemption of, and no registration, qualification, designation, declaration
or filing with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign is necessary to the
valid execution and delivery of this Agreement, the Notes or any other
documents evidencing or relating to the Borrowings.
(f) Financial Condition. The most recent financial statements of Borrower
delivered to the Bank are true and correct and represent fairly its financial
position as of the date thereof as required by GAAP; and the result of its
operations for the period indicated; and show all liabilities, direct, or
contingent, of Borrower as of the date thereof. Since the date of such
financial statements, there has been no material adverse change in the
condition, financial or otherwise, of Borrower or in the business and
properties of Borrower and, since such date, Borrower has not incurred, other
than in the ordinary course or business, any indebtedness, liabilities,
obligations or commitments, contingent or otherwise.
(g) Litigation. Except as previously disclosed in writing to Bank prior to the
date of this Agreement, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending, or to knowledge of Borrower, threatened by or against or affecting
Borrower or any of its properties or rights of Borrower which, if adversely
determined, would impair the right of Borrower to carry on its business
substantially as now conducted or would adversely affect the financial
condition, business or operations of Borrower in amount in excess of $100,000.
(h) Misrepresentation. Neither this Agreement nor any other document,
statement, financial statement, or certificate furnished to Bank by or on
behalf of Borrower in connection herewith, contains an untrue statement of a
material fact with respect to the financial condition or properties of
Borrower or omits to state a material fact necessary to make the statements
contained therein not misleading or, insofar as Borrower can now foresee, may
in the future materially adversely affect the financial condition or
properties of borrower which has not been set forth in this Agreement or in a
document, statement, financial statement, or certificate furnished to Bank in
connection herewith.
2. General Covenants. In addition to the covenants contained in the Notes,
Borrower hereby covenants and agrees that, so long as any of the Borrowings
are outstanding, Borrower shall, except as Bank may otherwise agree in
writing:
(a) Financial Statements-Annual. Furnish to Bank, within _____________________
days after the end of each fiscal year of Borrower, a financial statement of
Borrower's profit and loss and surplus for such fiscal year and a balance
sheet as of the end of such fiscal year, in each case setting forth in
comparative form the corresponding figures for the preceding fiscal year, all
in reasonable detail and
See Supplement to Loan Agreement
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Page 1 of 3
<PAGE>
================================================================================
(b) Financial Statements-Other. Furnish to Bank each financial statement
required to be delivered to Bank by any supplement, addendum or amendment
hereto, and such other information concerning the financial business affairs of
Borrower as may be requested by bank from time to time.
(c) Property. Maintain and keep all its property in good repair, working order
and condition and make or cause to be made all necessary or appropriate repairs,
renewals, replacements, substitutions, additions, betterments and improvements
thereto so that the efficiency of all such properties shall at all times be
properly preserved and maintained.
(d) Taxes and Assessments. Duly pay and discharge all taxes, assessments and
governmental charges levied upon or assessed against it or against its
properties or income prior to the date on which penalties are attached thereto,
unless and except to the extent only that such taxes, assessments and charges
shall be contested in good faith and by appropriate proceedings diligently
conducted by Borrower (unless and until foreclosure, distraint, sale or other
similar proceedings shall have been commenced) and provided that such reserve or
their appropriate provisions, if any, as shall be required by generally accepted
accounting principles shall have been made therefor.
(e) Litigation. Promptly give notice in writing to Bank of the occurrence of
any material litigation, arbitration or governmental proceeding affecting
Borrower, and of any governmental investigation or labor dispute pending or,
to the knowledge of Borrower, threatened which could reasonably be expected to
interfere substantially with normal operations of the business of Borrower or
materially adversely affect the financial condition of Borrower.
(f) Books and Records. Maintain and keep proper records and books of account
in conformance with generally accepted accounting principles applied on a
consistent basis in which full, true and correct entries shall be made of all
its dealings and business affairs.
(g) Access to Properties, Books and Records. Permit any of the officers,
employees or representatives of Bank to visit and inspect any of the
properties of Borrower and to examine its books and records and discuss the
affairs, finances and accounts of Borrower with representatives thereof, during
normal business hours, and as often as Bank may request.
(h) Financial Information-Guarantors. Cause any third party guarantor of the
Borrowings to submit annually or at any time there is a material change in their
financial position, personal or business financial statements containing such
financial information as may be requested by Bank from time to time.
(j) Continuance of Business. Not engage in any line of business other than
those in which it is actively engaged in on the date hereof.
(k) Sale of Assets. Except for sales or other dispositions of inventory in the
ordinary course of business, not sell, lease, transfer, or otherwise dispose of
in a single transaction, or a series of related transactions, all or a
substantial part of the property and assets of Borrower, whether now owned or
hereafter acquired, to any person, firm or corporation.
(l) Acquisition of Assets. Not purchase or otherwise acquire all or
substantially all of the operating assets of any other person, firm or
corporation and, if Borrower is a corporation, not merge or consolidate with or
into any other person, firm or corporation, or permit any other person, firm or
corporation to merge with or into it, or acquire all or substantially all of the
property or assets of any other person, firm or corporation.
(m) Selling Accounts Receivable. Not sell, assign or discount any of its
accounts receivable or any promissory note held by it, with or without recourse,
other than the discount of such receivables or notes in the ordinary course of
business for collection.
(n) Retirement of Outstanding Stock. Not purchase, redeem or retire or make any
distribution on account of, if Borrower is a corporation, any shares of the
capital stock of Borrower or if Borrower is a partnership, any capital account
of any partner of such partnership.
(o) Affiliated Entities.** Without providing prior written notice to Bank, Not
establish any partnership, subsidiary, corporation, joint venture or other form
of business combination.
(p) Insurance. Keep all insurable property, real and personal, now owned or
hereafter acquired, insured at all times against loss or damage by fire and
extended coverage risks and other hazards of the kinds customarily insured
against and in amounts customarily carried by businesses engaged in comparable
businesses and comparably situated; effect all such insurance under valid and
enforceable policies issued by insurers of recognized responsibility not
unacceptable to Bank; and, promptly from time to time upon request of Bank,
deliver to Bank a summary schedule indicating all insurance then in effect.
(q) Investments. Not purchase, own, invest in or otherwise acquire, directly or
indirectly, any stock or other securities, or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person, firm or corporation or permit to exist any loans or advances for
such purposes except for investments in direct obligations of the United States
of America or any agency thereof, obligations guaranteed by the United States of
America, certificates of deposit issued by a bank or trust company organized
under the laws of the United States, or any state thereof, or marketable
securities which are publicly traded on a nationally recognized market.
(r) Patents. Preserve and protect its patents, franchises, licenses,
trademarks, trademark rights, tradenames, tradename rights, and copyrights used
or useful in the conduct of its business.
(s) Guarantees and Contingencies. Not endorse, assume, guarantee, become surety
for, or otherwise become or remain liable in connection with the obligations of
any person, firm or corporation except Borrower may endorse negotiable or other
instruments for deposit or collection or similar transactions in the ordinary
course of its business.
(t) Transactions with Affiliates. Not enter into any transaction, including,
without limitation, the purchase, sale, leasing or exchange of property, real or
personal, or the rendering of any service, with any person, firm or corporation
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than would be obtained in a comparable
arm's-length transaction with any other person, firm or corporation not
affiliated with Borrower.
Page 2 of 3
<PAGE>
================================================================================
(u) Modifications to Other Agreements. Not amend or modify any existing
agreement with any person, firm or corporation in any manner materially adverse
to Borrower.
(v) Notice of Event of Default. Promptly give notice in writing to Bank of the
occurrence of any event of default and of any condition, event, act or omission
which, with the giving of notice or the lapse of time or both, would constitute
an event of default hereunder or under the Notes, or under any agreement or
document securing, evidencing or relating to the Notes.
3. General Provisions.
(a) Waivers. The provisions of this Agreement may from time to time be waived in
writing by Bank in its sole discretion. Any such waiver of any kind on the part
of Bank of any breach or default under this Agreement or any waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent set forth in such writing. No delay by Bank in
exercising any right or remedy hereunder shall operate as a waiver thereof.
(b) Financial Covenants. Compliance or non-compliance with all financial
covenants of Borrower contained herein, or in any supplement, addendum or
amendment hereto, shall be determined in accordance with generally accepted
accounting principles applied on a consistent basis. All financial statements of
Borrower required to be delivered to Bank hereby, or by any written supplement
now or hereafter executed by Borrower in which reference to this Agreement is
made, shall be prepared on the basis of generally accepted accounting principles
applied on a consistent basis.
(c) Binding Nature. The rights and privileges of Bank contained in this
Agreement shall inure to the benefit of its successors and assigns, and the
duties of Borrower shall bind all heirs, personal representatives, successors,
and assigns. "Borrower" refers individually and collectively to all signers of
this Agreement, including, in the case of any partnership, all general partners
of such partnership individually and collectively, whether or not such partners
sign below. Each of the signers shall be jointly and severally bound by the
terms hereof, and, with respect to any partnership executing this Agreement,
each general partner shall be bound hereby both in such general partner's
individual and partnership capacities.
(d) Governing Law. Time of performance hereunder is of the essence of this
Agreement. This Agreement and any written supplement hereto executed by Borrower
in which reference to this Agreement is made shall in all respects be governed
by the laws of the state where Notes are payable (except to the extent that
federal law governs).
(e) Severability. If any provision hereof shall for any reason be held invalid
or unenforceable, no other provision shall be affected thereby, and this
Agreement shall be construed as if the invalid or unenforceable provision had
never been a part of it. The descriptive headings hereof are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof.
4. Special Covenants. In addition to the covenants contained herein or in the
Notes, Borrower hereby agrees that, so long as any of the Borrowings are
outstanding, Borrower shall, except as Bank may grant its prior written consent,
comply with the special provisions or covenants set forth in any written
supplement, now or hereafter executed by Borrower, in which references to this
Agreement is made.
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Witness the due execution hereof intending to be legally bound this 24th day of
------
May, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Witness: Individual:
X X (Seal)
- ------------------------------------ -----------------------------------------
Address
- ------------------------------------ -----------------------------------------
Witness: Individual:
X X (Seal)
- ------------------------------------ -----------------------------------------
Address
-----------------------------------------
Corporation or Other Entity
RF POWER PRODUCTS, INC.
- ------------------------------------ -----------------------------------------
Attest/Witness: By: (Signature and Title)
Domenic Golato, CFO
X [SIGNATURE APPEARS HERE] /s/ Domenic Golato, CFO VP & CFO (Seal)
- ------------------------------------ -----------------------------------------
By: (Signature and Title)
X (Seal)
-----------------------------------------
(Corporate Seal) Business Address
502 Gibbsboro-Marlton Road
-----------------------------------------
Voorhees, NJ 08043
Page 3 of 3
<PAGE>
SUPPLEMENT TO LOAN AGREEMENT
----------------------------
The following constitutes the special provisions and/or special covenants
and/or modifications referred to in the Loan Agreement dated May 24th, 1996 (the
"Loan Agreement") covering the Borrowings (as that term is defined in the Loan
Agreement) of the undersigned (the "Borrower") from Mellon Bank, N.A. ("Bank").
The following shall supercede any special provision or covenant contained in any
prior Supplement to Loan Agreement and shall be applicable to all Borrowings in
existence on the date hereof or incurred hereafter.
1. The provisions of this Supplement shall, as of the date hereof, be
deemed to be fully incorporated by reference in, constitute a part of, and
supplement the provisions of, the Loan Agreement, which, except as supplemented
hereby, shall continue in full force and effect in accordance with its terms and
conditions.
2. The Borrower hereby covenants and decrees that, so long as any
Borrowings are outstanding, the Borrower shall, except as Bank may grant its
prior written consent:
(a) Financial Statements-Annual. Furnish to Bank, within ninety (90)
---------------------------
days after the end of each fiscal year of the Borrower, the annual consolidated
financial statements of the Borrower, audited and certified without material
qualification by an independent certified public accountant acceptable to Bank.
(b) Financial Statements-Quarterly. Furnish to Bank, within forty-five
------------------------------
(45) days after the end of each quarter of each fiscal year of the Borrower, a
statement of the Borrower's profit and loss, a statement of cash flow and a
balance sheet as of the end of such period, in each case setting forth in
comparative form the corresponding figures from the corresponding period of the
preceding fiscal year and comparative year-to-date presentations, all in
reasonable detail and in a form acceptable to Bank, and prepared on an unaudited
basis.
(c) Financial Statements-Monthly. Furnish to Bank, within fifteen (15)
----------------------------
days after the end of each month of the Borrower, an accounts receivable aging
in reasonable detail and in a form acceptable to Bank.
(d) Compliance Certificate. Together with the quarterly and annual
----------------------
financial statements, furnish to Bank an Officer's Compliance Certificate,
signed by the Chief Financial Officer of the Borrower, certifying that no
default or Event of Default has occurred as of the date of such certificate and
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the applicable requirements of the
financial covenants hereof, on the date of such financial statement.
<PAGE>
(e) Certain Other Reports and Information. Promptly upon their
-------------------------------------
becoming available to the Borrower, the Borrower shall deliver to Bank a copy of
(i) all regular or special reports, registration statements and amendments to
the foregoing which the Borrower shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) all
reports, proxy statements, financial statements and other information
distributed by the Borrower to its stockholders, bondholders or the financial
community generally, and (iii) all accountants' management letters pertaining
to, all other reports submitted by accountants in connection with any audit of,
and all other material reports from outside accountants with respect to, the
Borrower.
(f) Negative Pledge. Not incur, create, assume or permit to exist, any
---------------
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of the assets of the Borrower, whether now or hereafter owned, other than
(i) security interests granted in favor of Bank, (ii) pledges or deposits under
workers' compensation, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases or to secure statutory obligations or surety or
other similar bonds used in the ordinary course of business, (iii) tax liens
which are being contested in good faith and by appropriate proceedings
diligently conducted (unless and until foreclosure, sale or other similar
proceedings have been commenced) and provided that such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor, and (iv) any unfiled materialmen's, mechanic's, workmen's and
repairmen's liens (provided, that if such a lien shall be perfected, it shall be
discharged of record immediately by payment, bond or otherwise).
(g) Additional Indebtedness. Not create or incur any additional
-----------------------
indebtedness except loans from Bank and any term loans from the New Jersey
Economic Development Authority which in aggregate do not exceed $500,000.
(h) Financial Covenants. Comply with the following financial covenants
-------------------
which shall be tested on the Borrower on a quarterly basis and in accordance
with GAAP:
(i) Leverage Ratio. The Borrower's ratio of (a) total
--------------
liabilities, determined in accordance with GAAP, divided by (b) Tangible Net
----------
Worth, shall not exceed 1.25 to 1.00.
(ii) Cash Flow Ratio. The Borrower's ratio of (a) Cash Flow to
---------------
(b) current maturities on long term debt (including capitalized leases and as
determined in accordance with GAAP) which were reported on the balance sheet of
the Borrower for the period ending one year prior to the calculation date, plus
----
capital expenditures, as measured on a rolling four-quarter basis and as
determined in accordance with GAAP, shall not be less than 1.25 to 1.00 as
measured as of the fiscal quarters ending May 31, 1996,
-2-
<PAGE>
August 31, 1996 and November 30, 1996, and shall not be less than 1.50 to 1.00
at any fiscal quarter end thereafter.
(i) Management. The Borrower shall retain capable executive
----------
management personnel at all times satisfactory to Bank, it being understood
that the management personnel of the Borrower as of the date hereof is
satisfactory to Bank.
3. Conditions to Initial Loans. The obligation of Bank to make loans on
---------------------------
the date hereof is subject to the satisfaction, immediately prior to or
concurrently with the making of any Borrower, of the following conditions:
(a) All documentation, instruments, and proceedings shall be
satisfactory to Bank;
(b) No Material adverse change shall have occurred in the business,
products or prospects of the Borrower;
(c) The Borrower shall provide Bank with evidence that the Borrower
has purchased and currently maintains policies of insurance, satisfactory to
Bank and designating Bank as the loss payee, to protect the personal property
pledged as collateral to Bank;
(d) No material adverse change shall have occurred in the financial
condition of the Borrower, as such financial condition was depicted in the
Borrower's financial statements dated November 30, 1995 and February 29, 1996.
(e) The Borrower will provide Bank with an opinion of counsel for the
Borrower regarding the execution, delivery, validity and enforceability of the
loan documents and the liens granted thereto.
4. Adoption of Certain Terms or Covenants. The Borrower shall give notice
--------------------------------------
in writing to Bank of the occurrence of any default under any debt instruments
or under any material contractual obligations or agreements with governmental
authorities, and of the incurrence of new or additional debt obligations and the
terms thereof, and of any change, whether by addition or modification in the
terms or covenants of any debt obligation. In the event that the terms or
covenants of any debt obligation of the Borrower existing on the date hereof or
incurred by the Borrower subsequent to the date hereof are more restrictive than
the terms and covenants of the Loan Agreement, such terms and covenants shall be
deemed to be incorporated into the Loan Agreement for the benefit of Bank and
shall be binding upon the Borrower and enforceable by Bank hereunder, at its
discretion, as if such more restrictive terms and conditions were herein fully
set forth.
5. Definitions. In addition to other words and terms defined elsewhere in
-----------
the Loan Agreement, as used herein, the following words and terms shall have the
following meanings:
-3-
<PAGE>
(a) "Cash Flow" means net income minus dividends or withdrawals
--------- -----
plus depreciation and amortization, as measured on a rolling four-quarter basis
- ----
and as determined in accordance with GAAP.
(b) "GAAP" means generally accepted accounting principals of the
----
United States of America.
(c) "Tangible Net Worth" shall mean shareholders' equity less
------------------ ----
intangible assets, each determined in accordance with GAAP.
Witness the due execution hereof intending to be legally bound this 24th
day of May, 1996. ----
ATTEST: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun By: /s/ Domenic N. Golato
- ------------------------------ --------------------------------
By: Paul S. Zaun Domenic N. Golato
Title: [TITLE APPEARS HERE] Chief Financial Officer
MELLON BANK, N.A.
Accepted by
/s/ Anthony W. LaMarca
-----------------------------------
Anthony W. LaMarca
Vice President
-4-
<PAGE>
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Agreement") made as of
this 17th day of January, 1997 between RF POWER PRODUCTS, INC. a New Jersey
corporation (the "Borrower"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank are parties to a Loan Agreement
dated May 24th, 1996 (the "Loan Agreement"), pursuant to which the Bank agreed
to extend to the Borrower a One Million Four Hundred Thousand Dollar
($1,400,000) term loan (capitalized terms used herein but not defined in this
Agreement shall have the meaning ascribed to them in the Loan Agreement);
WHEREAS, the Borrower has requested that the Bank amend certain
provisions of the Loan Agreement in order to, among other things, gain
permission to obtain equipment financing in the amount of $500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the Borrower and the Bank hereby
covenant and agree as follows:
1. Amendments. Upon the execution and delivery by the Borrower and
----------
the Bank of this Agreement, the Loan Agreement shall be amended as follows:
(a) The Supplement to Loan Agreement (the "Supplement") shall be
amended by deleting Section 2(f) in its entirety and replacing it with the
following:
(f) Negative Pledge. Not incur, create, assume or permit to
---------------
exist, any mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of the assets of the Borrower, whether now or
hereafter owned, other than (i) security interests granted in favor of
Bank, (ii) security interests granted in favor of the New Jersey
Economic Development Corporation to secure equipment purchases in an
amount not to exceed $500,000, (iii) pledges or deposits under workers'
compensation, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory
obligations or surety or other similar bonds used in the ordinary
course of business, (iv) tax liens which are being contested in good
faith and by appropriate proceedings diligently conducted (unless and
until foreclosure, sale or other similar
<PAGE>
proceedings have been commenced) and provided that such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor, and (v) any unfiled materialmen's, mechanic's, workmen's and
repairmen's liens (provided, that if such a lien shall be perfected, it
shall be discharged of record immediately by payment, bond or otherwise).
(b) Section 2(h) of the Supplement, Financial Covenants, shall also be
--------- ---------
further amended by adding the following additional provision as Subsection
2(h)(iii):
(iii) Minimum Tangible Net Worth. The Tangible Net Worth of the
--------------------------
Borrower shall be greater than or equal to the following amounts as of the
following dates:
Fiscal Quarters Ending Tangible Net Worth
- ---------------------- ------------------
February 28, 1997 and $7,800,000
May 31, 1997
August 31, 1997 $8,000,000
November 30, 1997 $8,500,000
All times thereafter No requirement
2. One-Time Covenant Waiver. The Bank hereby agrees that it shall not
------------------------
measure the Cash Flow Ratio covenant set forth in Section 2(h)(ii) of the
Supplement for the fiscal quarters ending February 28, 1997, May 31, 1997,
August 31, 1997 or November 30, 1997. However, the Borrower specifically
acknowledges that the waiver of such covenant compliance represents a one-time
only, limited waiver and that the covenant shall be measured again beginning
with the fiscal quarter ending February 28, 1998, and shall not be less than
1.50 to 1.00 as of such date and as of each fiscal quarter thereafter.
3. Representations and Warranties. The Borrower hereby represents and
------------------------------
warrants to the Bank that the Borrower is not in default under the Loan
Agreement or any other document executed in connection therewith, including,
without limitation, the Note and Security Agreement (the "Note").
4. Other Terms Confirmed. All other terms and conditions of the Loan
---------------------
Agreement, including, without limitation, the Supplement attached thereto, are
hereby confirmed and shall remain in full force and effect without modification.
From and after the effectiveness of the amendments set forth in Section 1
hereof, all references in any document or instrument to the Loan Agreement shall
mean the Loan Agreement as amended by this Agreement.
5. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in
path-2-
<PAGE>
any way the extension of any new credit by the Bank to the Borrower, or the
satisfaction of any indebtedness evidenced by the Loan Agreement as amended
hereby or the Note.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
7. Headings. The descriptive headings which are used in this Agreement
--------
are for convenience only and shall not affect the meaning of any provision of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
Attest: RF POWER PRODUCTS, INC.
[SIGNATURE APPEARS HERE] /s/ Domenic N. Golato
- ----------------------------- ------------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal] MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
---------------------------
Anthony W. LaMarca
Vice President
path-3-
<PAGE>
THIS DIRECT LOAN AGREEMENT dated DECEMBER 29, 1996, by and between the
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY (the "Authority"), a public body
corporate and politic constituting and instrumentality of the State of New
Jersey and RF POWER PRODUCTS, INC. a corporation organized and existing under
the laws of the State of New Jersey (the "Borrower").
IT IS AGREED THAT:
Section 1. THE LOAN. The Authority agrees on the terms and conditions
--------
of this Direct Loan Agreement to make a loan (the "Loan") to the Borrower in the
principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) to finance the
purchase of equipment for the expansion of an existing manufacturer of radio
frequency power delivery system (the "Project") located at 1007 Laurel Oak
Road, Voorhees, New Jersey (the "Project Facility").
Section 2. THE NOTE. The Loan shall be evidenced by a Promissory Note
--------
substantially in the form attached as Exhibit "A" (the "Note"). The Loan shall
be repaid over a term of five (5) years in sixty (60) equal monthly installments
as provided in the Note and shall bear interest on the unpaid principal balance
from the date of the Note until payment in full of the entire principal amount,
at a rate of five percent (5%) per annum. The Borrower may prepay the Note in
whole at any time or in part of any payment date without penalty. Partial
prepayments shall be applied to the last maturing payments due on the Note,
shall be in one or more increments of the monthly amount due on principal, shall
not extend or postpone the due date of any subsequent monthly installment or
change the amounts of such installments unless the holder of the Note shall
otherwise expressly agree in writing. There shall be due and owing by the
Borrower a late charge of five percent (5%) of any monthly payment on any such
payment which is seven (7) days or more past due.
Section 3. SECURITY. As security for the Note, and for any other
--------
loans, advances, credits, indebtedness, obligations and liabilities of any kind
of Borrower to the Authority, now or hereafter existing, whether absolute or
contingent, due or to become due, direct or indirect, liquidated or unliquidated
and however incurred or arising, the Borrower hereby grants to the Authority a
security interest in all machinery and equipment purchased with the proceeds of
the Loan (hereinafter the "Collateral") including but not limited to the
following:
(a) All machinery and equipment of every nature, kind and
description wherever located purchased with the proceeds of the Loan whether
affixed to realty or not including without limitation, any and all present and
future accretions, additions, replacements, substitutions, improvements and
accessories relating thereto or used in connection therewith and all proceeds
thereof; and
<PAGE>
2
(b) all interest, proceeds and products of all of the above including
without limitation, any insurance proceeds thereof.
This Direct Loan Agreement shall be deemed a security agreement creating a
security interest on behalf of the Authority in said Collateral.
Section 4. DISBURSEMENT OF THE LOAN. The Loan shall be disbursed by the
------------------------
Authority upon receipt of the following:
(a) requisition of the form attached as Exhibit "B" signed by an
authorized representative of the Borrower stating the name of the person, firm
or corporation to whom payment is to be made and the amount to be paid;
(b) all documents, searches, opinions, evidence of insurance and
guarantees as required by the Authority commitment letter dated November 1, 1996
as amended attached as Exhibit "C."
Notwithstanding anything herein to the contrary, Borrower understands and
agrees the Authority shall be under no obligation to make any disbursement with
respect to which a requisition has been submitted by Borrower if, at the time of
said submission, Borrower is in default under Section 17 of this Direct Loan
Agreement.
Section 5. INSURANCE. The Borrower agrees to insure the Project Facility
---------
and the Collateral with insurance companies licensed to do business in New
Jersey in such a manner and against such loss, damage and liability to third
parties as is customary with companies in the same or similar business. The
Borrower shall at all times carry general liability insurance with companies
licensed to do business in New Jersey in amounts approved by the Authority and
naming the Authority as additional insured. With respect to the Collateral, the
Borrower shall carry at all times with companies licensed to do business in New
Jersey full extended coverage fire, theft and hazard insurance in an amount
approved by the Authority. Such extended coverage shall name the Authority as
loss payee, and shall contain a provision that such policy may not be canceled
or materially altered except upon at least fifteen (15) days written notice to
the Authority and shall not contain a provision for deductible amounts greater
than $5,000. In the event of loss or damage to any portion of the Project
Facility or the Collateral, the proceeds of any insurance shall be deposited
with the Authority and applied as set forth in Section 6. At least ten (10) days
prior to the expiration of any such policy the Borrower shall furnish evidence
satisfactory to the Authority that such policy has been renewed or replaced or
is no longer required by this Direct Loan Agreement.
<PAGE>
3
At all times during the term of this Direct Loan Agreement, the Borrower
shall comply with the laws of New Jersey relating to Worker's Compensation
Insurance.
Section 6. DAMAGE, DESTRUCTION AND CONDEMNATION.
------------------------------------
(a) If the Project Facility or the Collateral shall be damaged or
either partially or totally destroyed or if title to or the temporary use of the
whole or any part of the Project Facility shall be taken or condemned by a
competent authority for any public use or purpose, there shall be no abatement
or reduction in the amounts payable by the under this Direct Loan Agreement or
under the Note.
(b) In the event of any damage, destruction, taking or condemnation,
the proceeds from any insurance or condemnation award shall be deposited with
the Authority and applied to the payment of any amounts due on the Loan unless
the Borrower and the Authority shall agree to apply the proceeds to the repair,
reconstruction, replacement or relocation of the Collateral.
Section 7. FINANCIAL STATEMENTS. The Borrower agrees to furnish to the
--------------------
Authority:
(a) within 90 days of the end of each fiscal year, annual review
financial statements for the Borrower prepared by an independent accountant
acceptable to the Authority;
(b) within 45 days of the end of each quarter, quarterly company
prepared financial statements for the Borrower; and
(c) deliver to he authority concurrently with the annual review
financial statements, a certificate of the Borrower stating that:
(i) all taxes, assessments and charges which have become due have been
paid or specifying which have not been paid and stating why they
remain so; and
(ii) the Borrower has not failed to comply with any obligations under
this Direct Loan Agreement or specifying any such failure and the
reasons for such failure.
Section 8. REPRESENTATIONS AND WARRANTIES BY THE BORROWER. Borrower
----------------------------------------------
hereby makes the following representations and warranties and acknowledges and
agrees that each and every one of the following representations and warranties
shall survive closing and shall continue for as long as the Loan remains
outstanding:
<PAGE>
4
(a) The Borrower has been duly organized and validly exists as a
corporation under the laws of the State of New Jersey, has power to enter into
this Direct Loan Agreement and the Note evidencing the debt obligation of the
Borrower to the Authority hereunder and has authorized the taking of all action
necessary to carry out and give effect to the transactions contemplated by this
Direct Loan Agreement.
(b) There is no action or proceeding pending or threatened against the
Borrower before any court or administrative agency that might adversely affect
the ability of the Borrower to perform its obligations under this Direct Loan
Agreement and all authorizations, consents and approvals of governmental bodies
or agencies, required in connection with the performance of the Borrower's
obligations hereunder have been obtained and will be obtained whenever required
hereunder or by law.
(c) Neither the execution and delivery of this Direct Loan Agreement,
the consummation of the transactions contemplated hereby, nor the fulfilment of
or compliance with the terms and conditions of this Direct Loan Agreement is
prevented, limited by, or conflicts with or results in a breach of, the terms,
conditions, or provisions of any corporate restrictions or any evidence of
indebtedness, agreement or instrument of whatever nature to which the Borrower
is now a party or by which it is bound, or constitutes a default under any of
the foregoing.
(d) All tax returns and reports of the Borrower required by law to be
filed have been duly filed and all taxes, assessments, fees and other
governmental charges upon the Borrower or upon any of its respective properties,
assets, income or franchises which are due and payable pursuant to such returns
and reports, or pursuant to any assessment received by the Borrower have been
paid other than those which may be presently payable without penalty or
interest.
(e) The Borrower has, or will have, title to all the Collateral
whenever acquired or arising free and clear of all liens and claims,
encumbrances, set-offs, defenses and counterclaims, and has not made and will
not make any assignment, pledge, mortgage, hypothecation or transfer (other than
sales or leases in the ordinary course of business) of any such Collateral or
the proceeds thereof.
(f) There has been no material adverse change in the aggregate assets
or aggregate liabilities or in the condition, financial or otherwise, of the
Borrower from that set forth in the financial statements delivered to the
Authority by the Borrower in connection with this Direct Loan Agreement.
<PAGE>
5
(g) All statements, representations and warranties made by the
Borrower in its application to the Authority, and any materials furnished in
support of the request for Authority financial assistance and this Direct Loan
Agreement are true. It is specifically understood by the Borrower that all such
statements, representations and warranties shall be deemed to have relied upon
the Authority as an inducement to make the Loan and that if any such statements,
representations or warranties were materially false at the time they were made
or are breached during the term hereof, the Authority may, in its sole
discreation, consider any such misrepresentation or breach an event of default
including without limitation, the Borrower's representation that it would not
have been able to proceed with the Project without financial assistance from
the Authority.
(h) The chief executive office of the Borrower is located at
1007 Laurel Oak Road, Voorhees, New Jersey. None of the Borrower's books or
records are maintained at any other location. The Borrower shall notify the
Authority in writing of any change in the location of the Borrower's chief
executive office.
(i) Borrower represents to the Authority that it has at all
times pertinent to this Direct Loan Agreement been represented by advisors of
its own selection, including but not limited to attorneys-at-law and/or
certified public accountants; that it has not relied upon any statement,
representation, warranty, agreement or information provided by the Authority,
its employees, agents or attorneys; that it acknowledges that it is informed by
its advisors of its respective rights, duties, and obligations with respect to
the Loan under all applicable laws, that is has no set-offs, defenses or
counterclaims against the Authority with respect to the Loan, and that it is
indebted to the Authority for the amounts stated in this Direct Loan Agreement.
(j) Borrower further acknowledges and agrees that the Authority
has made no statements, representations, warranties, agreements or provided
information to it in order to induce the execution of this Direct Loan
Agreement. Borrower further acknowledges and agrees that all agreements of the
parties are set forth in this Direct Loan Agreement or in the financing
documents executed by Borrower prior to or on even date hereof.
(k) If during any time the Loan remains outstanding, the
Borrower becomes aware of any facts, occurrences, information, statements, or
events that render any of the foregoing representations or warranties herein
made untrue or materially misleading or incomplete, Borrower shall immediately
notify the Authority in writing of such facts, occurrences, information,
statements or events.
<PAGE>
Section 9. OPERATION AS AN AUTHORIZED PROJECT. The Borrower agrees to
----------------------------------
operate its business at the Project Facility as set forth in its application to
the Authority and will operate the Project Facility as an authorized project
under the New Jersey Economic Development Authority Act, P.L. 1974, c.80.
Section 10. TAXES AND OTHER GOVERNMENTAL CHARGES. The Borrower shall pay
------------------------------------
during the term of this Direct Loan Agreement as the same become due, all taxes,
assessments and governmental charges which may be required by law or contract to
be paid by the Borrower. The Borrower may in good faith contest such taxes and
governmental charges and such taxes and charges may remain unpaid during the
period of such contest provided the Collateral will not be subject to loss or
forfeiture as a result.
Section 11. MAINTENANCE OF ASSETS AND EMPLOYMENT.
------------------------------------
(a) The Borrower shall during the term of this Direct Loan Agreement
operate and maintain all assets of the Borrower in compliance with all
governmental laws, ordinances, approvals, rules and regulations which are
acceptable to and binding upon the Borrower.
(b) The Borrower will not relocate all or any substantial part of its
business operation from the Project Facility without the express prior written
consent of the Authority.
Section 12. PRESERVATION OF COLLATERAL.
--------------------------
(a) The Collateral will be kept and maintained at the Project Facility.
The Borrower will not remove the Collateral from that location, except in the
normal course of business without the express prior consent of the Authority.
(b) The Borrower will join the Authority in executing, filing and doing
whatever may be necessary under applicable law, to perfect and continue the
Authority's security interest in the Collateral at Borrower's expense.
(c) The Borrower agrees that it will at all times keep accurate and
complete records with respect to the Collateral including, but not limited to, a
record of all proceeds received therefrom or as a result of the sale thereof.
Section 13. EMPLOYMENT RECORDS. Within 30 days after the close of each
------------------
fiscal year, the Borrower shall furnish a written report to the Authority of the
number and classification of employees at the Project Facility as of the end of
the fiscal year.
<PAGE>
7
Section 14. ASSIGNMENT OF AGREEMENT, SALE OR LEASE OF PROJECT FACILITY. The
----------------------------------------------------------
Borrower may not assign or transfer the whole or any part of this Direct Loan
Agreement. The Borrower may not sell, lease, convey, assign, transfer or
otherwise dispose of any use or possessory interest in the Project Facility
without the express prior written consent of the Authority except that the
Borrower may grant utility, access and other easements and rights-of-way which
will not impair the Borrower's use of the Project Facility. The Authority
reserves the right to deny approval of any proposed lease, sublease, assignment
or transfer if the lessee, sublessee or assignee does not, in the judgment of
the Authority, satisfy guidelines for eligibility for Authority financial
assistance. No permitted subleasing or assignment shall relieve the Borrower
from primary liability hereunder.
Section 15. THE BORROWER TO MAINTAIN ITS EXISTENCE. During the term of this
--------------------------------------
Direct Loan Agreement the Borrower shall maintain its existence, shall continue
as a corporation either organized under the laws of or duly qualified to do
business as a corporation in the State of New Jersey, and without prior written
consent of the Authority shall not dispose of all or substantially all of its
assets and without prior written notice to the Authority shall not consolidate
with or merge into another entity or permit one or more other entities to
consolidate with or merge into it.
Section 16. ADDITIONAL COVENANTS.
--------------------
(a) The Borrower shall not, without written notice to the Authority:
(i) issue any additional stock (except as issued pursuant to stock
options);
(ii) declare cash or stock dividends (except for Sub-Chapter S
corporations);
(iii) purchase its own stock for value; or
(iv) transfer any excess funds of the Borrower, its affiliates or
subsidiaries for investment in any other business venture. The term
"business venture" does not include bank accounts or certificates of
deposit.
(b) The Borrower shall make no material or substantial changes in the
present management or operating control of the Borrower without the express
prior written consent of the Authority.
(c) The Borrower shall not borrow any additional funds or grant any
additional liens on the Collateral without the express prior written consent of
the Authority.
(d) The Borrower shall permit representatives of the Authority to examine
all books and records of the Borrower and to inspect the Project Facility at
reasonable times.
<PAGE>
8
(e) The Borrower agrees that the Authority shall have the right to have a
representative present at all special and regular meetings of the Board of
Directors. The Borrower shall notify the Authority of all such meetings in
advance.
(f) The Borrower represents and warrants that it would not have been able
to proceed with the Project without financial assistance from the Authority.
Section 17. EVENT OF DEFAULT. Any one or more of the following events
----------------
shall constitute an event of default of the Borrower hereunder (an "Event of
Default"):
(a) if any representation or warranty made herein or in any report,
certificate, financial statement or other instrument furnished in connection
with this Direct Loan Agreement shall prove to be false or misleading in any
material respect;
(b) default in the payment of any installment of the principal or interest
on the Note and such default shall continue unremedied for fifteen (15) days;
(c) failure of the Borrower to observe and perform any other covenant,
condition or agreement hereunder on its part to be performed (except obligation
referred to in (a) above) and (i) continuance of such failure for a period of
thirty (30) days after receipt by the Borrower of written notice by the
Authority, specifying the nature of such failure and requesting that it be
remedied; or (ii) if by reason of the nature of such failure the same cannot be
remedied within the said 30 days, the Borrower fails to proceed with reasonable
diligence after receipt of said notice to cure same;
(d) the Borrower shall have applied for or consented to the appointment of
a receiver, trustee or liquidator of all or a substantial part of its assets;
admitted in writing the inability to pay its debts as they mature; made a
general assignment for the benefit of creditors; been adjudged a bankrupt, or
filed a petition or an answer seeking an arrangement with creditors or taken
advantage of any insolvency law, or an answer admitting the material allegations
of a petition in bankruptcy or insolvency proceeding; or an order, judgment or
decree shall have been entered, without the application, approval or consent of
the Borrower by any court of competent jurisdiction approving a receiver,
trustee or liquidator of the Borrower or a substantial part of any of its assets
and such order, judgment or decree shall continue unstayed and in effect for any
period of forty-five (45) consecutive days; or file a voluntary petition in
bankruptcy or fail to remove an involuntary petition in bankruptcy filed against
it within 45 days of the filing thereof;
<PAGE>
9
(e) the default in the due observance or performance of any
covenant, condition or agreement on the part of the borrower to be
performed pursuant to the terms of the Mortgage, other than payment of
principal and interest which shall be governed by (b) above, and such
default shall continue unremedied for thirty (30) days after notice
given by the Authority;
(f) failure to observe any of the terms or conditions of the
commitment letter of the Authority dated November 1, 1996 as amended
which is incorporated herein.
Section 18. REMEDIES OF THE AUTHORITY.
-------------------------
(a) Whenever any Event of Default referred to in Section 17
hereof shall have occurred and be continuing, the Authority may take one
or more of the following remedial steps:
(i) declare the entire principal amount of the Note to be
due and payable forthwith, whereupon the note shall
become forthwith, due and payable, both as to principal
and interest, without presentment, demand, protest or
other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the
Note to the contrary notwithstanding;
(ii) take any action at law or in equity to collect the
payments then due and thereafter to become due under the
Note or to enforce performance and observance of any
obligation, agreement or covenant of the Borrower under
this Direct Loan Agreement;
(iii) take possession of the Borrower's interest in the
Collateral without terminating this Direct Loan
Agreement, and pursue remedies of a creditor under the
Uniform Commercial Code and assign, sell or lease, or
otherwise dispose of the Borrower's interest in the
collateral for the account of the Borrower, and the
Borrower shall then be liable for the difference between
the loan payments and other amounts due under this
Direct Loan Agreement and the Note and amounts received
pursuant to such assignment or contract of sale or lease
or other disposition of the borrower's interest in the
Collateral and the amount of such difference shall then
be immediately due and payable. The Borrower hereby
agrees that in the event the Authority does take
possession of the Collateral as provided herein, the
obligation of the Borrower to pay such loan payments due
or to become due under this Direct Loan Agreement and
Note shall survive such repossession;
<PAGE>
10
(iv) without further notice or demand or legal process, enter upon any
premises of the Borrower and take possession of the Collateral, all
records and items relating to the Collateral and, at the Authority's
request, the Borrower will assemble the Collateral and such records
and deliver them to the Authority;
(v) sell the Collatral but the Authority shall give the Borrower
reasonable notice of the time and place of any public sale of such
Collateral or of the time after which any private sale or other
intended disposition thereof is to be made. The requirement of
reasonable notice shall be met if notice of the sale or other
intended disposition is (1) mailed (by certified mail, postage paid)
to the Borrower at least ten (10) days prior to the time of such sale
or disposition or (2) delivered to the Borrower at least five (5)
days prior to the time of such sale or disposition. At such sale the
Authority may sell the Collateral for cash or upon credit or
otherwise, at such prices and upon such terms as it deems advisable
and the Authority may bid or become purchaser at such sale, free of
the right of redemption, which is hereby waived. The Authority may
adjourn such sales at the time and place fixed therefor without
further notice or advertisement and may sell such Collateral as an
entirety or in separate lots as it deems advisable, but the Authority
shall not be obligated to sell all or any part of such Collateral at
the time and place fixed for such sale if it determines not to do so.
Upon the institution of any such action hereunder by the Authority,
the Authority shall be entitled to the appointment of a receiver for
the Collateral without proof of the depreciation of the value of
same.
(b) If the Authority shall have proceeded to enforce its rights under this
Direct Loan Agreement and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Authority, then the Borrower and the Authority shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Borrower and the Authority shall continue as though no such
proceedings had taken place.
(c) Without limiting the generality of the foregoing, upon the happening
of an Event of Default by the Borrower hereunder, all of the Borrower's right,
title and interest in the Project Facility hereunder or in equity and the
Borrower's rights to possession thereof may be terminated by an action for
foreclosure or repossession in accordance with the statutes of the State of New
Jersey.
<PAGE>
11
(d) Upon the institution of any such action by the Authority, the
Authority shall be entitled to the appointment of a receiver for the Project
Facility.
(e) No remedy herein conferred or reserved to the Authority is intended to
be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Direct Loan Agreement or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Authority to exercise any remedy reserved to it in this Section, it shall
not be necessary to give notice other than such notice as may be required in
this Section.
(f) In addition to the above remedies, if the Borrower commits a breach,
or threatens to commit a breach of this Direct Loan Agreement, the Authority
shall have the right and remedy, without posting bond or other security, to have
the provisions of this Direct Loan Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Authority and
that money damages will not provide an adequate remedy therefor.
(g) In the event the Borrower should default under any of the provisions
of this Direct Loan Agreement and the Authority shall require and employ
attorneys or incur other expenses for the collection of payments due or to
become due for the enforcement or performance or observance of any obligation or
agreement on the part of the Borrower herein contained, the Borrower shall on
demand therefor pay to the Authority, the reasonable fees of such attorneys and
other expenses so incurred by the Authority.
(h) The Authority shall not be required to do any act whatsoever or
exercise any diligence whatsoever to mitigate the damages to the Borrower if an
Event of Default shall occur hereunder.
Section 19. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Borrower
---------------------------------------------
shall execute, acknowledge and deliver such supplements and further instruments
and perform such acts as the Authority may reasonably require for carrying out
the intention of or facilitating the performance of this Direct Loan Agreement
or the Note.
<PAGE>
12
Section 20. RELEASE AND INDEMNIFICATION. The Borrower covenants and
---------------------------
agrees that neither the Authority, its members, agents, servants, officers or
employees shall be liable for: (1) any loss, damage or injury to, or death of,
any person occurring at or about or resulting from any defect in the Project
Facility or the Collateral; (2) any damage or injury to the persons or property
of the Borrower, or its officers, agents, servants or employees, or any other
person who may be about the Project Facility, caused by any act of negligence of
any person (other than the Authority or its members, officers, agents, servants
or employees); or (3) any costs, expenses or damages incurred as a result of any
lawsuit commenced because of action taken in good faith by the Authority in
connection with the Project Facility or the Collateral. The Borrower shall
indemnify, protect, defend and hold the Authority, that State of New Jersey
their respective members, agents, servants, officers and employees (each an
"Indemnified Party"), harmless from and against any and all such losses,
damages, injuries, costs or expenses and (except for claims, demands, suits,
actions or other proceedings brought against an Indemnified Party resulting from
willful or wanton misconduct of such Indemnified Party) from and against any and
all claims, demands, suits, actions or other proceedings whatsoever, brought by
any person or entity whatsoever, (except the Borrower) and arising or
purportedly arising from this Direct Loan Agreement, the Note or any transaction
contemplated in any such documents, or from the construction, ownership and
operation of the Project Facility or the Collateral.
Section 21. NOTICES. Any notices required to be sent under this Direct
-------
Loan Agreement shall be sent to:
(1) The Authority at: CN 990, Trenton, New Jersey 08625-0990, Attn:
Managing Director - Finance
(2) The Borrower at: 1007 Laurel Oak Road, Voorhees, New Jersey 08043,
Attn: President
Section 22. MISCELLANEOUS.
-------------
(a) This Direct Loan Agreement constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral among
the parties with respect to the subject matter hereof and may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
(b) Modifications or waivers of any provisions of this Direct Loan
Agreement or the Note must be in writing.
(c) In the event any provision of this Direct Loan Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision thereof.
<PAGE>
13
(d) This Direct Loan Agreement shall become effective upon its execution
and delivery by the parties hereto, shall remain in full force from the date
thereof, and subject to the provisions hereof, shall expire on such date as the
Note and the interest thereon and all other expenses or sums to which the
Authority is entitled, have been fully paid and retired.
(e) In the event that any provision of this Direct Loan Agreement should
be breached by any party and thereafter waived by any party, such waiver shall
be limited to the particular breach so waived by any party and shall not be
deemed to waive any other breach.
(f) This Direct Loan Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Authority and the Borrower.
(g) This Direct Loan Agreement shall be construed and enforced under the
laws of the State of New Jersey.
(h) The rights and remedies of the Borrower under this Agreement shall be
subject to the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1 et seq.,
--------
the provisions of which are hereby incorporated herein by reference in their
entirety.
IN WITNESS WHEREOF, the Authority and the Borrower have caused this Direct
Loan Agreement to be executed in their respective names and by their duly
authorized officers, as of the date first above written.
ATTEST: NEW JERSEY ECONOMIC DEVELOPMENT
AUTHORITY
By: /s/ Teri Dunlop By: /s/ Adam Mukerji
--------------------------------- -----------------------------
Teri Dunlop Adam Mukerji
Director-Lending Services Director-Commercial Lending
ATTEST: RF POWER PRODUCTS, INC.
By: /s/ Christopher A. Ben By: /s/ Domenic N. Golato
--------------------------------- -----------------------------
Christopher A. Ben Domenic N. Golato
Secretary Chief Financial Officer
<PAGE>
EXHIBIT "A"
RF POWER PRODUCTS, INC.
DIRECT LOAN PROMISSORY NOTE
$500,000 $500,000
RF POWER PRODUCTS, INC. (the "Borrower") a corporation organized and
existing under the laws of the State of New Jersey acknowledges itself indebted
and for value received hereby promises to pay to the order of the NEW JERSEY
ECONOMIC DEVELOPMENT AUTHORITY (the "Authority") and its successors and assigns,
the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000), together with
interest on the unpaid principal balance thereof from the date hereof until the
Borrower's obligations with respect to the payment of such sum shall be
discharged at the rate of five percent (5%) per annum. Interest charges shall be
computed hereunder on the basis of a 360 day year, counting the actual number of
days elapsed.
This Note is issued to evidence the obligation of the Borrower under and
pursuant to, and shall be governed by and construed in accordance with the terms
and conditions of the Direct Loan Agreement (the "Agreement") between the
Authority and the Borrower dated as of December 20, 1996 for the repayment of
the loan made by the Authority to the Borrower thereunder and payment of
interest thereon. Terms referred to herein have the same meaning as defined in
the Agreement. This Note is secured by specific machinery and equipment of the
Borrower.
This Note is payable in sixty (60) equal monthly installments of principal
and interest in the sum of $9,450.95 commencing on February 1, 1997 and on the
first day of each succeeding month and terminating if not sooner paid, as herein
provided on January 1, 2002. Such installments shall be applied first to payment
of interest then due on the unpaid principal amount and the remaining balance of
each such installment to be applied to the payment and reduction of the unpaid
principal amount of this Note. There shall additionally be due and payable on
February 1, 1997 a sum equal to the interest at the rate hereinabove stated then
due on the total principal amount of this Note. The amount payable as the final
installment may be such greater or lesser amount as shall be equal to the actual
principal amount of this Note remaining unpaid together with interest thereon
then due and unpaid.
Payments hereon are to be made in lawful money of the United States of
America to the New Jersey Economic Development Authority (P9173), Title IX
Grant, P.O. Box 8500 S-41210, Philadelphia, PA 19178, or such other place as the
Authority may designate, on each due date provided above, in an amount which
will equal the amount payable as interest and principal on this Note.
<PAGE>
2
The Borrower agrees to make the payments on this Note on the dates and in
the amounts specified herein and in the Agreement and in addition agrees to make
such other payments as are required pursuant to the Agreement. A late charge of
five percent (5%) of the monthly payment shall be due and payable on any monthly
payment past due seven (7) days or more. In the event of default in the
Agreement, the principal of and interest on this Note may be declared
immediately due and payable as provided in the Agreement. This Note may be
canceled, amended or supplemented as provided in the Agreement.
The Borrower may prepay this Note in whole at any time or in part on any
payment date without penalty. Partial prepayments shall be applied to the last
maturing payments due on this Note, shall be in one or more increments of the
monthly amount due, shall not extend or postpone the due date of any subsequent
monthly installment or change the amounts of such installments. In any such
case, the final payment on this Note shall be a sum sufficient, together with
other funds deposited with the Authority and available for such purpose, to
redeem all of this Note then outstanding at the principal amount thereof plus
accrued interest to the date of payment and to pay all reasonable and necessary
fees and expenses of the Authority accrued and to accrue through final payment
for this Note. At the acceleration, termination or expiration of the term of
this Note and following full payment of this Note and all other fees and charges
in accordance with the provisions of the Agreement, the Authority shall deliver
to the Borrower any documents and take such actions as may be necessary to
effectuate the cancellation of this Note and evidence the termination of the
Agreement.
Premium upon sale of machinery and equipment purchased with the proceeds of
the Loan: a percentage of the net profit from the sale of the Borrower's
machinery and equipment purchased with the proceeds of the Loan shall be paid to
the Authority at the time of closing of said sale in the event same occurs
during the term of this Note. Such sale is subject to the prior written consent
of the Authority and is subject to the following conditions. The percentage of
the net profit of the sale paid to the Authority shall:
(i) equal 35% if the sale occurs within one year from the date of this
Note; and
(ii) decrease by 5% each year for the subsequent 5 years of this Note.
Net Profit is defined as the total sales price minus debt, depreciated value and
taxes payable upon the sale.
<PAGE>
3
IN WITNESS WHEREOF, RF POWER PRODUCTS, INC. has caused this Note to be
executed in its name and on its behalf by its authorized officers by their
manual signatures as of this 20TH day of DECEMBER, 1996.
ATTEST: RF POWER PRODUCTS, INC.
By: By:
---------------------------------- ---------------------------------
Christopher A. Ben Domenic N. Golato
Secretary Chief Financial Officer
<PAGE>
********** Amortization Schedule **********
Schedule for New Loan
Loan Type A: Straight Term, Rate: 5.00
Terms 60 Months Closing Date: 12/18/96, Amortized over: 60 mos
Outstanding Principal: 500,000.00 1st Payment Interest Adjustment: 972.22
Standard Payment: 9,450.95
<TABLE>
<CAPTION>
Starting Interest Principal Ending
Payment Payment Principal Monthly Payment Payment Principal
Number Date Balance Payment Due Due Balance
<S> <C> <C> <C> <C> <C> <C>
1. 02/01/97 500,000.00 10,423.17 3,125.00 7,298.17 492,701.83
2. 03/01/97 492,701.83 9,450.95 1,916.06 7,534.89 485,166.94
3. 04/01/97 485,166.94 9,450.95 2,088.91 7,362.04 477,804.90
4. 05/01/97 477,804.90 9,450.95 1,990.85 7,460.10 470,344.80
5. 06/01/97 470,344.80 9,450.95 2,025.10 7,425.85 462,918.95
6. 07/01/97 462,918.95 9,450.95 1,928.83 7,522.12 455,396.83
7. 08/01/97 455,396.83 9,450.95 1,960.74 7,490.21 447,906.62
8. 09/01/97 447,906.62 9,450.95 1,928.49 7,522.46 440,384.16
9. 10/01/97 440,384.16 9,450.95 1,834.93 7,616.02 432,768.14
10. 11/01/97 432,768.14 9,450.95 1,863.31 7,587.64 425,180.50
11. 12/01/97 425,180.50 9,450.95 1,771.59 7,679.36 417,501.14
12. 01/01/98 417,501.14 9,450.95 1,797.57 7,653.38 409,847.76
13. 02/01/98 409,847.76 9,450.95 1,764.62 7,686.33 402,161.43
14. 03/01/98 402,161.43 9,450.95 1,563.96 7,886.99 394,274.44
15. 04/01/98 394,274.44 9,450.95 1,697.57 7,753.38 386,521.06
16. 05/01/98 386,521.06 9,450.95 1,610.50 7,840.45 378,680.61
17. 06/01/98 378,680.61 9,450.95 1,630.43 7,820.52 370,860.09
18. 07/01/98 370,860.09 9,450.95 1,545.25 7,905.70 362,954.39
19. 08/01/98 362,954.39 9,450.95 1,562.72 7,888.23 355,066.16
20. 09/01/98 355,066.16 9,450.95 1,528.76 7,922.19 347,143.97
21. 10/01/98 347,143.97 9,450.95 1,446.43 8,004.52 339,139.45
22. 11/01/98 339,139.45 9,450.95 1,460.18 7,990.77 331,148.68
23. 12/01/98 331,148.68 9,450.95 1,379.79 8,071.16 323,077.52
24. 01/01/99 323,077.52 9,450.95 1,391.03 8,059.92 315,017.60
25. 02/01/99 315,017.60 9,450.95 1,356.33 8,094.62 306,922.98
26. 03/01/99 306,922.98 9,450.95 1,193.59 8,257.36 298,665.62
27. 04/01/99 298,665.62 9,450.95 1,285.92 8,165.03 290,500.59
28. 05/01/99 290,500.59 9,450.95 1,210.42 8,240.53 282,260.06
29. 06/01/99 282,260.06 9,450.95 1,215.29 8,235.66 274,024.40
30. 07/01/99 274,024.40 9,450.95 1,141.77 8,309.18 265,715.22
31. 08/01/99 265,715.22 9,450.95 1,144.05 8,306.90 257,408.32
32. 09/01/99 257,408.32 9,450.95 1,108.29 8,342.66 249,065.66
33. 10/01/99 249,065.66 9,450.95 1,037.77 8,413.18 240,652.48
34. 11/01/99 240,652.48 9,450.95 1,036.14 8,414.81 232,237.67
35. 12/01/99 232,237.67 9,450.95 967.66 8,483.29 223,754.38
36. 01/01/00 223,754.38 9,450.95 963.39 8,487.56 215,266.82
37. 02/01/00 215,266.82 9,450.95 926.84 8,524.11 206,742.71
38. 03/01/00 206,742.71 9,450.95 832.71 8,618.24 198,124.47
39. 04/01/00 198,124.47 9,450.95 853.04 8,597.91 189,526.56
40. 05/01/00 189,526.56 9,450.95 789.69 8,661.26 180,865.30
41. 06/01/00 180,865.30 9,450.95 778.73 8,672.22 172,193.08
42. 07/01/00 172,193.08 9,450.95 717.47 8,733.48 163,459.60
43. 08/01/00 163,459.60 9,450.95 703.78 8,747.17 154,712.43
44. 09/01/00 154,712.43 9,450.95 666.12 8,784.83 145,927.60
45. 10/01/00 145,927.60 9,450.95 608.03 8,842.92 137,084.68
46. 11/01/00 137,084.68 9,450.95 590.23 8,860.72 128,223.96
47. 12/01/00 128,223.96 9,450.95 534.27 8,916.68 119,307.28
48. 01/01/01 119,307.28 9,450.95 513.68 8,937.27 110,370.01
49. 02/01/01 110,370.01 9,450.95 475.20 8,975.75 101,394.26
50. 03/01/01 101,394.26 9,450.95 394.31 9,056.64 92,337.62
51. 04/01/01 92,337.62 9,450.95 397.56 9,053.39 83,284.23
52. 05/01/01 83,284.23 9,450.95 347.02 9,103.93 74,180.30
53. 06/01/01 74,180.30 9,450.95 319.39 9,131.56 65,048.74
54. 07/01/01 65,048.74 9,450.95 271.04 9,179.91 55,868.83
55. 08/01/01 55,868.83 9,450.95 240.55 9,210.40 46,658.43
56. 09/01/01 46,658.43 9,450.95 200.89 9,250.06 37,408.37
57. 10/01/01 37,408.37 9,450.95 155.87 9,295.08 28,113.29
58. 11/01/01 28,113.29 9,450.95 121.04 9,329.91 18,783.38
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
59. 12/01/01 18,783.38 9,450.95 78.26 9,372.69 9,410.69
60. 01/01/02 9,410.69 9,451.21 40.52 9,410.69 0.00
Totals: 68,029.48 500,000.00
</TABLE>
Adjustment made to Final Principal Payment: +0.26
<PAGE>
EXHIBIT "B"
REQUISITION
-----------
The Undersigned, on behalf of RF POWER PRODUCTS, INC., hereby requisitions
the following from the NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY:
1. Check number ____________ dated December _____________, 1996 made
payable to RF Power Products, Inc. and Laurel Oak Road, LLC in the
amount of $250,000.00.
2. Check number ____________ dated December _____________, 1996 made
payable to RF Power Products, Inc. and Atlantic Electric in the amount
of $33,050.70.
RF POWER PRODUCTS, INC.
By:
-----------------------------------
Domenic N. Golato
Chief Financial Officer
DATED: DECEMBER 20, 1996
<PAGE>
EXHIBIT "C"
[LETTERHEAD APPEARS HERE]
November 1, 1996
VIA FEDERAL EXPRESS
- -------------------
Joseph Stack, Chairman
R.F. Power Products, Inc.
502 Gibbsboro Marlton Road
Voorhees, New Jersey 08053
RE: R.F. Power Products, Inc.
P9173
--------------------------
Dear Mr. Stack:
I am pleased to inform you that at a meeting on October 8, 1996, the members of
the Authority approved the application of R.F. Power Products, Inc. for a
$500,000 Authority direct loan for the purchase of equipment for the expansion
of an existing manufacturer of radio frequency power delivery systems (the
"Project") as stated in your application dated August 7, 1996.
The Authority, unless stated otherwise in this commitment letter, has approved
the direct loan upon the terms and conditions set forth in this commitment
letter and the General Terms and Conditions of Lending attached and incorporated
herein. No act or omission by or on behalf of the Authority shall be deemed as
a waiver to any of the terms and conditions contained in this letter. Such a
waiver may be made only by an instrument in writing duly executed by an
authorized representative of the Authority.
Mailing Address: CN 990, Trenton, New Jersey 08625-0990
Delivery Address: 200 South Warren Street, 6th Floor, Trenton, NJ 08625
Telephone (609)292-1800
<PAGE>
NAME OF BORROWER: R. F. Power Products, Inc.
PROJECT LOCATION: 1007 Laurel Oak Road
Voorhees, New Jersey
LOAN: $500,000 from NJEDA for a term of five
(5) years at a rate of interest of 5% per
annum or the Federal Discount Rate at the
date of closing, whichever is greater.
AMORTIZATION: Principal payments in an amount to fully
amortize $500,000 over 5 years plus
interest payable monthly for sixty (60)
months.
PREPAYMENT PENALTY: None
PREMIUM UPON SALE: A percentage of the net profit from the
sale of the Borrower's machinery and
equipment purchased with the proceeds of
the Loan shall be paid to the Authority
at the time of closing of said sale in
the event such sale occurs during the
term of this Loan. Such sale is subject
to the prior written consent of the
Authority and is subject to the following
condition. The percentage of the net
profit of the sale paid to the Authority
shall:
(i) equal 35% if the sale occurs within
one year form the date of closing;
(ii) decrease by 5% each year for the
subsequent 5 years of the Loan.
Net Profit is defined as the total sales
price minus debt, depreciated value and
taxes payable upon the sale.
SECURITY: A first lien on all machinery and
equipment purchased with the proceeds of
this financing; all interest, proceeds
and products of all of the above
including without limitation, any
insurance proceeds thereof.
FINANCIAL STATEMENTS: Annual review financial statements
submitted to the Authority within 90 days
of the end of each fiscal year for R. F.
Power Products, Inc.
2
<PAGE>
Quarterly company prepared financial
statements submitted to the
Authority within 45 days of the end
of each quarter for R.F. Power
Products, Inc.
DISBURSEMENTS: The Loan proceeds will be disbursed
in accordance with the following
requirements: (1) receipt of a
statement or invoice together with a
requisition signed by the Borrower
stating (a) the name and address of
the person or firm to be paid; and
(b) the amount to be paid; or if the
Borrower has already paid the
invoice, proof of payment; and (2)
compliance with the terms of this
commitment letter.
CONDITIONS:
- ----------
1. The Authority shall receive evidence prior to closing that the Borrower has
contributed not less than $510,000 to the Project as equity.
2. The Authority shall receive at least 10 days prior to closing current
financial statements for the Borrower not more than ninety (90) days old at
the time of closing.
3. The Borrower shall obtain a landlord's waiver from the owner of the Laurel
Oak Road property recognizing the Authority's lien on all machinery and
equipment by the Borrower. A copy of the executed lease is required.
The interests of the Borrower and the Authority are or may be different and may
conflict. The Authority's attorney represents only the Authority and does not
represent the Borrower in the Loan transaction. The Borrower, therefore, is
advised to employ an attorney licensed to practice in the State of New Jersey,
of the Borrower's own choice, to represent the Borrower's interest in the Loan
transaction.
3
<PAGE>
The credit of the Borrower and all other features of the transaction shall be as
represented to the Authority without material adverse change. The Borrower shall
not be involved in any bankruptcy, reorganization or insolvency proceeding.
The Authority will require evidence satisfactory to it and its counsel that
assets pledged to it as security for this financing are free and clear of any
and all security interest, except as set forth herein. The Authority reserves
the right to pre-file financing statements prior to closing.
Counsel to the Authority must be satisfied with respect to the legality,
validity, binding effect, and enforceability of all instruments, agreements, and
documents used to effect and consummate the transactions contemplated herein.
By your acceptance of this commitment letter, you acknowledge this letter is
issued at a time when the Authority has not undertaken a full business, credit,
and legal analysis of the Borrower and/or the transaction(s) contemplated by
this commitment. As a result of further investigation and analysis by the
Authority and its counsel, information of which we are not presently aware may
be revealed and/or certain other impediments to closing may come to our
attention. Our mutual efforts will be directed toward the closing of this
financing. The Authority may require the financing to be restructured or
otherwise modified. As lender, the Authority is the sole judge of what is an
impediment and whether the impediment is so serious as to preclude closing.
Each unsatisfied covenant, term and condition of this commitment which is not
expressly waived in writing by the Authority shall survive any closing
hereunder. In case of any conflict between any unwaived and unsatisfied
covenant, term or condition of this commitment and the provisions of the loan
documents delivered at or pursuant to any closing regarding this financing, the
unwaived and/or unsatisfied covenant, term or condition of this commitment shall
control.
This commitment is subject to acceptance by the Borrower of the terms and
conditions contained herein and in the General Terms and Conditions of Lending.
This commitment letter must be signed and returned to the undersigned together
with a check in the amount of $2,500 made payable to the NJEDA for the
non-refundable direct loan commitment fee. In addition, $2,500 is payable to the
NJEDA at closing for direct loan closing costs.
This commitment shall terminate and the Authority shall have no further
obligation or liability hereunder if this letter is not signed and returned
together with the applicable fees on or before December 31, 1996 ("Acceptance
Date"). An extension fee of $750 is required to extend the Acceptance Date an
additional 15 days.
In the event this financing is not closed on or before March 31, 1997 ("Closing
Date"), the Authority's obligation to provide financing hereunder shall
terminate and the Borrower will be required to submit a new application.
Please contact Steven K. Szmutko at (609) 292-0181 if you have any questions
regarding this matter.
4
<PAGE>
P9173 -$2,500 RECEIVED
NOV 19 1996
COMMERCIAL LENDING
We are pleased to be of service to your financing needs.
Sincerely,
/s/ Adam Mulkerji
------------------
Adam Mulkerji
Director-Commercial Lending
td/mw
ACCEPTED AND AGREED THIS 18th DAY
----
OF November , 1996 BY:
------------------
BORROWER:
R.F. POWER PRODUCTS, INC.
By: /s/ Joseph Stack
----------------------
Joseph Stack
Chairman
5
<PAGE>
DIRECT LOAN
GENERAL TERMS AND CONDITIONS OF LENDING
---------------------------------------
1. Any liens on real property required by this commitment letter shall
be liens on the fee simple absolute title to the land and all improvements, free
of any prior mechanic's or materialmen's liens or special assessments. Any
title exceptions are subject to approval by the Authority.
2. Title insurance, when required, shall be evidenced by a paid policy
with an insurance company or companies acceptable to the Authority and qualified
to do business in New Jersey.
3. Appraisals, when required, shall be made by an independent appraiser
acceptable to the Authority. The appraisal fee shall be payable by the
Borrower.
4. Fire and hazard insurance, including theft, vandalism and malicious
mischief, shall equal 100% of the insurable value of all real estate, machinery,
equipment, furniture, fixtures and inventory securing the loan and shall be
secured from such companies approved by the Authority. Insurance covering real
property shall include a standard mortgagee endorsement in favor of the "New
Jersey Economic Development Authority." Insurance for contents shall include
the "New Jersey Economic Development Authority" as loss payee in a standard
lender's loss payable clause. General liability insurance shall be in amounts
of $500,000 per individual, $1,000,000 per occurrence. All insurance policies
required shall be secured from companies qualified to do business in New Jersey.
Flood insurance covering both building and contents or proof that the real
estate is not in a flood hazard area is required.
5. Financial statements shall be prepared by an independent certified
public accountant acceptable to the Authority. Unaudited financial statements
shall be duly certified by the chief financial officer of the company. Annual
financial statements shall be submitted to the Authority within 90 days of the
end of the Borrower's fiscal year. Quarterly statements shall be submitted
within 45 days of the end of each quarter. Semi-annual statements shall be
submitted within 45 days of the end of each semi-annual period. Financial
statements of the Guarantors shall be submitted within 90 days of the end of
each fiscal year or as provided in the commitment letter.
6. During the term of the Loan the Borrower and any Guarantor:
a. Shall make no material changes in their present management or
operating control without the consent of the Authority.
b. Shall not merge or consolidate with or acquire any other
business, corporation or partnership without written notice to the
Authority.
c. Shall not engage in any additional financing or grant any liens
or security interest to any other lender regarding the collateral
securing this Loan.
d. Shall not sell, assign, lease, sublease, transfer or encumber
its interest in any machinery or equipment financed with the
proceeds of the Loan.
e. Shall permit representatives of the Authority to examine all
books and records of the Borrower and to inspect the Borrower's
facilities.
f. If Borrower or Guarantor is a corporation, the Borrower or the
Guarantor shall agree that the Authority shall have the right to
have a representative present at all special and regular meetings of
its Board of Directors. The Borrower or the Guarantor shall notify
the Executive Director of the Authority of such meetings in advance.
In addition, each shall obtain the necessary authority of their
respective boards of directors and shareholders to enter into the
agreements evidenced or specified herein, and will each obtain such
further authorization of their respective boards of directors and
shareholders as may be necessary or appropriate to the financing
arrangements set forth herein.
g. Shall not transfer excess cash flow; declare cash or stock
dividends (except Sub-Chapter S Corporations); issue any additional
stock (except as issued pursuant to stock options); or purchase its
own stock for value without written notice to the Authority.
<PAGE>
General Terms and Conditions of Lending
Page 2
h. Shall pay all taxes, assessments and governmental charges
lawfully assessed or levied against its properties and assets. The
Borrower or Guarantor shall also pay all utility, water, sewer or
other charges incurred in the occupancy, use or operation regarding
its business operation.
7. The Borrower shall submit such searches, title reports, and
certificates evidencing Borrower's title to its real and personal property
serving as collateral for the loan in a form satisfactory to counsel for the
Authority.
8. The Borrower shall duly execute and deliver to such instruments,
documents, certificates, opinions, assurances, and do such other acts and things
as the Authority may reasonably require to effect the purpose of the transaction
described herein. All proceedings, agreements, instruments, documents, and other
matters relating to the application for the loan and all other transactions
contemplated herein shall be satisfactory to counsel for the Authority.
9. The Authority requires a current legal opinion by Borrower's legal
counsel to the effect that all documents are valid and binding on the Borrower
or Guarantor, that the Borrower or Guarantor have valid title to all machinery
and equipment purchased with the proceeds of the Loan and that to the best of
the attorney's knowledge there is no litigation pending which would adversely
affect the Borrower's or Guarantor's financial condition.
10. Any consent of the Authority required to be given hereunder must be
expressly stated in writing by an authorized officer of the Authority.
11. The Borrower shall operate the Project as an authorized project for
purposes of the New Jersey Economic Development Authority Act and substantially
as set forth in its application to the Authority. The Borrower will not
relocate all or any substantial part of its business operation from its present
location without the consent of the Authority.
12. Within 30 days after the end of each fiscal year, the Borrower shall
furnish to the Authority a report showing the number and classification of
employees employed at the Project Facility as of the end of the fiscal year. The
Borrower shall agree to maintain or increase the number of employees employed by
the Borrower as set forth in its application to the Authority.
13. The Borrower shall agree to indemnify and save harmless, the
Authority, their officers, members, employees, agents and servants from any
losses, damages, claims or liability arising from the making of the loan or the
acquisition, operation or ownership of the Project Facility or the Project.
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW JERSEY :
:
COUNTY OF MERCER :
BE IT REMEMBERED, that on the 18th day of December, 1996, before me, the
-----
subscriber, a Notary Public of the State of New Jersey, personally appeared ADAM
MUKERJI, who, being by me duly sworn on his oath, deposes and makes proof to my
satisfaction, that he is the DIRECTOR - COMMERCIAL LENDING of the NEW JERSEY
ECONOMIC DEVELOPMENT AUTHORITY, the Authority named in the within Instrument;
that the execution, as well as the making of this Instrument, has been duly
authorized by a proper resolution of the Members of said Authority; and said
Instrument was signed and delivered by said Director as and for the voluntary
act and deed of said Authority.
/s/ Yvonne J. Sprouls
----------------------------
YVONNE J. SPROULS
Notary Public of New Jersey
My Commission Expires July 27, 1999
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW JERSEY :
:
COUNTY OF :
BE IT REMEMBERED, that on this 20th day of December, 1996, before me, a
Notary Public of the State of New Jersey, personally appeared, DOMENIC N.
GOLATO, to me known, who, being by me duly sworn, did depose and say that he is
the CHIEF FINANCIAL OFFICER of RF POWER PRODUCTS, INC., the corporation named in
the within Instrument; that the execution, as well as the making of this
Instrument, has been duly authorized by a proper resolution of the Board of
Directors of said corporation; and said Instrument was signed and delivered by
said Chief Financial Officer as and for the voluntary act and deed of said
corporation.
/s/ Teri Dunlop
---------------------------
Teri Dunlop
Notary Public of New Jersey
My Commission Expires November 4, 2001
<PAGE>
RF POWER PRODUCTS, INC.
- ----------------------------------------
____________________________("Borrower")
has requested Mellon Bank, N.A.
---------------
__________________("Bank") to make loans (the "Loans") to Borrower from time
to time during the period set forth below (the "Commitment Period") in an
aggregate principal amount outstanding at any one time not to exceed Bank's
commitment set forth below (the "Commitment Amount") and, subject to the terms
and conditions set forth herein and in the Note and other Credit Documents
(hereinafter defined) and, relying upon the representations and warranties
herein and therein set forth, Bank is willing to make such Loans.
Commitment From the date hereof to but not
Period:
including May , 1998.
------------------ --
Commitment The lesser of (i) $ 4,000,000.00
Amount: ----------------,
or (ii) the sum of 80 % of Eligible
----
Accounts (as hereinafter defined)
and N/A % of Eligible Inventory
-----
(as hereinafter defined).
Within the limits of time and amount set forth above and subject to the terms
and conditions set forth herein and in the Note and the other Credit Documents,
Borrower may borrow, repay and reborrow hereunder. Borrower may at any time
from time to time reduce the Commitment Amount to an amount not less than the
sum of the unpaid principal amount of the Loans then outstanding plus the
principal amount of all Loans not yet made as to which notice has been given by
Borrower under Section 2 hereof, by providing not less than five days' prior
written notice (which notice shall be irrevocable) to such effect to Bank. If
Bank allows Loans above Commitment Amount, all the terms and conditions set
forth herein and in the Note and the other Credit Documents will apply to such
Loans.
The obligation of Borrower to repay the Loans, to pay interest thereon and pay
fees, if any, with respect to the Commitment Amount shall be evidenced by one or
more promissory notes, note and security agreements, letter of credit
applications, of other instruments or documents (collectively, the "Note"),
which together with this Agreement, including any Supplement hereto, and any
security agreements, instruments and other documents executed by Borrower in
connection herewith are sometimes referred to herein as the "Credit Documents".
In consideration of the foregoing and intending to be legally bound, Borrower
agrees with Bank as follows:
1. Representations and Warranties. In addition to the representations and
warranties contained in the Note and any other Credit Documents, Borrower hereby
makes the following representations and warranties which shall be true and
correct on the date hereof and shall continue to be true and correct at the time
of the creation of any of the Loans and until the Loans shall have been paid in
full, or of there are no Loans outstanding so long as the Commitment Period has
not expired:
(a) Organization-Corporation and Partnership. If Borrower is a corporation
or a partnership, Borrower is duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which Borrower is incorporated or
was formed; Borrower has the power and authority to own its properties and
assets, to carry on its businesses as now being conducted and is qualified to do
business in every jurisdiction in which it is required to qualify to do
business.
(b) Validity and Binding Nature. Borrower has the power to execute,
deliver, and perform this Agreement, the Note and all other Credit Documents,
and when executed and delivered, this Agreement, the Note and all other Credit
Documents will be valid and binding obligations of Borrower, enforceable in
accordance with their terms; provided, however, that this representation with
respect to enforceability is limited by bankruptcy, insolvency, or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
(c) Due Authorization-Corporation and Partnership. The execution, delivery
and performance of this Agreement, the Note and all other Credit Documents have
been duly authorized by all corporate or partnership action required for the
lawful creation and issuance and performance thereof and will not violate any
provision of law, any order of any court or governmental agency, the charter
documents and by-laws of, or partnership agreement of Borrower.
(d) Conflicting Instruments. The execution, delivery and performance of
this Agreement, the Note and all other Credit Documents will not violate any
provisions of any indenture, agreement, or other instrument to which Borrower or
any of Borrower's properties or assets are bound, and will not be in conflict
with, result in a breach of, or constitute (with due notice and/or lapse of
time) a default under any such indenture, agreement, or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of Borrower.
(e) Authorization and Consents. No authorization, consent, approval,
license or exemption of, and no registration, qualification, designation,
declaration or filing with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is necessary to
the valid execution, delivery and performance of this Agreement, the Note or any
other Credit Document.
(f) Financial Condition. The most recent financial statements of Borrower
delivered to the Bank are true and correct and represent fairly its financial
position as of the date thereof; and the results of its operations for the
period or periods indicated; and as required by GAAP, show all known
liabilities, direct or contingent, of Borrower as of the date thereof. Since the
date of such financial statements, there has been no material adverse change in
the condition, financial or otherwise, of Borrower or in the operations,
business, prospects or properties of Borrower and, since such date, Borrower has
not incurred, other than in the ordinary course of business, any indebtedness,
liabilities, obligations or commitments, contingent or otherwise, other than
indebtedness created hereunder.
(g) Compliance with Laws. Neither the Borrower nor any subsidiary is in
violation of or subject to any contingent liability on account of any law or any
order or regulation issued by any court or governmental authority, state or
federal, including but not limited to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as
amended (the "Code"), any applicable occupational and health or safety law,
environmental protection or pollution control law or hazardous waste or toxic
substances management, handling or disposal law which would have an adverse
effect on the Borrower in excess of $100,000.
(h) Litigation. Except as previously disclosed in writing to Bank prior to
the date of this Agreement, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending, or to the knowledge of Borrower, threatened by or against or affecting
Borrower or any of the properties or rights of Borrower which, if adversely
determined, would impair the right of Borrower to carry on its business
substantially as now conducted or would adversely affect the financial
condition, business or operations of Borrower in an amount in excess of
$100,000.
(i) Misrepresentation. Neither this Agreement, the Note, the other Credit
Documents, nor any other document, statement, financial statement, or
certificate furnished to Bank by or on behalf of Borrower in connection
herewith, contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
and, insofar as Borrower can now foresee, there is no event or condition which
may in the future materially adversely affect the financial condition,
operations or properties of Borrower which has not been set forth in this
Agreement or in a document, statement, financial statement, or certificate
furnished to Bank in connection herewith.
2. Conditions. The obligation of Bank to make any Loan hereunder is subject to
the performance by Borrower of its obligations to be performed hereunder and
under the Note and the other Credit Documents on or before the date of
<PAGE>
- --------------------------------------------------------------------------------
such Loan and to the satisfaction of the following further conditions:
(a) The representations and warranties contained herein, in the Note and
in the other Credit Documents shall be true on and as of the date of each
Loan hereunder with the same effect as though made on and as of each such
date; on each such date no "Event of Default" under and as defined in the
Note and no event, act or condition which with notice or the passage of
time or both would constitute such an Event of Default shall have occurred
and be continuing or exist or shall occur or exist after giving effect to
the Loan to be made on such date; and any request for borrowing under
Section 2.(b) below shall constitute a certification by Borrower to both
such effects.
(b) Borrower shall have provided Bank with written notice (or telephonic
notice confirmed in writing) of the proposed Loan specifying the principal
amount thereof and the proposed date thereof, which notice shall be
received by Bank at its designated office no later than 1:00 p.m., local
time at the place where the proposed Loan is to be payable, on the date
(which shall be a day on which Bank is opened for business) of such
proposed Loan. Such notice shall contain a certification as to the amounts
of the then current Eligible Accounts and Eligible Inventory. In the event
Bank receives telephonic notice, Bank may act in reliance upon such
telephonic notice, provided Bank has acted in good faith.
(c) The conditions, if any, specified in any Supplement hereto and in the
Note or any Credit Document shall have been met to the satisfaction of
Bank.
(d) All legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory to Bank and Bank shall
have received all such counterpart originals or certified or other copies
of such documents and records of proceedings in connection with such
transactions, in form and substance satisfactory to Bank, as Bank may from
time to time request.
3. General Covenants. In addition to the covenants contained in the Note and
the other Credit Documents, Borrower hereby covenants and agrees that, so long
as any of the Loans are outstanding, or if there are no Loans outstanding so
long as the Commitment Period has not expired, Borrower shall, except as Bank
may otherwise agree in writing:
(a) Financial Statements-Annual. Furnish to Bank, within
-----------------
days after the end of each fiscal year of Borrower, a financial statement
of Borrower's profit and loss and surplus for such fiscal year and a
balance sheet as of the end of such fiscal year, in each case setting forth
in comparative form the corresponding figures for the preceding fiscal
year, all in reasonable detail and
----------------------------------------
See Supplement to Revolving Line of Credit Agreement
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) Accounts Receivable and Inventory Reporting. Furnish to Bank, on or
before the day of each calendar month, a report, as at the end of the
------
preceding calendar month, containing Borrower's account receivable aging
and a description of raw material and finished goods inventory, including a
listing of Eligible Accounts and Eligible Inventory, all in reasonable
detail and in form and content satisfactory to Bank.
(c) Financial Statements-Other. Furnish to Bank each financial statement
required to be delivered to Bank by any supplement, addendum or amendment
hereto, and such other information concerning the financial or business
affairs of Borrower as may be requested by Bank from time to time.
(d) Property. Maintain and keep all its property in good repair, working
order and condition and make or cause to be made all necessary or
appropriate repairs, renewals, replacements, substitutions, additions,
betterments and improvements thereto so that the efficiency of all such
properties shall at all times be properly preserved and maintained.
(e) Taxes and Assessments. Duly pay and discharge all taxes, assessments
and governmental charges levied upon or assessed against it or against its
properties or income prior to the date on which penalties are attached
thereto, unless and except to the extent only that such taxes, assessments
and charges shall be contested in good faith and by appropriate proceedings
diligently conducted by Borrower (unless and until foreclosure, distraint,
sale or other similar proceedings shall have been commenced) and provided
that such reserve or their appropriate provisions, if any, as shall be
required by generally accepted accounting principles shall have been made
therefor.
(f) Litigation. Promptly give notice in writing to Bank of the occurrence
of any material litigation, arbitration or governmental proceeding
affecting Borrower, and of any governmental investigation or labor dispute
pending or, to the knowledge of Borrower, threatened which could reasonably
be expected to interfere substantially with normal operations of the
business of Borrower or materially adversely, affect the financial
condition, business, or operations of Borrower.
(g) Books and Records. Maintain and keep proper records and books of
account in conformance with generally accepted accounting principles
applied on a consistent basis in which full, true and correct entries shall
be made of all its dealings and business affairs.
(h) Access to Properties, Books and Records. Permit any of the officers,
employees or representatives of Bank to visit and inspect any of the
properties of Borrower and to examine its books and records and discuss the
affairs, finances and accounts of Borrower with representatives thereof,
during normal business hours, and as often as Bank may request.
(i) Financial Information-Guarantors. Cause any third party guarantor of
the Loans to submit annually or at any time there is a material change in
their financial position, personal or business financial statements
containing such financial information as may be requested by Bank from time
to time.
(k) Continuance of Business. Not engage in any line of business other than
those in which it is actively engaged in on the date hereof.
(l) Compliance with Laws. Comply, and shall cause any subsidiary to
comply, with all laws, and all regulations or orders issued pursuant
thereto, including but not limited to ERISA, the Code, any applicable
occupational, and health or safety law, environmental protection or
pollution control law or hazardous waste or toxic substances management,
handling or disposal law.
(m) Sale of Assets. Except for sales or other dispositions of inventory in
the ordinary course of business, not sell, lease, transfer, or otherwise
dispose of in a single transaction, or a series of related transactions,
all or a substantial part of the property and assets of Borrower, whether
now owned or hereafter acquired, to any person, firm or corporation.
(n) Acquisition of Assets. Not purchase or otherwise acquire all or
substantially all of the operating assets of any other person, firm or
corporation and, if Borrower is a corporation, not merge or consolidate
with or into any other person, firm or corporation, or permit any other
person, firm or corporation to merge with or into it, or acquire all or
substantially all of the property or assets of any other person, firm or
corporation.
(o) Selling Accounts Receivable. Not sell, assign or discount any of its
accounts receivable or any promissory note held by it, with or without
recourse, other than the discount of such receivables or notes in the
ordinary course of business for collection.
<PAGE>
(p) Payments on Outstanding Stock. Pursuant to or in contemplation of
termination, liquidation, dissolution or winding up of Borrower, not
purchase, redeem or retire or make any dividend on or distribution on account
of, if Borrower is a corporation, any shares of the capital stock of Borrower
or if Borrower is a partnership, any capital account of any partner of such
partnership.
(q) Affiliated Entities. Not establish any partnership, subsidiary,
corporation, joint venture or other form of business combination without
providing prior written notice to Bank.
(r) Insurance. Keep all insurable property, real and personal, now owned or
hereafter acquired, insured at all times against loss or damage by fire and
extended coverage risks and other hazards of the kinds customarily insured
against and in amounts customarily carried by businesses engaged in
comparable businesses and comparably situated; effect all such insurance
under valid and enforceable policies issued by insurers of recognized
responsibility not unacceptable to Bank, and, promptly from time to time upon
request of Bank, deliver to Bank a summary schedule indicating all insurance
then in effect.
(s) Investments. Not purchase, own, invest in or otherwise acquire, directly
or indirectly, any stock or other securities, or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person , firm or corporation or permit to exist any loans or advances
for such purposes except for investments in direct obligations of the United
States of America or any agency thereof, obligations guaranteed by the United
States of America, certificates of deposit issued by a bank or trust company,
organized under the laws of the United States, or any state thereof, or
marketable securities which are publicly traded on a nationally recognized
market.
(t) Patents. Preserve and protect its patents, franchises, licenses,
trademarks, trademark rights, tradenames, tradename rights, and copyrights
used or useful in the conduct of its business.
(u) Guarantees and Contingencies. Not endorse, assume, guarantee, become
surety for, or otherwise become or remain liable in connection with the
obligations of any person, firm or corporation, except Borrower may endorse
negotiable or other instruments for deposit or collection or similar
transactions in the ordinary course of its business.
(v) Transactions with Affiliates. Not enter into any transaction, including,
without limitation, the purchase, sale, leasing or exchange of property, real
or personal, or the rendering of any service, with any person, firm or
corporation affiliated with Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair
and reasonable terms no less favorable to Borrower than would be obtained in
a comparable arm's-length transaction with any other person, firm or
corporation not affiliated with Borrower.
(w) Modifications to Other Agreements. Not amend or modify any existing
agreement with any person, firm or corporation in any manner materially
adverse to Borrower.
(x) Notice of Event of Default. Promptly give notice in writing to Bank of
the occurrence of any Event of Default under and as defined in the Note, and
of any condition, event, act or omission which, with the giving of notice
of the lapse of time or both, would constitute such an Event of Default.
4. General Provisions.
(a) Waivers. The provisions of this Agreement may from time to time be waived
in writing by Bank in its sole discretion. Any such waiver of any kind on the
part of Bank of any breach or default under this Agreement or any waiver of
any provision or condition of this Agreement must be in writing and shall be
effective only to the extent set forth in such writing. No delay by Bank in
exercising any right or remedy hereunder shall operate as a waiver thereof.
(b) Financial Covenants. Compliance or non-compliance with all financial
covenants of Borrower contained herein, or in any supplement, addendum or
amendment hereto, shall be determined in accordance with generally accepted
accounting principles applied on a consistent basis. All financial statements
of Borrower required to be delivered to Bank hereby, or by any written
supplement now or hereafter executed by Borrower in which reference to this
Agreement is made, shall be prepared on the basis of generally accepted
accounting principles applied on a consistent basis.
(c) Binding Nature. The rights and privileges of Bank contained in this
Agreement shall inure to the benefit of its successors and assigns, and the
duties of Borrower shall bind all heirs, personal representatives,
successors, and assigns. "Borrower" refers individually and collectively to
all signers of this Agreement, including, in the case of any partnership, all
general partners of such partnership individually and collectively, whether
or not such partners sign below. Each of the signers shall be jointly and
severally bound by the terms hereof, and with respect to any partnership
executing this Agreement, each general partner shall be bound hereby both in
such general partner's individual and partnership capacities.
(d) Governing Law. Time of performance hereunder is of the essence of this
Agreement. This Agreement and any written supplement hereto executed by
Borrower in which reference to this Agreement is made shall in all respects
be governed by the laws of the state where the Note is payable (except to the
extent that federal law governs).
(e) Severability. If any provision hereof shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and
this Agreement shall be construed as if the invalid or unenforceable
provision had never been a part of it. The descriptive headings hereof are
for convenience only and shall not in any way affect the meaning or
construction of any provision hereof.
(f) Definitions. i) "Eligible Accounts" shall be defined as trade accounts
receivable created or acquired by Borrower in the ordinary
course of business which are and at all times continue to be
acceptable to Bank and in which Bank has a Prior Security
Interest at all times. Standards of acceptability shall be
fixed and may be revised from time to time solely by Bank in
its exclusive judgment. As of the date hereof, accounts
receivable aged less than 90 days from the date of invoice
shall be acceptable as Eligible Accounts.
ii) "Eligible Inventory" shall be defined as Borrower's
inventory excluding work in process, of saleable raw
materials and finished goods manufactured or acquired by
Borrower in the ordinary course of business, in its sole
possession or control, stored in a location or locations and
in a manner acceptable to Bank, valued at the lower cost or
market value, which inventory is an at all times continues
to be acceptable to Bank and in which Bank has a Prior
Security Interest at all times. Standards of acceptability
shall be fixed and may be revised from time to time solely
by Bank in its exclusive judgment.
iii) "Prior Security Interest" shall be defined as an
enforceable, perfected security interest (under the Uniform
Commercial Code), which interest is senior and prior to all
liens (including without limitation all security interests,
pledges, bailments, leases, mortgages, conditional sales and
title retention agreements, charges, claim encumbrances,
judgments, levies and all other types of liens whatsoever.
5. Loans Above Commitment Amount. Notwithstanding any other provision of this
Agreement, the Note or the other Credit Documents, if, in Bank's sole
determination, the principal balance of the Loans hereunder shall at any time
exceed the Commitment Amount, Borrower shall pay such excess to Bank on
demand.
<PAGE>
- --------------------------------------------------------------------------------
6. Special Covenants. In addition to the covenants contained herein and in the
Note and the other Credit Documents, Borrower hereby agrees that, so long as any
of the Loans are outstanding, or if there are no Loans outstanding so long as
the Commitment Period has not expired, Borrower shall, except as Bank may grant
its prior written consent, comply with the special provisions or covenants set
forth in any written supplement, now or hereafter executed by Borrower, in which
reference to this Agreement is made.
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Witness the due execution hereof intending to be legally bound this 24th day of
May, 1996.
- --------------------------------------------------------------------------------
Witness: Individual:
x x (Seal)
- ------------------------------------- -------------------------------------
Address
- ------------------------------------- -------------------------------------
Witness Individual:
x x (Seal)
- ------------------------------------- -------------------------------------
Address
-------------------------------------
Corporation or Other Entity
RF POWER PRODUCTS, INC.
- ------------------------------------- -------------------------------------
Attest/Witness: By: (Signature and Title)
Domenic Golato, CFO
x x /s/ Domenic Golato - VP+CFO (Seal)
- ------------------------------------- -------------------------------------
By: (Signature and Title)
x (Seal)
-------------------------------------
Business Address
(Corporate Seal) 502 Gibbsboro-Marlton Road
-------------------------------------
Voorhees, NJ 08043
MELLON BANK N.A.
--------------------------
-------------------------------------
By: (Signature and Title)
Anthony W. LaMarca, V.P.
x /s/ Anthony W. LaMarca
-------------------------------------
Office Address
Plymouth Meeting Executive Campus
-------------------------------------
610 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
<PAGE>
SUPPLEMENT TO REVOLVING LINE OF CREDIT AGREEMENT
------------------------------------------------
The following constitutes the special provisions and/or special covenants
and/or modifications referred to in the Revolving Line of Credit Agreement dated
May 24th, 1996 (the "Credit Agreement") covering the Borrowings (as that term is
defined in the Credit Agreement) of the undersigned (the "Borrower") from Mellon
Bank, N.A. ("Bank"). The following shall supercede any special provision or
covenant contained in any prior Supplement to Revolving Line of Credit Agreement
and shall be applicable to all Borrowings in existence on the date hereof or
incurred hereafter.
1. The provisions of this Supplement shall, as of the date hereof, be
deemed to be fully incorporated by reference in, constitute a part of, and
supplement the provisions of, the Credit Agreement, which, except as
supplemented hereby, shall continue in full force and effect in accordance with
its terms and conditions.
2. The Borrower hereby covenants and decrees that, so long as any
Borrowings are outstanding, the Borrower shall, except as Bank may grant its
prior written consent:
(a) Financial Statements-Annual. Furnish to Bank, within ninety
---------------------------
(90) days after the end of each fiscal year of the Borrower, the annual
consolidated financial statements of the Borrower, audited and certified without
material qualification by an independent certified public accountant acceptable
to Bank.
(b) Financial Statements-Quarterly. Furnish to Bank, within
------------------------------
forty-five (45) days after the end of each quarter of each fiscal year of the
Borrower, a statement of the Borrower's profit and loss, a statement of cash
flow and a balance sheet as of the end of such period, in each case setting
forth in comparative form the corresponding figures from the corresponding
period of the preceding fiscal year and comparative year-to-date presentations,
all in reasonable detail and in a form acceptable to Bank, and prepared on an
unaudited basis.
(c) Borrowing Base. Furnish to Bank, within fifteen (15) days after
--------------
the end of each month of the Borrower, an accounts receivable aging and a
borrowing base certificate, each in reasonable detail and in a form acceptable
to Bank.
(d) Compliance Certificate. Together with the quarterly and annual
----------------------
financial statements, furnish to Bank an Officer's Compliance Certificate,
signed by the Chief Financial Officer of the Borrower, certifying that no
default or Event of Default has occurred as of the date of such certificate and
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the applicable requirements of the
financial covenants hereof, on the date of such financial statement.
<PAGE>
(e) Certain Other Reports and Information. Promptly upon their
-------------------------------------
becoming available to the Borrower, the Borrower shall deliver to Bank a copy
of (i) all regular or special reports, registration statements and amendments to
the foregoing which the Borrower shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) all
reports, proxy statements, financial statements and other information
distributed by the Borrower to its stockholders, bondholders or the financial
community generally, and (iii) all accountants' management letters pertaining
to, all other reports submitted by accountants in connection with any audit of,
and all other material reports from outside accountants with respect to, the
Borrower.
(f) Negative Pledge. Not incur, create, assume or permit to exist,
---------------
any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever
on any of the assets of the Borrower, whether now or hereafter owned, other than
(i) security interests granted in favor of Bank, (ii) pledges or deposits under
workers' compensation, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases or to secure statutory obligations or surety or
other similar bonds used in the ordinary course of business, (iii) tax liens
which are being contested in good faith and by appropriate proceedings
diligently conducted (unless and until foreclosure, sale or other similar
proceedings have been commenced) and provided that such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor, and (iv) any unfiled materialmen's, mechanic's, workmen's and
repairmen's liens (provided, that if such a lien shall be perfected, it shall
be discharged of record immediately by payment, bond or otherwise).
(g) Additional Indebtedness. Not create or incur any additional
-----------------------
indebtedness except loans from Bank and any term loans from the New Jersey
Economic Development Authority which in aggregate do not exceed $500,000.
(h) Financial Covenants. Comply with the following financial
-------------------
covenants which shall be tested on the Borrower on a quarterly basis and in
accordance with GAAP:
(i) Leverage Ratio. The Borrower's ratio of (a) total
--------------
liabilities, determined in accordance with GAAP, divided by (b) Tangible Net
----------
Worth, shall not exceed 1.25 to 1.00.
(ii) Cash Flow Ratio. The Borrower's ratio of (a) Cash Flow to
---------------
(b) current maturities on long term debt (including capitalized leases and as
determined in accordance with GAAP) which were reported on the balance sheet of
the Borrower for the period ending one year prior to the calculation date, plus
----
capital expenditures, as measured on a rolling four-quarter basis and as
determined in accordance with GAAP, shall not be less than 1.25 to 1.00 as
measured as of the fiscal quarters ending May 31, 1996,
-2-
<PAGE>
August 31, 1996 and November 30, 1996, and shall not be less than 1.50 to 1.00
at any fiscal quarter end thereafter.
(i) Management. The Borrower shall retain capable executive
----------
management personnel at all times satisfactory to Bank, it being understood that
the management personnel of the Borrower as of the date hereof is satisfactory
to Bank.
3. Conditions to Initial Loans. The obligation of Bank to make loans on
---------------------------
the date hereof is subject to the satisfaction, immediately prior to or
concurrently with the making of any Borrowing, of the following conditions:
(a) All documentation, instruments, and proceedings shall be
satisfactory to Bank;
(b) No material adverse change shall have occurred in the business,
products or prospects of the Borrower;
(c) The Borrower shall provide Bank with evidence that the Borrower
has purchased and currently maintains policies of insurance, satisfactory to
Bank and designating Bank as the loss payee, to protect the personal property
pledged as collateral to Bank;
(d) No material adverse change shall have occurred in the financial
condition of the Borrower, as such financial condition was depicted in the
Borrower's financial statements dated November 30, 1995 and February 29, 1996.
(e) The Borrower will provide Bank with an option of counsel for the
Borrower regarding the execution, delivery, validity and enforceability of the
loan documents and the liens granted thereto.
4. Adoption of Certain Terms or Covenants. The Borrower shall give notice
--------------------------------------
in writing to Bank of the occurrence of any default under any debt instruments
or under any material contractual obligations or agreements with governmental
authorities, and of the incurrence of new or additional debt obligations and the
terms thereof, and of any change, whether by addition or modification in the
terms or covenants of any debt obligation. In the event that the terms or
covenants of any debt obligation of the Borrower existing on the date hereof or
incurred by the Borrower subsequent to the date hereof are more restrictive than
the terms and covenants of the Credit Agreement, such terms and covenants shall
be deemed to be incorporated into the Credit Agreement for the benefit of Bank
and shall be binding upon the Borrower and enforceable by Bank hereunder, at its
discretion, as if such more restrictive terms and conditions were herein fully
set forth.
5. Definitions. In addition to other words and terms defined elsewhere in
-----------
the Credit Agreement, as used herein, the following words and terms shall have
the following meanings:
-3-
<PAGE>
(a) "Cash Flow" means net income minus dividends or withdrawals plus
--------- ----- ----
depreciation and amortization, as measured on a rolling four-quarter basis and
as determined in accordance with GAAP.
(b) "GAAP" means generally accepted accounting principals of the
----
United States of America.
(c) "Tangible Net Worth" shall mean shareholders' equity less
------------------ ----
intangible assets, each determined in accordance with GAAP.
Witness the due execution hereof intending to be legally bound this 24th
----
day of May, 1996.
ATTEST: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun By: /s/ Domenic N. Golato
- -------------------------------- --------------------------------
By: Paul S. Zaun Domenic N. Golato
Title: Director Cost Accounting Chief Financial Officer
MELLON BANK, N.A.
Accepted by:
/s/ Anthony W. LaMarca
-----------------------------------
Anthony W. LaMarca
Vice President
-4-
<PAGE>
FIRST AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT
-----------------------------------------------------
THIS FIRST AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT (this
"Agreement") made as of this 17th day of January, 1997 between RF POWER
PRODUCTS, INC. a New Jersey corporation (the "Borrower"), and MELLON BANK, N.A.,
a national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank are parties to a Revolving Line of
Credit Agreement dated May 24th, 1996 (the "Credit Agreement"), pursuant to
which the Bank agreed to extend to the Borrower a Four Million Dollar
($4,000,000) revolving credit facility (capitalized terms used herein but not
defined in this Agreement shall have the meaning ascribed to them in the Credit
Agreement);
WHEREAS, the Borrower has requested that the Bank amend certain
provisions of the Credit Agreement in order to, among other things, gain
permission to obtain equipment financing in the amount of $500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the Borrower and the Bank hereby
covenant and agree as follows:
1. Amendments. Upon the execution and delivery by the Borrower and
----------
the Bank of this Agreement and the First Amendment to Note and Security
Agreement dated of even date herewith, (the "Note Amendment"), the Credit
Agreement shall be amended as follows:
(a) The Supplement to Revolving Line of Credit Agreement (the
"Supplement") shall be amended by deleting Section 2(f) in its entirety and
replacing it with the following:
(f) Negative Pledge. Not incur, create, assume or permit to
---------------
exist, any mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of the assets of the Borrower, whether now or
hereafter owned, other than (i) security interests granted in favor of
Bank, (ii) security interests granted in favor of the New Jersey
Economic Development Corporation to secure equipment purchases in an
amount not to exceed $500,000, (iii) pledges or deposits under workers'
compensation, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory
obligations or surety or other similar bonds used in the ordinary
course of business, (iv) tax liens which are being contested in good
<PAGE>
faith and by appropriate proceedings diligently conducted (unless and until
foreclosure, sale or other similar proceedings have been commenced) and
provided that such reserve or other appropriate provisions, if any, as shall
be required by GAAP shall have been made therefor, and (v) any unfiled
materialmen's, mechanic's, workmen's and repairmen's liens (provided, that
if such a lien shall be perfected, it shall be discharged or record
immediately by payment, bond or otherwise).
(b) Section 2(h) of the Supplement, Financial Covenants, shall also be
--------- ---------
further amended by adding the following additional provision as Subsection
2(h)(iii):
(iii) Minimum Tangible Net Worth. The Tangible Net Worth of the
--------------------------
Borrower shall be greater than or equal to the following amounts as of the
following dates:
Fiscal Quarters Ending Tangible Net Worth
- ---------------------- ------------------
February 28, 1997 and $7,800,000
May 31, 1997
August 31, 1997 $8,000,000
November 30, 1997 $8,500,000
All times thereafter No requirement
(c) The Credit Agreement shall be amended to reflect that references in
the Credit Agreement to the "Note" shall be references to the Note and Security
Agreement as amended by the Note Amendment and as may be still further amended,
modified or supplemented from time to time.
2. One-Time Covenant Waiver. The Bank hereby agrees that it shall not
------------------------
measure the Cash Flow Ratio covenant set forth in Section 2(h)(ii) of the
Supplement for the fiscal quarters ending February 28, 1997, May 31, 1997,
August 31, 1997 or November 30, 1997. However, the Borrower specifically
acknowledges that the waiver of such covenant compliance represents a one-time
only, limited waiver and that the covenant shall be measured again beginning
with the fiscal quarter ending February 28, 1998, and shall not be less than
1.50 to 1.00 as of such date and as of each fiscal quarter thereafter.
3. Representations and Warranties. The Borrower hereby represents and
------------------------------
warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
4. Other Terms Confirmed. All other terms and conditions of the Credit
---------------------
Agreement, including, without limitation, the Supplement attached thereto, are
hereby confirmed and shall remain in full force and effect without modification.
From and
path-2-
<PAGE>
after the effectiveness of the amendments set forth in Section 1 hereof, all
references in any document or instrument to the Credit Agreement shall mean the
Credit Agreement as amended by this Agreement.
5. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in any way the extension of any
new credit by the Bank to the Borrower, or the satisfaction of any indebtedness
evidenced by the Credit Agreement as amended hereby or the Note.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
7. Headings. The descriptive headings which are used in this Agreement
--------
are for convenience only and shall not affect the meaning of any provision of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
Attest: RF POWER PRODUCTS, INC.
[SIGNATURE APPEARS HERE] /s/ Domenic N. Golato
- ----------------------------- ------------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal] MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
---------------------------
Anthony W. LaMarca
Vice President
path-3-
<PAGE>
- --------------------------------------------------------------------------------
Note and Security Agreement [LOGO OF MELLON BANK APPEARS HERE]
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
$ 4,000,000.00 May 24th, 1996
-------------------- ---------- --
For value received, and intending to be legally bound, Undersigned, as defined
below, promises to pay to Mellon Bank, N.A.
----------------------------------------
------------------------------------------------------------------------------
("Bank") or its order at 1735 Market Street,
------------------------------------------------------
Philadelphia, PA
------------------------------------------------------------------------------
the sum of Four Million and --------------------------------------------
----------------------------------------------------- 00/100 Dollars
------------------------------------------------------------------------------
($ 4,000,000.00 ), or such lesser or greater
-----------------------------------------
principal amounts as may be outstanding from time to time under Revolving Line
of Credit Agreement dated May 24th, 1996 (as amended and supplemented from
--------- --
time to time, the "Credit Agreement"), between Bank and Undersigned, with
interest on the outstanding balance from the date of this Note and Security
Agreement ("Note") at the rate(s) ("Contractual Rate(s)") specified herein.
See Supplement to Note and Security Agreement.
After maturity, whether by acceleration or otherwise, interest shall accrue at
a rate 2 percent per annum above the Contractual Rate(s) specified until all
sums due hereunder are paid. Interest shall continue to accrue after the entry
of judgment by confession or otherwise at a rate of 2 percent (2%) per annum
above the Contractual Rate(s) until all sums due hereunder and/or under the
judgment are paid, unless the Contractual Rate(s) is (are) altered by
subsequent maturity. Undersigned agrees to pay to Bank, as consideration for
Bank's commitment under the Credit Agreement, (i) a commitment fee equal to
0.125 % per annum on the unborrowed Commitment Amount
------
(as defined in the Credit Agreement), from time to time, for each day of the
Commitment Period (as defined in the Credit Agreement), and (ii) a facility
fee equal to N/A % per annum on the Commitment Amount (whether borrowed or
-----
unborrowed) for each day of the Commitment Period, in each case payable for
the preceding period for which such fee has not been paid, (a) on the last day
of each ______________________, __________________________, and
_______________ after the date hereof, (b) on the date of each reduction of
the Commitment Amount on the amount so reduced, and (c) on the last day of the
Commitment Period.
If any law, regulation, order, decree or guideline or interpretation or
application thereof by any governmental authority charged with the
interpretation or administration thereof or compliance by Bank with any
request or directive of any governmental authority (whether or not having the
force of law) shall either impose, modify or deem applicable any capital
adequacy or similar requirement against assets (funded or contingent) of, or
credits or commitments to extend credit extended by Bank and the result of any
of the foregoing is to increase the cost to, reduce the income receivable by,
or impose any expense (including loss of margin) upon Bank with respect to the
Credit Agreement, this Note, or the making, maintenance or funding of any part
of the Loans (or, in the case of capital adequacy or similar requirement, to
have the effect of reducing the rate of return on Bank's capital, taking into
account Bank's policies with regard to capital adequacy) by an amount which
Bank deems to be material, Bank shall from time to time notify Undersigned of
the amount determined in good faith by Bank (which determination shall be
conclusive absent manifest error) to be necessary to compensate Bank for such
increase, reduction or imposition. Such amount shall be due and payable by
Undersigned to Bank ten (10) business days after such notice is given.
So long as Bank is the holder hereof, Bank's books and records shall be
presumed, except in the case of manifest error, to accurately evidence at all
times all amounts outstanding under this Note and the date and amount of each
advance and payment made pursuant hereto.
The prompt and faithful performance of all of Undersigned's obligations
hereunder, including without limitation time of payment, is of the essence of
this Note.
Certain terms used in this Note are defined in Section 9 below.
1. Security Interest. Undersigned hereby grants to Bank a security interest in
the following property now owned or hereafter acquired by Undersigned:
[XX]_________________ (a) all equipment, wherever located, including
machinery, motor vehicles, furniture and fixtures;
[XX]_________________ (b) all inventory (whether held for sale or lease or to
be furnished under contracts of service), raw materials, work in process, and
materials used or consumed in the conduct of Undersigned's business, and all
books, records, invoices and other documents which describe or evidence the
same;
[__]_________________ (c) all farm products;
[XX]_________________ (d) all accounts, contract rights, general intangibles,
choses in action, instrument, chattel paper, documents (including all
documents of title and warehouse receipts) and all rights to the payment of
money, however evidenced or arising;
[__]_________________ (e) the securities described below, together with all
cash, stock or other dividends or distributions paid upon or made in respect
of such securities in any form; all securities received in addition to or in
exchange for such securities; and all subscription rights incident to such
securities; and
[__]_________________ (f) Other;
<PAGE>
(g) In addition to the foregoing, Undersigned (1) grants to Bank a security
interest in all accessions, parts, accessories, attachments and appurtenances in
any way used with, attached or related to, or installed in, any equipment or
inventory constituting "Collateral" hereunder; (2) grants to Bank a security
interest in all substitutions for, renewals of, improvements, replacements and
additions to, and the products and proceeds (cash and non-cash) of all property
constituting "Collateral" hereunder and any insurance policies relating thereto;
(3) grants to Bank a security interest in, lien upon, and right of setoff
against, all deposit accounts, credits, securities, moneys or other property of
Undersigned which may at any time be in the possession of, delivered to, or owed
by Bank, including any proceeds or returned or unearned premiums of insurance,
and the proceeds (cash and non-cash) of all the foregoing property; and (4)
assigns to Bank all moneys which may become payable on any policy of insurance
required to be maintained under this Note, including any returned or unearned
premiums.
All such property subject to Bank's security interests described in this Section
1 is referred to herein collectively as the "Collateral". With respect to
Section 4 hereunder, the term "Collateral" shall not include the property
described in subsections (g)(3) and (g)(4) of this Section 1.
All security interests in Collateral shall be deemed to arise and be perfected
under and governed by the Uniform Commercial Code, except to the extent that
such law does not apply to certain types of transactions or Collateral, in which
case applicable law shall govern.
2. Obligations Secured. The Collateral shall secure the following obligations
("Obligations") of Undersigned to Bank: (a) all amounts at any time owing or
payable under this Note; (b) all costs and expenses incurred by Bank in the
collection or enforcement of this Note or the protection of the Collateral; (c)
all future advances made by Bank for taxes, levies, insurance, and repairs to or
maintenance of the Collateral; and (d) any other indebtedness, liability or
obligation of Undersigned to Bank, past, present, or future, direct or indirect,
absolute or contingent, individual, joint or several, now due or to become due,
whether as drawer, maker, endorser, guarantor, surety or otherwise, except that
none of the security interests created herein shall secure any obligation
incurred by Undersigned which is defined as "consumer credit" by Federal Reserve
Board Regulation Z, 12 C.F.R. (S)226.1 et seq., and is not exempted from the
application of that Regulation.
3. Representations. Undersigned hereby makes the following representations and
warranties which shall be true and correct on the date of this Note and shall
continue to be true and correct at the time of the creation of any Obligation
secured hereby and until the Obligations secured hereby shall have been paid in
full: (a) Undersigned's residence and/or Chief Executive Office, as the case may
be, is as stated below or as otherwise stated in a subsequent written notice
delivered to Bank pursuant to the terms hereof; (b) Undersigned has good and
marketable title to the Collateral subject to no security interest, lien or
encumbrance, except as indicated to the contrary to Bank in writing prior to the
execution of this Note; and (c) if any of the Undersigned is an individual, each
such individual is at least 18 years of age and under no legal disability or
incapacity.
4. Covenants. Undersigned covenants and agrees that until the Obligations
secured hereunder have been paid in full, Undersigned shall: (a) use the
proceeds of the Loans evidenced hereby only for the purpose(s) specified to the
Bank at or prior to the execution hereof; (b) not permit use of the Collateral
for any illegal purposes; (c) promptly notify Bank in writing of any change in
its or their residence or Chief Executive Office; (d) not permit removal of any
of the Collateral from county to county or state to state unless Bank has given
written consent in advance and except for inventory shipped to customer
locations for evaluation purposes in the ordinary course of business; (e)
maintain at all times good and marketable title to all Collateral, free and
clear of any security interest, lien or encumbrance (except as to which Bank may
grant its prior written consent pursuant to section 4(f) below), and defend such
title against the claims and demands of all persons; (f) not (1) affix the
Collateral or permit the Collateral to be affixed to real estate or to any other
goods, (2) lease, mortgage, pledge or encumber the Collateral, (3) permit the
Collateral's identity to be lost, (4) permit the Collateral to be levied upon or
attached under any legal process, (5) permit or cause any security interest or
lien to arise with respect to the Collateral (other than those created in this
Note), or (6) except Collateral customarily sold by Undersigned in the ordinary
course of business and so sold in such manner for full value, sell, consign,
part with possession of, or otherwise dispose of the Collateral or any rights
therein, except as Bank may grant its prior specific written consent with
respect to acts or events specified in subsections (1), (2), (5) or (6) hereof;
(g) maintain the Collateral in good condition and repair, excepting only
reasonable wear and tear; pay and discharge all taxes and other levies on the
Collateral, as well as the costs of repair and maintenance thereof; and furnish
to Bank upon request documentary proof of payment of such taxes, levies and
costs; (h); (i) purchase and maintain policies of insurance (including flood
insurance) to protect the Collateral or other property against such risks and
casualties, and in such amounts, as shall be required by Bank and/or applicable
law, which policies shall (1) be in form and substance satisfactory to Bank, (2)
designate Bank as loss payee and, at Bank's option, as additional insured, and
(3) be (or certificates evidencing same shall be) deposited with Bank; (j)
provide, upon request, financial or other information, documentation or
certifications to Bank (including balance sheets and income statements), all in
form and content satisfactory to Bank; (k) execute, upon demand by Bank, any
financing statements or other documents which Bank may deem necessary to perfect
or maintain perfection of the security interest(s) created in this Note and pay
all costs and fees pertaining to the filing of any financing, continuation or
termination statements with regard to such security interests; (l) procure, and
cause a statement of Bank's security interest to be noted on, any certificate of
title issued or required by law to be issued with respect to any motor vehicle
constituting part of the Collateral, and cause any such certificate to be
delivered to Bank within 10 days from the later of the date of this Note or the
date of the issuance of such certificate; (m) pay, upon demand, all amounts
incurred by Bank in connection with any action or proceeding taken or commenced
by Bank to enforce or collect this Note or protect, insure or realize upon the
Collateral, including attorney's fees equal to the lesser of (a) 20% of the
above sum and interest then due hereunder, or $500.00, whichever is greater, or
(b) the maximum amount permitted by law, and attorney's costs and all costs of
legal proceedings; and (n) immediately notify Bank if any of Undersigned's
accounts arise out of contracts with the United States or any department, agency
or instrumentality thereof, and execute any instruments and take any steps
required by Bank in order that all moneys due and to become due under any such
contracts shall be assigned to Bank and notice thereof given to the United
States under the Federal Assignment of Claims Act.
5. Events of Default. The occurrence of any of the following shall constitute
an "Event of Default" hereunder: (a) default in payment or performance of any of
the Obligations evidenced or secured by this Note or any other evidence of
liability of Undersigned to Bank which remains uncured for longer than 10 days;
(b) the breach by any Obligor (defined as Undersigned and each surety or
guarantor of any of Undersigned's liabilities to Bank, as well as any person or
entity granting Bank a security interest in property to secure the Obligations
evidenced hereby) of any covenant contained in the Credit Agreement, this Note,
or in any separate security, guarantee or suretyship agreement between Bank and
any Obligor, the occurrence of any default hereunder or under the terms of any
such agreement, or the discovery by Bank of any false or misleading
representation made by any Obligor herein or in any such agreement or in any
other information submitted to Bank by any Obligor; (c) with respect to any
Obligor: (1) death or incapacity of any individual or general partner; or (2)
dissolution of any partnership or corporation; (d) any assignment for the
benefit of creditors by any Obligor; (e) insolvency of any Obligor; (f) the
filing or commencement of any petition, action, case or proceeding, voluntary or
involuntary, under any state or federal law regarding dissolution, including the
Bankruptcy Reform Act of 1978, as amended, by or against any Obligor; (g)
default under the terms of any lease of or mortgage on the premises where any
Collateral is located which remains uncured for longer than 10 days; (h)
garnishment, attachment or taking by governmental authority of any Collateral or
other property of the Undersigned which is in Bank's possession;
<PAGE>
or (j) the maturity of any life insurance policy held as collateral under this
Note by reason of the death of the insured or otherwise.
6. Acceleration; Remedies. Upon the occurrence of any Event of Default: (a) all
amounts due under this Note, including the unpaid balance of principal and
interest hereof, shall become immediately due and payable at the option of Bank,
without any demand or notice whatsoever; (b) Undersigned shall, upon demand by
Bank, assemble the Collateral and promptly make it available to Bank at any
place designated by Bank which is reasonably convenient to both parties; (c)
Bank may immediately and without demand exercise any of its rights and remedies
granted herein, under applicable law or which it may otherwise have, against the
Undersigned, the Collateral, or otherwise; and (d) Bank may, without notice or
process of any sort, peaceably enter any premises where any vehicle constituting
a part of the Collateral is located and take possession, retain and dispose of
such vehicle and all property located in or upon it. Bank shall have no
obligation to return any property not constituting Collateral found in any such
vehicle unless Bank actually receives Undersigned's written request
therefor specifically describing such property within 72 hours after
repossession thereof. Notwithstanding any provision to the contrary contained
herein, upon the occurrence of an Event of Default as described in Section 5(f)
hereof, all amounts due under this Note shall become immediately due and
payable, without any demand, notice, or further action by Bank whatsoever, and
demand, notice, or further action by Bank whatsoever, and an action therefor
shall immediately accrue.
7. Bank's Rights. Undersigned hereby authorizes Bank, and Bank shall have the
continuing right, at its sole option and discretion, to: (a) do anything which
Undersigned is required but fails to do hereunder, and in particular Bank may,
if Undersigned fails to do so, (1) insure or take any reasonable steps to
protect the Collateral, (2) pay all taxes, levies, expenses and costs arising
with respect to the Collateral, or (3) pay any premiums payable on any policy of
insurance required to be obtained or maintained hereunder, and add any amounts
paid under this Section 7(a) to the principal amount of the indebtedness secured
by this Note; (b) direct any insurer to make payment of any insurance proceeds,
including any returned or unearned premiums, directly to Bank, and apply such
moneys to any Obligations or other amounts evidenced or secured hereby in such
order or fashion as Bank may elect; (c) inspect the Collateral at any reasonable
time; (d) pay any amounts Bank elects to pay or advance hereunder on account of
insurance, taxes, or other costs, fees or charges arising in connection with the
Collateral, either directly to the payee of such cost, fee or charge, directly
to Undersigned, or to such payee(s) and Undersigned jointly; and (e) pay the
proceeds of the Loans evidenced by this Note to any or all of the Undersigned
individually or jointly, or to such other persons as any of the Undersigned may
direct.
In addition to all rights given to Bank by this Note, Bank shall have all the
rights and remedies of a secured party under any applicable law, including
without limitation, the Uniform Commercial Code.
8. Miscellaneous Provisions. (a) Undersigned waives protest of all commercial
paper at any time held by Bank on which Undersigned is in any way liable, notice
of nonpayment at maturity of any and all accounts, and (except where requested
hereby) notice of action taken by Bank; and hereby ratifies and confirms
whatever Bank may do. Bank shall be entitled to exercise any right
notwithstanding any prior exercise, failure to exercise or delay in exercising
any such right. (b) Bank shall retain the lien of any judgment entered on
account of the indebtedness evidenced hereby, as well as any security interest
previously granted to secure repayment of the indebtedness evidenced hereby, and
Undersigned warrants that Undersigned has no defense whatsoever to any action or
proceeding that may be brought to enforce or realize on such judgment or
security interest. (c) If any provision hereof shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and this
Note shall be construed as if the invalid or unenforceable provision had never
been a part of it. The descriptive headings of this Note are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof. (d) The rights and privileges of Bank contained in this Note
shall inure to the benefit of its successors and assigns, and the duties of
Undersigned shall bind all heirs, personal representatives, successors and
assigns. (e) This Note shall in all respects be governed by the laws of the
state in which this Note is payable (except to the extent that federal law
governs), and all references to the Uniform Commercial Code shall be deemed to
refer to the Uniform Commercial Code as enacted in such state. (f) Undersigned
hereby irrevocably appoints Bank and each holder hereof as Undersigned's
attorney-in-fact to: (1) endorse Undersigned's name to any draft or check which
may be payable to Undersigned in order to collect the proceeds of any insurance
or any returned or unearned premiums in respect of any policies of insurance
required to be maintained hereunder; and (2) take any action Bank deems
necessary to perfect or maintain perfection of any security interest granted to
Bank herein, including executing any document on Undersigned's behalf. (g)
Undersigned shall bear the risk of loss of, damage to, or destruction of the
Collateral, and Undersigned hereby releases Bank from all claims for loss or
damage to the Collateral caused by any act or omission on the part of Bank,
except for willful misconduct. (h) Copies or reproductions of this document or
of any financing statement may be filed as a financing statement.
9. Definitions. As used herein: (a) "account", "chattel paper", "contract
right", "document", "instrument", and "inventory" have the same respective
meanings given to those terms in the Uniform Commercial Code; (b) "general
intangibles" has the meaning given to that term in the Uniform Commercial Code,
including without limitation, customer lists, books and records (including
without limitation, all correspondence, files, tapes, cards, book entries,
computer runs, computer programs and other paper and documents, whether in the
possession or control of Undersigned or any computer service bureau), rights in
franchises and sales contracts, patents, copyrights, trademarks, logos,
goodwill, trade names, label designs, royalties, brand names, plans, blueprints,
inventions, patterns, trade secrets, licenses, jigs, dies, molds, and formulas;
(c) "Chief Executive Office" means the place from which the main part of the
business operations of an entity is managed; and (d) "Undersigned" refers
individually and collectively to all makers of this Note, including, in the case
of any partnership, all general partners of such partnership, individually and
collectively, whether or not such partners sign below. Undersigned shall each be
jointly and severally bound by the terms hereof, and, with respect to any
partnership executing this Note, each general partner shall be bound hereby both
in such general partner's individual and partnership capacities.
Capitalized terms not defined in this Note shall have the same meanings set
forth in the Credit Agreement.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Signatures
- -----------------------------------------------------------------------------------------------------------------------------------
Witness the due execution hereof.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Witness: Individual:
x x (Seal)
- ------------------------------------------------------------- -----------------------------------------------------------------
Witness: Address
x
- ------------------------------------------------------------- -----------------------------------------------------------------
Individual:
x (Seal)
-----------------------------------------------------------------
Address
-----------------------------------------------------------------
Corporation or Other Entity
RF POWER PRODUCTS, INC.
- ------------------------------------------------------------- -----------------------------------------------------------------
Attest/Witness: By: (Signature and Title) Domenic Golato, CFO
X /s/ [SIGNATURE APPEARS HERE] /s/ Domenic Golato - VP & CFO (Seal)
- ------------------------------------------------------------- -----------------------------------------------------------------
(Corporate Seal) By: (Signature and Title)
x (Seal)
-----------------------------------------------------------------
Business Address
502 Gibbsboro-Marlton Road
-----------------------------------------------------------------
Voorhees, NJ 08043
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Supplement to Security Agreement [LOGO OF MELLON PSFS APPEARS HERE]
- --------------------------------------------------------------------------------
Accounts Receivable and Inventory
- --------------------------------------------------------------------------------
This Supplement to Security Agreement supplements a Note and Security
Agreement or Security Agreement, dated May 24, 1996 ("Agreement"), executed by
------------
Undersigned to and for the benefit of Mellon Bank, N.A. ("Bank"). Undersigned,
----------------
intending to be legally bound, hereby agrees as follows:
1. Reaffirmation. Undersigned hereby reaffirms all security interests granted
heretofore or simultaneously herewith by the Undersigned's inventory and rights
to the payment of money, including, but not limited to, accounts, contract
rights, chattel paper and general intangibles as set forth in the Agreement,
together with the proceeds of the foregoing. All terms used herein shall have
the same respective meanings given to such terms in the Agreement. Any reference
in this Supplement to any "account" shall be deemed to refer to any right to the
payment of money, including any contract right or general intangible.
2. Additional Representations. In addition to the representations and warranties
set forth in the Agreement, Undersigned hereby makes the following
representations and warranties which shall be true and correct on the date of
this Supplement and shall continue to be true and correct at the time of any
borrowing under any line of credit with Bank and until the Obligations secured
by the Agreement shall have been paid in full: (a) each account: (1) represents
an amount actually owing to the Undersigned by the account debtor (less
discounts allowed for prompt payment), (2) is valid and enforceable according to
its terms without further performance of any kind; (3) is not evidenced by any
instrument or chattel paper unless the original of such instrument or chattel
paper has been deposited with Bank; and (4) is not evidenced by any judgment
unless such judgement has been assigned of record to Bank; and (b) the locations
of all of Undersigned's places of business are as stated below, and the
inventory and records of the accounts are kept at the places indicated below.
3. Additional Covenants. In addition to the covenants set forth in the
Agreement, Undersigned covenants and agrees that until the Obligations secured
by the Agreement have been paid in full Undersigned shall: (a) immediately
notify the Bank in writing in the event that any of the following occurs: (1)
except in the ordinary course of business any account is or becomes entitled or
eligible for discount for prompt payment except in the ordinary course of
business; (2) any account debtor has or may have any defense to payment of, or
right of setoff, counterclaim, or recoupment against any account; (3) any
account represents an amount which is disputed by the account debtor or the
payment of which is in any way contingent or conditional; or (4) the
desirability, usefulness, or marketability of any of the inventory has been in
any way materially reduced or materially impaired by reason of physical
deterioration, technical, obsolescence, or otherwise; (b) keep accurate and
complete books and records in accordance with generally accepted accounting
principles and, at Undersigned's expense, promptly furnish Bank such information
and documents relating to the Collateral at such times and in such form and
detail as Bank may request, including without limitation: (1) copies of invoices
or other evidence of Undersigned's accounts and schedules showing the aging,
identification, reconciliation, and collection thereof; (2) evidence of shipment
and receipt of goods and the performance of services or obligations covered by
accounts; and (3) reports as to Undersigned's inventory and purchases, sales,
damage, or loss thereof; all of the foregoing to be certified by authorized
officers or other employees or Undersigned; (c) not change any location listed
below regarding places of business, inventory and records of accounts without
Bank's prior written consent; (d) at Undersigned's expense, diligently collect
the accounts on behalf of Bank until such time as Bank exercises its right to
directly collect the accounts, and upon notice from Bank, deliver all proceeds
of accounts to Bank forthwith upon receipt, in the original form in which
received; (e) immediately upon Bank's request, open a cash collateral account
("Cash Collateral Account") at Bank and deposit therein all cash proceeds of
collections on the accounts; (f) immediately upon Bank's request, give the Bank
assignments, in form acceptable to Bank, of specific accounts or groups of
accounts and specific general intangibles, and immediately repay the amount
loaned against any account so assigned to the Bank if the contract with the
account debtor is breached, cancelled or terminated; (g) immediately upon Bank's
request, furnish Bank with all information received by Undersigned regarding the
financial condition of any account debtor, except to the extent prohibited by
law; (h) immediately deliver to Bank all instruments, documents or chattel paper
representing any of the Collateral and immediately assign of record to Bank any
judgement representing any account constituting Collateral; and (i) immediately
upon Bank's request, mark its records evidencing its accounts in a manner
satisfactory to Bank so as to show which accounts have been assigned to Bank.
4. Additional Rights of Bank. In addition to Bank's rights set forth in the
Agreement, Undersigned hereby authorizes Bank, and Bank shall have the
continuing rights at any time, whether or not any default has occurred under the
Agreement, and at its sole option and discretion, without notice, to: (a) take
over and collect any or all of the accounts and to take any other action
pursuant to its power of attorney granted herein; (b) exercise absolute and
exclusive dominion and control over all funds deposited in the Cash Collateral
account; apply any funds therein against any Obligations; any charge to any
deposit account of Undersigned any item of payment credited to the Cash
Collateral account which is subsequently dishonored; (c) at any reasonable time,
through its authorized agents and employees, inspect, audit, and verify the
accounts and the inventory, review Undersigned's books and records, and copy or
make excerpts from any document; and (d) verify accounts with debtors in the
name of Undersigned, Bank, or Bank's designee.
5. Additional Power of Attorney. In addition to the powers of attorney granted
to Bank by Undersigned in the Agreement, Undersigned hereby appoints Bank and
its officers, employees and agents as its irrevocable, true and lawful attorneys
in fact with all necessary power and authority to: (a) endorse Undersigned's
name on all media of payment delivered to Bank or deposited in the Cash
Collateral account; (b) notify Undersigned's account debtors of the assignment
of their debts and direct them to make all payments thereon to Bank; (c) in
Bank's name or in the name of Undersigned demand, sue for, collect, compromise,
settle, and give releases from any account; and (d) take such other action as
Bank may deem appropriate for any such purpose.
In exercising its rights under this section, Bank shall have no liability to
Undersigned except for willful misconduct.
Page 1 of 2
<PAGE>
- --------------------------------------------------------------------------------
6. Integration. The provision of this Supplement shall, as of the date
hereof, be deemed to be fully incorporated by reference in, constitute a part
of, and supplement the provisions of, the Agreement, which, except as
supplemented hereby, shall continue in full force and effect in accordance
with its terms and conditions.
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Witness the due execution hereof this 24th day of May, 1996
------------------------------------------------------------------------------
Witness: Individual:
X X (Seal)
----------------------------------- ----------------------------------------
Address
----------------------------------- ----------------------------------------
Witness: Individual:
X X (Seal)
----------------------------------- ----------------------------------------
Address
----------------------------------------
Corporation or Other Entity
RF POWER PRODUCTS, INC.
----------------------------------- ----------------------------------------
Attest/Witness By: (Signature and Title)
Domenic Golato, CFO
X [SIGNATURE APPEARS HERE] X /s/ Domenic Golato VP & CFO (Seal)
----------------------------------- ----------------------------------------
By: (Signature and Title)
X (Seal)
----------------------------------------
(Corporate Seal) Business Address
502 Gibbsboro-Marlton Road
----------------------------------------
Voorhees, NJ 08043
Location of Inventory: Location of records concerning the
accounts:
Voorhees, NJ Voorhees, NJ
----------------------------------- ----------------------------------------
Austin, TX Austin, TX
----------------------------------- ----------------------------------------
San Jose, CA San Jose, CA
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Page 2 of 2
<PAGE>
SUPPLEMENT TO NOTE AND SECURITY AGREEMENT
-----------------------------------------
This Supplement to Note and Security Agreement ("Supplement") is annexed
to and is part of the Note and Security Agreement dated as of May 24th, 1996 of
----
Undersigned, payable to Mellon Bank, N.A, ("Bank"), in the stated principal
amount of $4,000,000.00 ("Facility"). Such Note and Security Agreement as
supplemented by this Supplement shall be referred to as the Note. Capitalized
terms used without further definition herein shall have the meaning set forth in
the Note.
1. Use of Borrowings. Advances of principal under this Note shall be
-----------------
used by Undersigned to repay existing loans, fund working capital and purchase
equipment.
2. Payment. Interest shall be payable at each of the following times:
-------
(a) if at the Prime-Based Rate, on the first day of each month beginning June
1, 1996; (b) if at the LIBOR Rate at the end of each LIBOR Rate Period specified
in each Notification; and (c) upon the Maturity Date. Undersigned understands
and agrees that any payments of principal, interest or other sums required under
this Note may be deducted on the due date, without notice by Bank, from any
deposit account maintained by Undersigned with Bank.
3. Alternative Principal Amortization. So long as no default or Event
----------------------------------
of Default shall be in existence under the Note, Undersigned shall have the
option of reducing the principal amount of Borrowings used for the purchase of
equipment by electing to amortize such Borrowings, provided however that,
---------------------
(i) the principal amount to be amortized (the "Term Loan(s)") shall not exceed
$2,000,000 and (ii) the aggregate principal amount of the Term Loan(s) plus any
other principal amounts outstanding under this Note shall not exceed the
Commitment Amount stated in the Credit Agreement. The Term Loans(s) shall be
subject to the same terms provided for in that certain Note and Security
Agreement dated May 24th, 1996 from the Borrower to Bank in the principal amount
----
of $1,400,000, including without limitation, the following payment terms:
Payment-Principal. Principal shall be payable in
-----------------
forty-eight (48) equal consecutive monthly installments
of an amount as would be obtained by dividing the
principal outstanding as of the date the Borrower elects
to create the Term Loan (s) (the "Election Date") by the
forty-eight (48) required principal installments. The
initial principal installment will be due and payable
on the first day of the first month after the election
date and thereafter on the first day of each month through
the Term Loan(s) maturity date, the date four (4) years after
the Election Date.
[LOGO]
<PAGE>
4. Interest Rate Options. (a) The outstanding principal balance of
---------------------
this Note shall earn interest at the Prime-Based Rate, provided however that,
--------------------
subject to the terms of paragraph 4(b) below, by giving Notification,
Undersigned may request to have all or such portion of the outstanding principal
of this Note as hereinafter permitted earn interest, instead, or at the LIBOR
Rate as follows: (i) with respect to the principal amount outstanding under the
Facility, from the date of a Notification until the end of the LIBOR Rate Period
specified in the Notification; and/or (ii) with respect to the principal amount
of any portion of the Facility outstanding and earning interest at the LIBOR
Rate at the time of the Notification related to such principal amount, from the
expiration of the then current LIBOR Rate Period related to such principal
amount until the end of the or LIBOR Rate Period specified in the Notification;
and/or (iii) with respect to all or any portion of the principal amount of the
Facility outstanding and earning interest at the Prime-Based Rate at the time of
Notification, from the date set forth in the Notification until the end of the
LIBOR Rate Period specified in the Notification. All advances of principal
amounts accruing interest at the LIBOR Rate or the shall be made in minimum
increments of $100,000.00 provided however that, there shall be no more
---------------------
than five (5) advances of principal accruing interest at the LIBOR Rate at any
one time.
(b) Undersigned understands and agrees: (i) that Bank, in its sole
discretion from time to time and without notice, may refuse any request of
Undersigned to select, convert to or renew the LIBOR Rate, if Bank determines in
good faith (which determination shall be conclusive) that the Undersigned is in
default under the Note or that such interest rate is impractical or unlawful due
to any law, regulation, rule, guideline or interpretation or administration to
which Bank may be subject, (ii) that subject to the provisions of this Note, the
Prime-Based Rate and the LIBOR Rate may apply simultaneously to the different
parts of the outstanding principal of this Note, (iii) that the LIBOR Rate may
apply simultaneously to various portions of the outstanding principal for
various LIBOR Rate periods, (iv) that the LIBOR Rate applicable to any portion
of outstanding principal may be different from the LIBOR Rate applicable to any
other portion of outstanding principal and (v) that the Bank shall have the
right to terminate any LIBOR Rate Periods, and the interest rate applicable
thereto, prior to maturity of such Rate Period, if Bank determines in good faith
(which determination shall be conclusive) that continuance of such interest rate
has been made impractical or unlawful by any law, regulation, rule, guideline or
interpretation or administration to which Bank may be subject, in which event
the principal to which such terminated Rate Period relates thereafter shall earn
interest at the Prime-Based Rate.
5. Interest Rate Spread. The Undersigned's shall pay a basis point
--------------------
spread under this Note on the LIBOR Rate option based on the Undersigned's
financial performance based on its Cash Flow
-2-
<PAGE>
Ratio (as defined in the Credit Agreement) and effective on the first day
following receipt of the Undersigned's quarterly financial statements until
receipt of the Undersigned's quarterly financial statements for the following
fiscal quarter:
<TABLE>
<CAPTION>
LIBOR Rate Plus
Cash Flow Ratio Basis Point Spread
- --------------- ------------------
<S> <C>
Less than 2.50 to 1.00 LIBOR + 125 b.p.
Greater than or equal to 2.50 to
1.00, but less than 3.50 to 1.00 LIBOR + 100 b.p.
Greater than or equal to 3.50 to 1.00 LIBOR + 75 b.p.
</TABLE>
6. Prime-Based Rate Fallback. After expiration of any LIBOR Rate
-------------------------
Period, any principal portion corresponding to such Rate Period which has not
been converted or renewed in accordance with paragraph 4(a) hereof shall earn
interest automatically at the Prime-Based Rate from the date of expiration of
such Rate Period until paid in full, unless and until Undersigned requests and
Bank approves a conversion to the LIBOR Rate in accordance with paragraph 4(a).
With respect to any principal amount, if Undersigned fails to request the LIBOR
Rate option by giving Bank a Notification, or if Bank fails to approve such
request when made, such principal amount shall be deemed to earn interest at the
Prime-Based Rate.
7. Voluntary Repayment. Prior to the occurrence of an Event of Default
-------------------
hereunder, (a) Undersigned shall have the right at its option from time to time
to prepay that portion of the outstanding principal balance hereof which is
earning interest at such time at the Prime-Based Rate in whole or in part
without any Repayment Premium; and (b) Undersigned shall have the right to
prepay all or any portion of the outstanding principal balance hereof which is
earning interest at the LIBOR Rate, provided however that, any prepayments of
---------------------
principal earning interest at the LIBOR Rate shall be accompanied by the
Repayment Premium applicable thereto.
8. Indemnity. Undersigned shall indemnify Bank against any loss or
---------
expense (including loss of margin) which Bank has sustained or incurred as a
consequence of: (a) any payment, prepayment or conversion of any principal
amount earning interest at the LIBOR Rate, on a day other than the last day of
the corresponding Rate Period (whether or not any such payment is made pursuant
to demand by Bank under this Note and whether or not any such payment consented
to by Bank, unless Bank shall have expressly waived such indemnity in writing);
(b) any attempt by Undersigned to revoke in whole or part any Notification given
pursuant to this Note; (c) any attempt by Undersigned to convert or renew any
principal amount earning interest at the LIBOR Rate, on a day other than the
last day of the corresponding applicable Rate Period (whether or not such
conversion or renewal is
-3-
<PAGE>
consented to by Bank, unless Bank shall have expressly waived such indemnity in
writing); or (d) any Event of Default.
If Bank sustains any such loss or expense it shall from time to time
notify Undersigned of the amount determined in good faith by Bank (which
determination shall be conclusive) to be necessary to indemnify Bank for such
loss or expense. Such amount shall be due and payable by Undersigned on demand.
9. Events of Default. In addition to the Events of Default described in
-----------------
Section 5 of the Note, the occurrence of the following shall constitute an
Event of Default: (i) any failure by Undersigned to pay when due and payable
the principal of or interest on any debt in respect of which it is obligated to
make payment, or the maturity of such debt shall have been accelerated in
accordance with the provisions of any contract providing for the creation of or
concerning such debt, or any event shall have occurred or failed to occur and
be continuing that, with the giving of notice or the passage of time or both,
would permit any holder or holders of such debt, any trustee or agent acting on
behalf of such holder or holders or any other person so to accelerate such
maturity; (ii) entry of judgment in an amount in excess of $100,000 against any
Obligor in any court of record; and (iii) the assessment against any Obligor by
the Internal Revenue Service or any other federal, state or local taxing
authority of unpaid taxes, or the issuance of a levy or the entering of a lien
in connection therewith.
10. Records. The unpaid principal amount of this Note, the unpaid
-------
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability and the date and amount of
each payment or demand shall at all times be ascertained from the books and
records created by Bank, which shall be conclusive absent manifest error.
All notices (including any Notification) under this Note shall be in
writing or by telephone promptly confirmed in writing, and all such writings
shall be sent by first-class, first-class express or certified mail or by hand
delivery, in all cases with charges prepaid, provided that Bank may act in
reliance on any telephonic notice prior to receipt of written confirmation. All
notices shall be sent to Undersigned at the address stated on the signature page
hereof or in accordance with the last unrevoked written direction from
Undersigned to Bank. All notices by Undersigned shall be effective when
received by Bank at its address at Mellon Bank, N.A., Plymouth Meeting
Executive Campus, 610 W. Germantown Pike, Suite 200, Plymouth Meeting, PA
19462, Attention: Middle Market Banking, and all notices by Bank shall be
effective when telephoned, deposited in the mail or hand delivered. Written
notices or confirmations by Undersigned shall not be deemed records of Bank
within the meaning of this paragraph whether or not received by Bank and, in
the event that any written notice sent by Undersigned in confirmation of
telephonic notice
-4-
<PAGE>
differs from Bank's records of such telephonic notice, Bank may act in
reliance upon such telephonic notice as if written notice were not
received, provided that Bank has acted in good faith. Bank may
conclusively rely without inquiry on any notice or confirmation
purporting to be from or authorized by Undersigned and such reliance
shall be presumed to be correct.
11. Time of Essence. The prompt and faithful performance of all
---------------
of Undersigned's obligations hereunder, including without limitation time
of payment, is of the essence of this Note.
12. Definitions. As used in this Supplement: "LIBOR Rate" means
----------- ----------
for any day during each LIBOR Rate Period the per annum rate of interest
(computed on a basis of a year of 360 days and actual days elapsed)
determined by Bank by adding (a) the per annum rate of interest (rounded
upward to the nearest 1/100 of 1%) obtained by dividing (i) the rate of
interest estimated in good faith by Bank in accordance with its usual procedures
(which determination shall be conclusive) to be the average of the rate per
annum for deposits, in an amount of U.S. Dollars comparable to the amount of
principal relating to such LIBOR Rate Period and having maturities comparable
to such LIBOR Rate Period, offered to major money center banks in the London
interbank market at or about 11:00 am., London time, two London Business Days
prior to such LIBOR Rate Period, (ii) a number equal to 1.00 minus the LIBOR
-----
Rate Reserve Percentage for such day; plus (b) the applicable basis point
----
spread. "LIBOR Rate Period" means for any portion of principal for which
-----------------
Undersigned elects the LIBOR Rate the period of time for which such rate shall
apply to such principal portion. LIBOR Rate Periods shall be for periods of
30, 60 or 90 days and for no other length of time; provided that no LIBOR Rate
Period may extend beyond the Maturity Date. "LIBOR Rate Reserve Percentage"
-----------------------------
for any day means the percentage (rounded upward to the nearest 1/100 of 1%),
as determined in good faith by Bank (which determination shall be conclusive)
as representing for such day the maximum effective percentage as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserve requirements) for Bank with
respect to eurocurrency funding. "Maturity Date" means May 29,1998.
-------------
"Notification" means telephonic notice (which shall be irrevocable) by
- -------------
Undersigned to Bank that Undersigned has requested that the LIBOR Rate shall
apply to some portion of the principal amount of this Note in accordance with
the provisions of paragraph 4 hereof, which notice shall be given no later than
1:00 p.m., local time at the place where this Note is payable, on the day which
is at least three (3) business days prior to the day (which shall be a day on
which Bank is opened for business) on which such election is to become
effective, which notice shall specify (i) that the LIBOR Rate option is
being selected; (ii) the principal amount to be subject to the LIBOR Rate;
(iii) whether such amount is a renewal of a previous request of the LIBOR Rate,
a conversion from the Prime Based Rate to the LIBOR Rate, or a combination
-5-
<PAGE>
thereof; (iv) the Rate Period selected; and (v) the date on which such request
is to become effective (which date shall be a date selected in accordance with
paragraph 4(a) hereof. "Prime-Based Rate" means a per annum rate of interest,
----------------
calculated on an 360 day basis but charged on the actual number of days elapsed,
equal to the rate of interest announced from time to time by Bank as its Prime
Rate which rate is not necessarily the lowest interest rate charged by the Bank
for loans, such Prime-Based Rate to change from time to time as of the effective
date of each change in Prime Rate. "Repayment Premium" means the amount which
-----------------
Undersigned shall pay to Bank as a premium in connection with a repayment of
outstanding principal earning interest at the LIBOR Rate at the time of
repayment, which amount shall be the amount determined by Bank to be the
difference between (a) the present value of the interest payments that would
have been paid in the future to Bank by Undersigned on such repaid portion of
principal accruing at the LIBOR Rate but for such repayment, and (b) the present
value of the interest payments that would be paid in the future to Bank at the
United States Treasury Rate if on or about the date of repayment Bank made a
hypothetical investment of the repaid portion of principal accruing at a fixed
rate of interest in United States Treasury securities maturing on or about the
date that the repaid portion of principal would have matured but for such
repayment and bearing interest accruing from the date of repayment, payable on
each date on which Undersigned, but for such repayment, payable on each date on
which Undersigned, but for such repayment, would have paid interest on the
repaid portion of principal. "Undersigned" means, individually and collectively,
-----------
all makers of this Note. "United States Treasury Rate" means a rate of interest
---------------------------
per annum, equal to (rounded downward to the nearest 1/100 of one percent) the
annual yield Bank could obtain by purchasing on the date of repayment United
States Treasury Securities with semi-annual interest payments, maturing on or
about the date on which the repaid portion of principal would have matured.
WITNESS the due execution and delivery hereof, intending to be
legally bound.
ATTEST: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun BY: /s/ Domenic N. Golato
- -------------------------------- ---------------------------------
By: Paul S. Zaun Domenic N. Golato
Title: Director Cost Acctg. Chief Financial Officer
MELLON BANK, N.A.
Accepted by:
/s/ Anthony W. LaMarca
------------------------------------
Anthony W. LaMarca
Vice President
-6-
<PAGE>
LATE PAYMENT CHARGE ADDENDUM
SPECIFIED PERCENTAGE CHARGE
---------------------------
THIS ADDENDUM dated May 24th, 1996, to the Note and Security Agreement dated of
even date herewith (the "Note") RF Power Products, Inc. ("Undersigned") to
Mellon Bank, N.A. ("Bank"),
WHEREAS, Undersigned and Bank desire to incorporate the following provisions
into the Note.
NOW, THEREFORE, Undersigned, intending to be legally bound hereby, covenants and
agrees that the following shall be added to the Note and made a part thereof.
1. If any payment (including without limitation any regularly scheduled
payment, balloon payment and final payment) is not paid within 10 days
after it is due, Undersigned will pay a late charge equal to 4.0% of the
unpaid portion of the payment due. Such late charge shall be in addition to
any increase made to the interest rate(s) applicable to the outstanding
balance hereof as a result of maturity of this Note or otherwise, as well
as in addition to any other applicable fees, charges and costs. Also, Bank
reserves the right to modify, in its sole discretion and upon thirty (30)
days prior written notice to Undersigned, the late charge set forth herein.
2. Except as stated in this LATE PAYMENT CHARGE ADDENDUM, the terms,
covenants, conditions and provisions of the Note will remain in full force
and effect.
Witness the due execution hereof.
ATTEST: RF POWER PRODUCTS, INC.
/s/ APPEARS HERE By: /s/ Domenic N. Golato
- ------------------------------- --------------------------
By: Domenic N. Golato
Title: Chief Financial Officer
Business Address:
502 Gibbsboro-Marlton Road
Voorhees, NJ 08043
<PAGE>
MELLON BANK, N.A.
ENVIRONMENTAL RIDER
-------------------
THIS ENVIRONMENTAL RIDER dated May 24th, 1996, is a rider to a Note and
Security Agreement ($4,000,000.00) dated of even date herewith from RF POWER
PRODUCTS, INC. ("Undersigned") to MELLON BANK, N.A. ("Mellon");
WHEREAS, Undersigned and Bank desire to incorporate the following
provisions into the Agreement.
NOW, THEREFORE, Undersigned, intending to be legally bound hereby,
covenants and agrees that the following shall be added to the Agreement and made
a part thereof.
1. Additional Representations, Warranties and Convenants.
-----------------------------------------------------
In addition to the representations, warranties, and covenants set forth in
the Agreement, Undersigned hereby represents, warrants, covenants, and agrees,
on behalf of itself and each of its subsidiaries and affiliates, if any, that:
(a) Each of them now has and will continue to have all Environmental
Permits (as hereinafter defined) necessary for the conduct of each of their
businesses and operations;
(b) Each of them conducts and will continue to conduct each of their
businesses and operations in material compliance with all applicable
Environmental laws (as hereinafter defined) and Environmental Permits;
(c) There does not exist, nor will any of them permit to exist, any event
or condition that requires or is likely to require any of them under any
Environmental Law to pay or expend funds by way of fines, judgments, damages,
cleanup, remediation or the like in an aggregate amount, the payment of which
could reasonably be expected to interfere substantially with normal operations
of Undersigned or materially adversely affect the financial condition of
Undersigned;
(d) Undersigned shall notify the Bank, in writing within five (5) business
days, upon becoming aware of any pending or threatened proceeding, suit,
investigation, allegation or inquiry regarding any alleged event or condition
that, if resolved unfavorably to Undersigned or any of Undersigned's
subsidiaries or affiliates, is likely to cause Undersigned or any of its
subsidiaries or affiliates under any Environmental Law to pay or expend funds by
way of fines, penalties, administrative actions, judgments, damages, cleaning,
remediation or the like, or cause Undersigned or any of its subsidiaries or
affiliates to pay or expend funds for any third party claims, proceedings,
actions or judgments for personal injury or property damage resulting from an
event or condition relating to Hazardous Substances (as hereinafter defined) or
from a release or threatened release of Hazardous Substance; and
<PAGE>
(e) Undersigned shall provide at Undersigned's costs, upon request by
Bank, certifications, documentation, copies of pleadings and other information
regarding the above, all in form and content satisfactory to Bank.
2. Definitions.
-----------
As used in this Rider:
(a) "Environmental Law" means any federal, state or local environmental
law, statute, regulation, rule, ordinance, court or administrative order or
decree, or private agreement or interpretation, now or hereafter in existence,
relating to the manufacture, distribution, labeling, use, handling, collection,
storage, treatment, disposal or otherwise of Hazardous Substances, or in any way
relating to pollution or protection of the environment or public health.
(b) "Environmental Permit" means any federal, state or local permit,
license or authorization issued under or in connection with any Environmental
Law.
(c) "Hazardous Substances" means petroleum and petroleum products,
radioactive materials, asbestos, radon, lead containing materials, sewage or any
materials or substances defined as or included in the definition of "hazardous
wastes," "hazardous substances," "hazardous materials," "toxic substances,"
"hazardous air pollutants," and "toxic pollutants," or "pollution" as those
terms are used in any Environmental Law.
Witness the due execution hereof.
Attest: RF POWER PRODUCTS, INC.
[SIGNATURE APPEARS HERE] By: /s/ Domenic Golato
- ------------------------------- -----------------------------------
Name: Domenic Golato
Chief Financial Officer
[CORPORATE SEAL APPEARS HERE]
Business Address:
502 Gibbsboro-Marlton Road
Voorhees, NJ 08043
-2-
<PAGE>
FIRST AMENDMENT TO NOTE AND SECURITY AGREEMENT
----------------------------------------------
THIS FIRST AMENDMENT TO NOTE AND SECURITY AGREEMENT (this "Agreement")
made as of this 17th day of January, 1997 between RF POWER PRODUCTS, INC. a New
Jersey corporation (the "Borrower"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower is the maker of a certain Note and Security
Agreement to the Bank in the original principal amount of Four Million Dollars
($4,000,000.00) dated May 24th, 1996 (the "Note") (capitalized terms used herein
but not defined in this Agreement shall have the meaning ascribed to them in the
Note);
WHEREAS, the Borrower has requested that the Bank amend certain
provisions of the Note in order to, among other things, gain permission to
obtain equipment financing in the amount of $500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Credit Amendment referred to below, and intending to be
legally bound, the Borrower and the Bank hereby covenant and agree as follows:
1. Amendments. Upon the satisfaction of any condition precedent
----------
contained in the First Amendment to Revolving Line of Credit Agreement dated as
of even date herewith (the "Credit Amendment") and the execution and delivery
of this Agreement by the Borrower and the Bank, the Note shall be amended as
follows:
(a) Section 3 of the Supplement to Note and Security Agreement (the
"Supplement"), Alternative Principal Amortization, shall be amended by adding
----------------------------------
the following sentence to the end of such Section:
The Borrower's option set forth in this Section 3 shall expire as
of May 31, 1997.
(b) The Note shall be amended to reflect that references in the Note to
the "Credit Agreement" shall be references to the Revolving Line of Credit
Agreement as amended by the Credit Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Representations and Warranties. The Borrower hereby represents and
------------------------------
warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
<PAGE>
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Note, including, without limitation, the supplements annexed thereto and made a
part thereof, are hereby confirmed and shall remain in full force and effect
without modification. From and after the effectiveness of the amendments set
forth in Section 1 hereof, all references in any document or instrument to the
Note shall mean the Note as amended by this Agreement.
4. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in any way the extension of any
new credit by the Bank to the Borrower, or the satisfaction of any indebtedness
evidenced by the Credit Agreement or the Notes as amended hereby.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
Attest: RF POWER PRODUCTS, INC.
/s/ [SIGNATURE APPEARS HERE] /s/ Domenic N. Golato
- ----------------------------- ---------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
------------------------
Anthony W. LaMarca
Vice President
-2-
<PAGE>
- --------------------------------------------------------------------------------
Note and Security Agreement [LOGO OF MELLON PSFS APPEARS HERE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ 1,400,000.00 May 24th, 1996
- ------------------------------------ --------------------------------------
For value received, and intending to be legally bound, Undersigned, as defined
below, promises to pay
Mellon Bank, N.A.
- --------------------------------------------------------------------------------
("Bank") or its order at
Philadelphia, Pennsylvania
- --------------------------------------------------------------------------------
the sum of
One Million, Four Hundred Thousand and
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------00/100
- --------------------------------------------------------------------------------
Dollars ($ 1,400,000.00 ), or such lesser or greater principal amount as may be
-----------------
outstanding from time to time under a discretionary line of credit established
by Bank for the benefit of Undersigned, with interest on the outstanding balance
from the date of this Note and Security Agreement ("Note") at the rate(s)
("Contractual Rate(s)") specified herein.
See Supplement to Note and Security Agreement
Upon the occurrence of any Event of Default (as defined below), at Bank's
option, interest shall accrue at a rate equal to two percent (2%) per annum
above the Contractual Rate(s) specified until the earlier of (a) the date that
such Event of Default has been cured, (b) until and including the date of
maturity hereof, or (c) if this Note is payable on demand, until and including
the date for payment in full set forth in any such demand, whichever the case
may be.
After maturity, whether by acceleration or otherwise, or if this Note is payable
on demand, after the date for payment in full set forth in any such demand, at
Bank's option, interest shall accrue at a rate equal to 2 percent (2%) per annum
above the Contractual Rate(s) specified until all sums due hereunder are paid.
Interest shall continue to accrue after the entry of judgment by confession or
otherwise at a rate equal to 2 percent (2%) per annum above the Contractual
Rate(s) until all sums due hereunder and/or under the judgment are paid, unless
the Contractual Rate(s) is (are) altered by subsequent maturity. This is the
Note or one of the Notes referred to in that Loan Agreement dated
May 24th, 1996
- --------------------------------------------------------------------------------
between Undersigned and Bank, as the same may be supplemented from time to time.
If any payment (including without limitation any regularly scheduled payment,
balloon payment and final payment) is not paid within 10 days after it is due,
-----
Undersigned will pay a late charge as specified below, regardless of whether the
payment due consists of principal and interest, principal only or interest only.
[XX] 4.0% of the unpaid portion of the payment due
[__] the greater of $ , or % of the unpaid portion of the payment
-------- ------
due
[__] late payment charge does not apply
Such late charge shall be in addition to any increase made to the Contractual
Rates(s) applicable to the outstanding balance hereof as a result of maturity of
this Note or otherwise, as well as in addition to any other applicable fees,
charges and costs.
Undersigned shall have the right, at its option, to prepay this Note in whole at
any time or in part from time to time. Any such prepayment shall be applied
first to any accrued but unpaid interest, secondly to the prepayment charge, if
any, discussed below, and tasty to the unpaid installments of principal in the
reverse order of their scheduled maturities. In the event that any portion of
principal of this Note accruing interest at a fixed rate is prepaid for any
reason whatsoever, whether by declaration, acceleration, demand or otherwise and
whether or not an Event of Default has occurred, a prepayment charge shall be
due and payable by Undersigned to Bank, calculated as described in the
Prepayment Addendum, if any, which references this Note, from Undersigned to
Bank, incorporated herein by reference and made a part hereof. All such
prepayments shall be subject to all terms and conditions of any such Prepayment
Addendum.
So long as Bank is the holder hereof, Bank's books and records shall be
presumed, except in the case of manifest error, to accurately evidence at all
times all amounts outstanding under this Note and the date and amount of each
advance and payment made pursuant hereto.
The prompt and faithful performance of all of Undersigned's obligations
hereunder, including without limitation time of payment is of the essence of
this Note.
Certain terms used in this Note are defined in Section 14 below.
Page 1 of 6
<PAGE>
1. Security Interest. Undersigned hereby grants to Bank a security interest
in the following property now owned or hereafter acquired by Undersigned:
[X] (a) all equipment, wherever located, including machinery, motor
-------
vehicles, furniture and fixtures;
[X] (b) all inventory (whether held for sale or lease or to be furnished
-------
under contracts of service), raw materials, work in process, and materials
used or consumed in the conduct of Undersigned's business, and all books,
records, invoices and other documents which describe or evidence the same;
[_] (c) all farm products;
-------
[X] (d) all accounts, contract rights, general intangibles, choses in
-------
action, instruments, chattel paper, documents (including all documents of
title and warehouse receipts) and all rights to the payment of money, however
evidenced or arising;
[_] (e) the securities described below, together with all cash, stock or
-------
other dividends or distributions paid upon or made in respect of such
securities in any form; all securities received in addition to or in exchange
for such securities; and all subscription rights incident to such securities;
and
[_] (f) Other;
-------
(g) In addition to the foregoing, Undersigned (1) grants to Bank a security
interest in all accessions, parts, accessories, attachments and appurtenances
in any way used with, attached or related to, or installed in, any equipment
or inventory constituting "Collateral" hereunder; (2) grants to Bank a
security interest in all substitutions for, renewals of, improvements,
replacements and additions to, and the products and proceeds (cash and non-
cash) of all property constituting "Collateral" hereunder and any insurance
policies relating thereto; (3) grants to Bank a security interest in, lien
upon, and right of setoff against, all deposit accounts, credits, securities,
moneys or other property of Undersigned which may at any time be in the
possession of, delivered to, or owed by Bank, including any proceeds or
returned or unearned premiums of insurance, and the proceeds (cash and non-
cash) of all the foregoing property; and (4) assigns to Bank all moneys which
may become payable on any policy of insurance required to be maintained under
this Note, including any returned or unearned premiums.
All such property subject to Bank's security interests described in this
Section 1 is referred to herein collectively as the "Collateral." With
respect to Section 4 hereunder, the term "Collateral" shall not include the
property described in subsections (g)(3) and (g)(4) of this Section 1.
All security interests in Collateral shall be deemed to arise and be
perfected under and governed by the Uniform Commercial Code, except to the
extent that such law does not apply to certain types of transactions or
Collateral, in which case applicable law shall govern.
2. Obligations Secured. The Collateral shall secure the following obligations
("Obligations") of Undersigned to Bank: (a) all amounts at any time owing or
payable under this Note; (b) all costs and expenses incurred by Bank in the
collection or enforcement of this Note or the protection of the Collateral;
(c) all future advances made by Bank for taxes, levies, insurance, and
repairs to or maintenance of the Collateral; and (d) any other indebtedness,
liability or obligation of Undersigned to Bank, past, present or future,
direct or indirect, absolute or contingent, individual, joint or several, now
due or to become due, whether as drawer, maker, endorser, guarantor, surety
or otherwise, except that none of the security interests created herein shall
secure any obligation incurred by Undersigned which is defined as "consumer
credit" by Federal Reserve Board Regulation Z, 12 C.F.R. (S)226.1 et seq.,
and is not exempted from the application of that Regulation.
3. Representations. Undersigned hereby makes the following representations
and warranties which shall be true and correct on the date of this Note and
shall continue to be true and correct at the time of the creation of any
Obligation secured hereby and until the Obligations secured hereby shall have
been paid in full: (a) Undersigned's residence and/or Chief Executive Office,
as the case may be, is as stated below or as otherwise stated in a subsequent
written notice delivered to Bank pursuant to the terms hereof; (b)
Undersigned has good and marketable title to the Collateral subject to no
security interest, lien or encumbrance, except as indicated to the contrary
to Bank in writing prior to the execution of this Note; and (c) if any of the
Undersigned is an individual, each such individual is at least 18 years of
age and under no legal disability or incapacity.
4. Covenants. Undersigned covenants and agrees that until the Obligations
secured hereunder have been paid in full, Undersigned shall: (a) use the
proceeds of the loan evidenced hereby only for the business purpose(s)
specified to the Bank at or prior to the execution hereof; (b) not permit use
of the Collateral for any illegal purposes; (c) promptly notify Bank in
writing of any change in its or their residence or Chief Executive Office;
(d) not permit removal of any of the Collateral from county to county or
state to state unless Bank has given written consent in advance and except
for inventory shipped to customer locations for evaluation purposes in the
ordinary course of business; (e) maintain at all times good and marketable
title to all Collateral, free and clear of any security interest, lien or
encumbrance (except as to which Bank may grant its prior written consent
pursuant to section 4(f) below), and defend such title against the claims and
demands of all persons; (f) not (1) affix the Collateral or permit the
Collateral to be affixed to real estate or to any other goods, (2) lease,
mortgage, pledge or encumber the Collateral, (3) permit the Collateral's
identity to be lost, (4) permit the Collateral to be levied upon or attached
under any legal process, (5) permit or cause any security interest or lien to
arise with respect
Page 2 of 6
<PAGE>
to the Collateral (other than those created in this Note), or (6) except
Collateral customarily sold by Undersigned in the ordinary course of business
and so sold in such manner for full value, sell, consign, part with possession
of, or otherwise dispose of the Collateral or any rights therein, except as Bank
may grant its prior specific written consent with respect to acts or events
specified in subsections (1), (2), (5) or (6) hereof; (g) maintain the
Collateral in good condition and repair, excepting only reasonable wear and
tear; pay and discharge all taxes and other levies on the Collateral, as well as
the costs of repair and maintenance thereof; and furnish to Bank upon request
documentary proof of payment of such taxes, levies and costs; (h); (i) purchase
and maintain policies of insurance (including flood insurance) to protect the
Collateral or other property against such risks and casualties, and in such
amounts, as shall be required by Bank and/or applicable law, which policies
shall (1) be in form and substance satisfactory to Bank, (2) at Bank's option,
designate Bank as loss payee and/or as additional insured, and/or contain a
lender's loss payable endorsement, and (3) be (or certificates evidencing same
shall be) deposited with Bank; (j) provide, upon request, financial or other
information, documentation or certifications to Bank (including balance sheets
and income statements), all in form and content satisfactory to Bank; (k)
execute, upon demand by Bank, any financing statements or other documents which
Bank may deem necessary to perfect or maintain perfection of the security
interest(s) created in this Note and pay, upon demand by Bank, (1) all costs and
fees pertaining to the filing of any financing, continuation or termination
statements, mortgages, satisfaction pieces, judgments and any other type of
document which Bank deems necessary or desirable to be filed with regard to
security interests which secure the Obligations evidenced or secured hereby,
regardless of whether such security interests were granted by Undersigned, and
(2) all costs and expenses incurred by Bank in connection with any Collateral
securing this Note (including without limitation all advances made by Bank for
taxes, levies, insurance, repairs to or maintenance of the Collateral, appraisal
or valuation of the Collateral and determination and monitoring of flood hazard
status), regardless of whether such Collateral is owned by Undersigned; (1)
procure, and cause a statement of Bank's security interest to be noted on, any
certificate of title issued or required by law to be issued with respect to any
motor vehicle constituting part of the Collateral, and cause any such
certificate to be delivered to Bank within 10 days from the later of the date of
this Note or the date of the issuance of such certificate; (m) pay, upon demand,
all amounts incurred by Bank in connection with any action or proceeding taken
or commenced by Bank to enforce or collect this Note or protect, insure or
realize upon the Collateral, including attorney's fees equal to the lesser of
(a) 20% of the above sum and interest then due hereunder, or $500.00, whichever
is greater, or (b) the maximum amount permitted by law, and attorney's costs and
all costs of legal proceedings; and (n) immediately notify Bank if any of
Undersigned's accounts arise out of contracts with the United States or any
department, agency or instrumentality thereof, and execute any instruments and
take any steps required by Bank in order that all moneys due and to become due
under any such contracts shall be assigned to Bank and notice thereof given to
the United States under the Federal Assignment of Claims Act.
5. Environmental Representations, Warranties and Covenants. In addition to the
representations, warranties and covenants set forth in this Note, the Loan
Agreement (if any) and any other document executed and delivered in connection
with this Note and/or the Loan Agreement, Undersigned hereby represents,
warrants, covenants and agrees, on behalf of itself and each of its subsidiaries
and affiliates, if any, that: (a) each of them now has and will continue to have
all Environmental Permits (as hereinafter defined) necessary for the conduct of
each of their businesses and operations; (b) each of them conducts and will
continue to conduct each of their businesses and operations in material
compliance with all applicable Environmental Laws (as hereinafter defined) and
Environmental Permits; (c) there does not exist, nor will any of them permit to
exist, any event or condition that required or is likely to require any of them
under any Environmental Law to pay or expend funds by way of fines, judgments,
damages, cleanup, remediation or the like in an aggregate amount, the payment of
which could reasonably be expected to interfere substantially with normal
operations of Undersigned or materially adversely affect the financial condition
of Undersigned; (d) Undersigned shall notify Bank, in writing within five
(5) business days, upon becoming aware of any pending or threatened proceeding,
suit, investigation, allegation or inquiry regarding any alleged event or
condition that, if resolved unfavorably to Undersigned or any of Undersigned's
subsidiaries or affiliates, is likely to cause Undersigned or any of its
subsidiaries or affiliates under any Environmental Law to pay or expend funds by
way of fines, penalties, administrative actions, judgments, damages, cleaning,
remediation or the like, or cause Undersigned or any of its subsidiaries or
affiliates to pay or expend funds for any third party claims, proceedings,
actions or judgments for personal injury or property damage resulting from an
event or condition relating to Hazardous Substances (as hereinafter defined) or
from a release or threatened release of Hazardous Substances; and (e)
Undersigned shall provide at Undersigned's cost, upon request by Bank,
certifications, documentation, copies of pleadings and other information
regarding the above, all in form and content satisfactory to Bank.
6. Additional Representations. If the Collateral includes inventory and/or
accounts, the following shall be applicable: In addition to any representations
and warranties set forth elsewhere in this Note, Undersigned hereby makes the
following representations and warranties which shall be true and correct on the
date hereof and shall continue to be true and correct at the time of any
borrowing made hereunder and until the Obligations shall have been paid in
full: (a) each account: (1) represents an amount actually owing to Undersigned
by the account debtor (less discounts allowed for prompt payment); (2) is valid
and enforceable according to its terms without further performance of any kind;
(3) is not evidenced by any instrument or chattel paper unless the original of
such instrument or chattel paper has been deposited with Bank; and (4) is not
evidenced by any judgment unless such judgment has been assigned of record to
Bank; and (b) the locations of all of Undersigned's places of business are as
stated elsewhere in this Note, and the inventory and records of the accounts are
kept at the places indicted elsewhere in this Note.
7. Additional Covenants. If the Collateral includes inventory and/or accounts,
the following shall be applicable: In addition to the covenants set forth
elsewhere in this Note, Undersigned covenants and agrees that until the
Obligations shall have been paid in full Undersigned shall: (a) immediately
notify Bank in writing in the event that any of the following occurs: (1) any
account is or becomes entitled to or eligible for discount for prompt payment
except in the ordinary course of business (2) any account debtor has or may have
any defense to payment of, or right of setoff, counterclaim, or recoupment
against any account; (3) any account represents an amount which is disputed by
the account debtor or the payment of which is in any way contingent or
conditional; or (4) the desirability, usefulness, or marketability of any of the
inventory has been in any way materially reduced or materially impaired by
reason of physical deterioration, technical obsolescence, or otherwise; (b) keep
accurate and complete books and records in accordance with generally accepted
accounting principles and, at Undersigned's expense, promptly furnish Bank such
information and documents relating to the Collateral at such times and in such
form and detail as Bank may request, including without limitation: (1) copies of
invoices
Page 3 of 6
<PAGE>
or other evidence of Undersigned's accounts and schedules showing the aging,
identification, reconciliation, and collection thereof; (2) evidence of shipment
and receipt of goods and the performance of services of obligations covered by
accounts; and (3) reports as to Undersigned's inventory and purchases, sales,
damage, or loss thereof; all of the foregoing to be certified by authorized
officers or other employees of Undersigned; (c) not change any location listed
elsewhere in this Note regarding places of business, inventory and records of
accounts without Bank's prior written consent; (d) at Undersigned's expense,
diligently collect the accounts on behalf of Bank until such time as Bank
exercises its right to directly collect the accounts, and upon notice from Bank,
deliver all proceeds of accounts to Bank forthwith upon receipt, in the
original form in which received; (e) immediately upon Bank's request, open a
cash collateral account ("Cash Collateral Account") at Bank and deposit therein
all cash proceeds of collections on the accounts; (f) immediately upon Bank's
request, give the Bank assignments, in form acceptable to Bank, of specific
accounts or groups of accounts and specific general intangibles, and immediately
repay the amount loaned against any account so assigned to the Bank if the
contract with the account debtor is breached, cancelled or terminated; (g)
immediately upon Bank's request, furnish Bank with all information received by
Undersigned regarding the financial condition of any account debtor, except to
the extent prohibited by law; (h) immediately deliver to Bank all instruments,
documents, or chattel paper representing any of the Collateral and immediately
assign of record to Bank any judgement representing any account constituting
Collateral; and (i) immediately upon Bank's request, mark its records evidencing
its accounts in a manner satisfactory to Bank so as to show which accounts have
been assigned to Bank.
8. Events of Default. The occurrence of any of the following shall constitute
an "Event of Default" hereunder: (a) default in payment or performance of any of
the Obligations evidenced or secured by this Note or any other evidence of
liability of Undersigned to Bank which remains uncared for longer than 10 days;
(b) the breach by any Obligor (defined as Undersigned and each surety or
guarantor of any of Undersigned's liabilities to Bank, as well as any person or
entity granting Bank a security interest in property to secure the Obligations
evidenced hereby) of any covenant contained in the Loan Agreement (if any), this
Note, or in any separate security guarantee or suretyship agreement between Bank
and any Obligor, the occurrence of any default hereunder or under the terms of
any such agreement, or the discovery by Bank of any false or misleading
representation made by any Obligor herein or in any such agreement or in any
other information submitted to Bank by any Obligor; (c) with respect to any
Obligor: (1) death or incapacity of any individual or general partner; or (2)
dissolution of any partnership of corporation; (d) any assignment for the
benefit of creditors by any Obligor; (e) insolvency of any Obligor; (f) the
filing or commencement of any petition, action, case or preceding, voluntary or
involuntary, under any state or federal law regarding bankruptcy, insolvency,
reorganization, receivership or dissolution, including the Bankruptcy Reform Act
of 1978, as amended, by or against any Obligor; (g) default under the terms of
any lease of or mortgage on the premises where any Collateral is located which
remains uncured for longer than 10 days; (h) garnishment, tax assessment,
attachment or taking by governmental authority or other creditor of any
Collateral or other property of any Obligor which is in Bank's possession or
which constitutes security for any Obligations evidenced or secured hereby; (i)
entry of judgement in an amount in excess of $100,000 against any Obligor in any
court of record; (j) the assessment in an amount in excess of $100,000 against
any Obligor by the Internal Revenue Service or any other federal, state or local
taxing authority of unpaid taxes, or the issuance of a levy or the entering of a
lien in connection therewith; (k) the maturity of any life insurance policy held
as collateral under this Note by reason of the death of the insured or
otherwise; (l) the revocation , termination, cancellation, denial of liability,
or the attempt of any of the foregoing, by any Obligor of any Obligation or
liability whatsoever of the Obligor to Bank, including without limitation any
security, guarantee or suretyship agreement; or (m) default by Undersigned in
the payment of any indebtedness of Undersigned or in the performance of any of
Undersigned's obligations which remains uncured for longer than 10 days (other
than indebtedness or obligations evidenced by this Note or any other evidence of
liability of Undersigned to Bank) and such default shall continue for more than
any applicable grace period.
9. Acceleration; Remedies. Upon either (i) the occurrence of any Event of
Default, or (ii) if this Note is payable on demand, such demand by Bank: (a) all
amounts due under this Note, including the unpaid balance of principal and
interest hereof, shall become immediately due and payable at the option of Bank,
without any demand or notice whatsoever; (b) Undersigned shall, upon demand by
Bank, assemble the Collateral and promptly make it available to Bank at any
place designated by Bank which is reasonably convenient to both parties; (c)
Bank may immediately and without demand exercise any of its rights and remedies
granted herein, under applicable law, or which it may otherwise have, against
the Undersigned, the Collateral, or otherwise and (d) Bank may, without notice
or process of any sort, peaceably enter any premises where any vehicle
constituting a part of the Collateral is located and take possession, retain and
dispose of such vehicle and all property located in or upon it. Bank shall have
no obligation to return any property not constituting Collateral found in any
such vehicle unless Bank actually receives Undersigned's written request
therefor specifically describing such property within 72 hours after
repossession thereof. Notwithstanding any provision to the contrary contained
herein, upon the occurrence of an Event of Default as described in Section 8(f)
hereof, all amounts due under this Note, including without limitation the
unpaid balance of principal and interest hereof, shall become immediately due
and payable, without any demand, notice, or further action by Bank whatsoever,
and an action therefor shall immediately occur.
10. Bank's Rights. Undersigned hereby authorizes Bank, and Bank shall have the
continuing right, at its sole option and discretion , to: (a) do anything which
Undersigned is required but fails to do hereunder, and in particular Bank may,
if Undersigned fails to do so, (1) insure or take any reasonable steps to
protect the Collateral, (2) pay all taxes, levies, expenses and costs arising
with respect to the Collateral, or (3) pay any premiums payable on any policy of
insurance required to be obtained or maintained hereunder; (b) direct any
insurer to make payment of any insurance proceeds, including any returned or
unearned premiums, directly to Bank, and apply such moneys to any Obligations or
other amounts evidenced or secured hereby in such order or fashion as Bank may
elect; (c) inspect the Collateral at any reasonable time; (d) pay any amounts
Bank elects to pay or advance hereunder on account of insurance, taxes or other
costs, fees or charges arising in connection with the Collateral, either
directly to the payee of such cost, fee or charge, directly to Undersigned, or
to such payee(s) and Undersigned jointly; (e) pay the proceeds of the loan
evidenced by this Note to any or all of the Undersigned individually or jointly,
or to such other persons as any of the Undersigned may direct; and (f) add any
amounts paid or incurred by Bank under Section 4(k), Section 4(m), Section 10(a)
or Section 10(d) to the principal amount of the indebtedness evidenced by this
Note.
In addition to all rights given to Bank by this Note, Bank shall have all the
rights and remedies of a secured party under any applicable law, including
without limitation, the Uniform Commercial Code.
11. Additional Rights of Bank. If the Collateral includes inventory and/or
accounts, the following shall be applicable: In addition to Bank's rights set
forth elsewhere in this Note, Undersigned hereby
Page 4 of 6
<PAGE>
================================================================================
authorizes Bank, and Bank shall have the continuing rights at any time, whether
or not any Event of Default has occurred hereunder, and at its sole option and
discretion, without notice, to: (a) take over and collect any or all of the
accounts and to take any other action pursuant to its power of attorney granted
herein; (b) exercise absolute and exclusive dominion and control over all funds
deposited in the Cash Collateral Account; apply any funds therein against any
Obligations; and charge to any deposit account of Undersigned any item of
payment credited to the Cash Collateral Account which is subsequently
dishonored; (c) at any reasonable time, through its authorized agents and
employees, inspect, audit, and verify the accounts and the inventory, review
Undersigned's books and records, and copy or make excerpts from any document;
and (d) verify accounts with debtors in the name of Undersigned, Bank or Bank's
designee.
12. Miscellaneous Provisions. (a) Undersigned waives protest of all commercial
paper at any time held by Bank on which Undersigned is in any way liable, notice
of nonpayment at maturity of any and all accounts, and (except where requested
hereby) notice of action taken by Bank; and hereby ratifies and confirms
whatever Bank may do. Bank shall be entitled to exercise any right
notwithstanding prior exercise, failure to exercise or delay in exercising any
such right. (b) Bank shall retain the lien of any judgment entered on account of
the indebtedness evidenced hereby, as well as any security interest previously
granted to secure repayment of the indebtedness evidenced hereby, and
Undersigned warrants that Undersigned has no defense whatsoever to any action or
proceeding that may be brought to enforce or realize on such judgment of
security interest. (c) If any provision hereof shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and this
Note shall be construed as if the invalid or unenforceable provision had never
been a part of it. The descriptive headings of this Note are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof. (d) The rights and privileges of Bank contained in this Note
shall inure to the benefit of its successors and assigns, and the duties of
Undersigned shall bind all heirs, personal representatives, successors and
assigns. (e) This Note shall in all respects be governed by the laws of the
state in which this Note is payable (except to the extent that federal law
governs), and all references to the Uniform Commercial Code shall be deemed to
refer to the Uniform Commercial Code as enacted in such state. (f) Undersigned
hereby irrevocably appoints Bank and each holder hereof as Undersigned's
attorney-in-fact to: (1) endorse Undersigned's name to any draft or check which
may be payable to Undersigned in order to collect the proceeds of any insurance
or any returned or unearned premiums in respect of any policies of insurance
required to be maintained hereunder; and (2) take any action Bank deems
necessary to perfect or maintain perfection of any security interest granted to
Bank herein, including executing any document on Undersigned's behalf.
Undersigned hereby acknowledges that this appointment of Bank and each holder
hereof as attorney-in-fact is irrevocable and is coupled with an interest. (g)
Undersigned shall bear the risk of loss of, damage to, or destruction of the
Collateral, and Undersigned hereby releases Bank from all claims for loss or
damage to the Collateral caused by any act or omission on the part of Bank,
except for willful misconduct. (h) Copies or reproductions of this document or
of any financing statement may be filed as a financing statement.
13. Additional Power of Attorney. If the Collateral includes inventory and/or
accounts, the following shall be applicable: In addition to any powers of
attorney granted to Bank by Undersigned elsewhere in this Note, Undersigned
hereby appoints Bank and its officers, employees and agents as its irrevocable,
true and lawful attorneys-in-fact with all necessary power and authority to: (a)
endorse Undersigned's name on all media of payment delivered to Bank or
deposited in the Cash Collateral Account; (b) notify Undersigned's account
debtors of the assignment of their debts and direct them to make all payments
thereon to Bank; (c) in Bank's name or in the name of Undersigned, demand, sue
for, collect, compromise, settle, and give releases from any account; and (d)
take such other action as Bank may deem appropriate for any such purpose.
Undersigned hereby acknowledges that this appointment of Bank and each holder
hereof as attorney-in-fact is irrevocable and is coupled with an interest. In
exercising its rights under this section, Bank shall have no liability to
Undersigned except for willful misconduct.
14. Definitions. As used herein: (a) "account," "chattel paper," "contract
right," "document," "instrument," and "inventory" have the same respective
meanings given to those terms in the Uniform Commercial Code; (b) "general
intangibles" has the meaning given to that term in the Uniform Commercial Code,
including without limitation, customer lists, books and records (including
without limitation, all correspondence, files, tapes, cards, book entries,
computer runs, computer programs and other papers and documents, whether in the
possession or control of Undersigned or any computer service bureau), rights in
franchises and sales contracts, patents, copyrights, trademarks, logos,
goodwill, trade names, label designs, royalties, brand names, plans, blueprints,
inventions, patterns, trade secrets, licenses, jigs, dies, molds, and formulas;
(c) "Chief Executive Office" means the place from which the main part of the
business operations of an entity is managed; (d) "Environmental Law" means any
federal, state or local environmental law, statute, regulation, rule, ordinance,
court or administrative order or decree, or private agreement or interpretation,
nor or hereafter in existence, relating to the manufacture, distribution,
labeling, use, handling, collection, storage, treatment, disposal or otherwise
of Hazardous Substances, or in any way relating to pollution or protection of
the environment or public health; (e) "Environmental Permit" means any federal,
state or local permit, license or authorization issued under or in connection
with any Environmental Law; (f) "Hazardous Substances" means petroleum and
petroleum products, radioactive materials, asbestos, radon, lead containing
materials, sewage or any materials or substances defined as or included in the
definition of "hazardous wastes," "hazardous substances," "hazardous materials,"
"toxic substances," "hazardous air pollutants," "topic pollutants," "pollution,"
or terms of similar meaning as those terms are used in any Environmental Law;
and (g) "Undersigned" refers individually and collectively to all makers of this
Note, including, in the case of any partnership, all general partners of such
partnership individually and collectively, whether or not such partners sign
below. Undersigned shall each be jointly and severally bound by the terms
hereof, and, with respect to any partnership executing this Note, each general
partner shall be bound hereby both in such general partner's individual and
partnership capacities.
[Remainder of page intentionally left blank]
Page 5 of 6
<PAGE>
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Witness the due execution hereof under seal.
- --------------------------------------------------------------------------------
Witness: Individual:
x x (Seal)
- --------------------------------------- --------------------------------------
Address
- --------------------------------------- --------------------------------------
Witness: Individual:
x x (Seal)
- --------------------------------------- --------------------------------------
Address
--------------------------------------
Corporation or Other Entity
RF POWER PRODUCTS, INC.
- --------------------------------------- --------------------------------------
Attest/Witness: By: (Signature and Title)
x [SIGNATURE APPEARS HERE] x /s/ Domenic Golato - VP & CFO (Seal)
- --------------------------------------- --------------------------------------
By: (Signature and Title)
x (Seal)
--------------------------------------
(Corporate Seal) Business Address
502 Gibbsboro-Marlton Road
--------------------------------------
Voorhees, NJ 08043
Locations of inventory: Locations of records concerning the
accounts:
Voorhees, NJ Voorhees, NJ
- --------------------------------------- --------------------------------------
Austin, TX Austin, TX
- --------------------------------------- --------------------------------------
San Jose, CA San Jose, CA
- --------------------------------------- --------------------------------------
- --------------------------------------- --------------------------------------
- --------------------------------------- --------------------------------------
- --------------------------------------- --------------------------------------
- --------------------------------------- --------------------------------------
Page 6 of 6
<PAGE>
SUPPLEMENT TO NOTE AND SECURITY AGREEMENT
-----------------------------------------
This Supplement to Note and Security Agreement ("Supplement") is annexed to
and is part of the Note and Security Agreement dated as of May 24th, 1996 of
Undersigned, payable to Mellon Bank, N.A. ("Bank"), in the stated principal
amount of $1,400,000.00 ("Facility"). Such Note and Security Agreement as
supplemented by this Supplement shall be referred to as the Note. Capitalized
terms used without further definition herein shall have the meaning set forth in
the Note.
1. Use of Borrowings. The proceeds of this Note shall be used by
-----------------
Undersigned to repay existing loans.
2. Payment-Interest. Interest shall be payable at each of the following
----------------
times: (a) if at the Prime Rate or the As-Offered Fixed Rate, on the first day
of each month, payable in arrears, beginning June 1, 1996 until the end of the
As-Offered Fixed Rate Period specified in each Notification or May 29, 2000, the
maturity date; and (b) if at the LIBOR Rate, at the end of each LIBOR Rate
Period specified in each Notification. Undersigned understands and agrees that
any payments of principal, interest or other sums required under this Note may
be deducted on the due date, without notice by Bank, from any deposit account
maintained by Undersigned with Bank.
3. Payment-Principal. Principal shall be payable in forty-seven (47)
-----------------
equal consecutive monthly installments of $29,166.66 each. The initial
principal installment will be due and payable on June 1, 1996 and thereafter on
the first day of each month. There shall be a final forty-eighth payment of all
remaining unamortized principal on May 29, 2000, the maturity date.
4. Interest Rate Options. (a) The outstanding principal balance of this
---------------------
Note shall earn interest at the Prime-Based Rate, provided however that, subject
---------------------
to the terms of paragraph 4(b) below, by giving Notification, Undersigned may
request to have all or such portion of the outstanding principal of this Note as
hereinafter permitted earn interest, instead, at the As-Offered Fixed Rate or
the LIBOR Rate as follows: (i) with respect to the principal amount outstanding
under the Facility, from the date of a Notification until the end of the
As-Offered Fixed Rate Period or the LIBOR Rate Period (as applicable) specified
in the Notification and/or (ii) with respect to the principal amount of any
portion of the Facility outstanding and earning interest at the As-Offered Fixed
Rate or the LIBOR Rate at the time of the Notification related to such principal
amount, from the expiration of the then current As-Offered Fixed Rate Period or
LIBOR Rate Period related to such principal amount until the end of the
As-Offered Fixed Rate Period or LIBOR Rate Period (as applicable) specified in
the Notification; and/or (iii) with respect to all or any portion of the
principal amount of the Facility outstanding and earning interest at the
Prime-Based Rate at the time of Notification, from the date set forth in the
Notification until the
<PAGE>
end of the As-Offered Fixed Rate Period or LIBOR Rate Period (as applicable)
specified in the Notification. There shall be no more than one (1) advance of
principal accruing interest at the As-Offered Fixed Rate and no more than one
(1) advance of principal accruing interest at the LIBOR Rate outstanding at any
one time. The Undersigned shall, in selecting any interest rate option and/or
interest rate period, allow for scheduled principal installment repayments.
(b) Undersigned understands and agrees: (i) that Bank, from time to
time, may refuse any request of Undersigned to select, convert to or renew the
As-Offered Fixed Rate or LIBOR Rate, as the case may be, if Bank determines in
good faith (which determination shall be conclusive) that the Undersigned is in
default under the Note or that such interest rate is impractical or unlawful due
to any law, regulation, rule, guideline or interpretation or administration to
which Bank may be subject, (ii) that subject to the provisions of this Note, the
Prime-Based Rate, the As-Offered Fixed Rate or the LIBOR Rate may apply
simultaneously to the different parts of the outstanding principal of this Note,
(iii) that the As-Offered Fixed Rate or LIBOR Rate, as the case may be, may
apply simultaneously to various portions of the outstanding principal for
various As-Offered Fixed Rate Periods or LIBOR Rate Periods, as the case may be,
(iv) that the As-Offered Fixed Rate or LIBOR Rate, as the case may be,
applicable to any portion of outstanding principal may be different from the
As-Offered Fixed Rate or LIBOR Rate, as the case may be, applicable to any other
portion of outstanding principal and (v) that the Bank shall have the right to
terminate any As-Offered Fixed Rate Period or LIBOR Rate Period, as the case may
be, and the interest rate applicable thereto, prior to maturity of such Rate
Period, if Bank determines in good faith (which determination shall be
conclusive) that continuance of such interest rate has been made impractical or
unlawful by any law, regulation, rule, guideline or interpretation or
administration to which Bank may be subject, in which event the principal to
which such terminated Rate Period relates thereafter shall earn interest at the
Prime-Based Rate.
5. Interest Rate Spread. The Undersigned's shall pay a basis point
--------------------
spread under this Note on its LIBOR Rate Option based on the Undersigned's
financial performance based on its Cash Flow Ratio (as defined in the Credit
Agreement) and effective on the first day following receipt of the Undersigned's
quarterly financial statements and continuing until receipt of the Undersigned's
quarterly financial statements for the following fiscal quarter:
<TABLE>
<CAPTION>
Cash Flow Ratio LIBOR Rate Plus
- --------------- Basis Point Spread
------------------
<S> <C>
Less than 2.50 to 1.00 LIBOR + 150 b.p.
Greater than or equal to 2.50 to 1.00,
but less than 3.50 to 1.00 LIBOR + 125 b.p.
Greater than or equal to 3.50 to 1.00 LIBOR + 100 b.p.
</TABLE>
-2-
<PAGE>
6. Prime-Based Rate Fallback. After expiration of any As-Offered Fixed
-------------------------
Rate Period or LIBOR Rate Period, as applicable, any principal portion
corresponding to such Rate Period which has not been converted or renewed in
accordance with paragraph 4 hereof shall earn interest automatically at the
Prime-Based Rate from the date of expiration of such Rate Period until paid in
full, unless and until Undersigned request and Bank approves a conversion
to the As-Offered Fixed Rate or the LIBOR Rate, as applicable, in accordance
with paragraph 4. With respect to any principal amount, if Undersigned fails to
request the As-Offered Fixed Rate option or the LIBOR Rate option, as the case
may be, by giving Bank a Notification, or if Bank fails to approve such request
when made, such principal amount shall be deemed to earn interest at the Prime-
Based Rate.
7. Voluntary Repayment. Prior to the occurrence of an Event of Default
-------------------
hereunder, (a) Undersigned shall have the right at its option from time to time
to prepay that portion of the outstanding principal balance hereof which is
earning interest at such time at the Prime-Based Rate in whole or in part
without any Repayment Premium; and (b) Undersigned shall have the right to
prepay all or any portion of the outstanding principal balance hereof which is
earning interest at the As-Offered Fixed Rate or the LIBOR Rate, provided
--------
however that, any prepayments of principal earning interest at the As-Offered
- ------------
Fixed Rate or the LIBOR Rate shall be applied to the unpaid installments of
principal in the reverse order of their maturities and shall be accompanied by
the Repayment Premium applicable thereto.
8. Indemnity. Undersigned shall indemnify Bank against any loss or expense
---------
(including loss of margin) which Bank has sustained or incurred as a consequence
of: (a) any payment, prepayment or conversion of any principal amount earning
interest at the As-Offered Fixed Rate or the LIBOR Rate, as the case may be, on
a day other than the last day of the corresponding Rate Period (whether or not
any such payment is made pursuant to demand by Bank under this Note and whether
or not any such payment is consented to by Bank, unless Bank shall have
expressly waived such indemnity in writing); (b) any attempt by Undersigned to
revoke in whole or part any Notification given pursuant to this Note; (c) any
attempt by Undersigned to convert or renew any principal amount earning interest
at the As-Offered Fixed Rate or the LIBOR Rate, as the case may be, on a day
other than the last day of the corresponding applicable Rate Period (whether or
not such conversion or renewal is consented to by Bank, unless Bank shall have
expressly waived such indemnity in writing); or (d) any Event of Default.
If Bank sustains any such loss or expense it shall from time to time
notify Undersigned of the amount determined in good faith by Bank (which
determination shall be conclusive) to be necessary to indemnify Bank for such
loss or expense. Such amount shall be due and payable by Undersigned on demand.
-3-
<PAGE>
9. Records. The unpaid principal amount of this Note, the unpaid interest
-------
accrued thereon, the interest rate or rates applicable to such unpaid principal
amount, the duration of such applicability and the date and amount of each
payment or demand shall at all times be ascertained from the books and records
created by Bank, which shall be conclusive absent manifest error.
All notices (including any Notification) under this Note shall be in
writing or by telephone promptly confirmed in writing, and all such writings
shall be sent by first-class, first-class express or certified mail or by hand
delivery, in all cases with charges prepaid, provided that Bank may act in
reliance on any telephonic notice prior to receipt of written confirmation. All
notices shall be sent to Undersigned at the address stated on the signature page
hereof or in accordance with the last unrevoked written direction from
Undersigned to Bank. All notices by Undersigned shall be effective when received
by Bank at its address at Mellon Bank, N.A., Plymouth Meeting Executive Campus,
610 W. Germantown Pike, Suite 200, Plymouth Meeting, PA 19462. Attention: Middle
Market Banking, and all notices by Bank shall be effective when telephoned,
deposited in the mail or hand delivered. Written notices or confirmations by
Undersigned shall not be deemed records of Bank within the meaning of this
paragraph whether or not received by Bank and, in the event that any written
notice sent by Undersigned in confirmation of telephonic notice differs from
Bank's records of such telephonic notice, Bank may act in reliance upon such
telephonic notice as if written notice were not received, provided that Bank has
acted in good faith. Bank may conclusively rely without inquiry on any notice or
confirmation purporting to be from or authorized by Undersigned and such
reliance shall be presumed to be correct.
10. Time of Essence. The prompt and faithful performance of all of
---------------
Undersigned's obligations hereunder, including without limitation time of
payment, is of the essence of this Note.
11. Definitions. As used in this Note: "As-Offered Fixed Rate" means a
----------- -----------------------
per annum rate of interest (computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed) offered by Bank to Undersigned.
"As-Offered Fixed Rate Period" means for any portion of principal for which
- ------------------------------
Undersigned elects the As-Offered Fixed Rate the period of time for which such
As-Offered Fixed Rate shall apply to such principal portion. "LIBOR Rate" means
------------
for any day during each LIBOR Rate Period the per annum rate of interest
(computed on a basis of a year of 360 days and actual days elapsed) determined
by Bank by adding (a) the per annum rate of interest (rounded upward to the
nearest 1/100 of 1%) obtained by dividing (i) the rate of interest estimated in
good faith by Bank in accordance with its usual procedures (which determination
shall be conclusive) to be the average of the rate per annum for deposit, in an
amount of U.S. Dollars comparable to the amount of principal relating to such
LIBOR Rate Period and having maturities comparable to such LIBOR Rate Period,
offered to major money center banks in the London interbank market at
-4-
<PAGE>
or about 11:00 a.m., London time, two London Business Days prior to such LIBOR
Rate Period, (ii) a number equal to 1.00 minus the LIBOR Rate Reserve Percentage
-----
for such day, and (b) the applicable basis point spread. "LIBOR Rate Period"
-----------------
means for any portion of principal for which Undersigned elects the LIBOR Rate
the period of time for which such rate shall apply to such principal portion.
LIBOR Rate Periods shall be the periods of 30, 60 and 90 days and for no other
length of time. "LIBOR Rate Reserve Percentage" for any day means the percentage
-----------------------------
(rounded upward to the nearest 1/100 of 1%), as determined in good faith by Bank
(which determination shall be conclusive) as representing for such day the
maximum effective percentage as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) for Bank with respect to eurocurrency funding.
"Notification" means telephonic notice (which shall be irrevocable) by
Undersigned to Bank that Undersigned has requested that the As-Offered Fixed
Rate or the LIBOR Rate, as the case may be, shall apply to some portion of the
principal amount of this Note in accordance with the provisions of paragraph 4
hereof, which notice shall be given no later than 1:00 p.m., local time at the
place where this Note is payable, on the day (which shall be a day on which Bank
is opened for business) on which such election is to become effective, or if the
LIBOR Rate is requested, 1:00 p.m., local time at the place where this Note is
payable, on the day which is at least three (3) business days prior to the day
(which shall be a day on which Bank is opened for business) on which such
election is to become effective, which notice shall specify (i) that the As-
Offered Fixed Rate or LIBOR Rate option is being selected; (ii) the principal
amount to be subject to the As-Offered Fixed Rate or the LIBOR Rate; (iii)
whether such amount is a renewal of a previous request of the As-Offered Fixed
Rate or the LIBOR Rate, a conversion from the Prime Based Rate or As-offered
Fixed Rate to the Libor Rate, or a combination thereof; (iv) the Rate Period
selected; and (v) the date on which such request is to become effective (which
date shall be a date selected in accordance with paragraph 4(a) hereof). "Prime-
-----
Based Rate" means a per annum rate of interest, calculated on an 360 day basis
- ----------
but charged on the actual number of days elapsed, equal to the rate of interest
announced from time to time by Bank as its Prime Rate which rate is not
necessarily the lowest interest rate charged by the Bank for loans, such Prime-
Based Rate to change from time to time as of the effective date of each change
in the Prime Rate. "Repayment Premium" means the amount which Undersigned shall
-----------------
pay to Bank as a premium in connection with a repayment of outstanding principal
earning interest at the As-Offered Fixed Rate or the LIBOR Rate, as applicable,
at the time of repayment, which amount shall be the amount determined by Bank to
be the difference between (a) the present value of the interest payments that
would have been paid in the future to Bank by Undersigned on such repaid portion
of principal accruing at the As-Offered Fixed Rate or the LIBOR Rate or as
applicable, but for such repayment, and (b) the present value of the interest
payments that would be paid in the
-5-
<PAGE>
future to Bank at the United States Treasury Rate if on or about the date of
repayment Bank made a hypothetical investment of the repaid portion of principal
accruing at a fixed rate of interest in United States Treasury securities
maturing on or about the date that the repaid portion of principal would have
matured but for such repayment and bearing interest accruing from the date of
repayment, payable on each date on which Undersigned, but for such repayment,
would have paid interest on the repaid portion of principal. "Undersigned"
-----------
means, individually and collectively, all makers of this Note. "United States
-------------
Treasury Rate" means a rate of interest per annum, equal to (rounded downward to
- -------------
the nearest 1/100 of one percent) the annual yield Bank could obtain by
purchasing on the date of repayment United States Treasury Securities with
semi-annual interest payments, maturing on or about the date on which the repaid
portion of principal would have matured.
WITNESS the due execution and delivery hereof, intending to be legally
bound.
ATTEST: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun By: /s/ Domenic N. Golato
- ---------------------------------- -----------------------------------
By: Paul S. Zaun Domenic N. Golato
Title: Director Cost Accounting Chief Financial Officer
Accepted by:
MELLON BANK, N.A.
/s/ Anthony W. LaMarca
--------------------------------------
Anthony W. LaMarca
Vice President
-6-
<PAGE>
PROMISSORY NOTE AND SECURITY AGREEMENT
--------------------------------------
$132,000 Dated: February 11, 1994
FOR VALVE RECEIVED Joseph Stach, an individual residing at 7 Chelmsford
Court, Marlton, New Jersey 08053 ("Maker") agrees to pay to the order of RF
Power Produce Inc., a New Jersey Corporation having its principal business
office at 502 Gibbsboro-Marlton Road, Voorhees, New Jersey 08043 (the "Company"
or "Payee"), the principal sum of One Hundred and Thirty-Two Thousand Dollars
($132,000) (the "Principal Sum"), plus interest accrued on the unpaid balance of
the Principal Sum outstanding from time to time compounded annually at the prime
rate of National Westminister Bank NJ in effect on the first of each calendar
quarter (or portion thereof) during which this Note is outstanding calculated
based on a 360 day year and the actual number of days elapsed, on the terms and
conditions set forth below:
1. Payment. The Principal Sum shall be payable in three (3)
-------
consecutive annual installments of Forty-Four Thousand Dollars ($44,000) each.
Each installment shall be due on the 10th day of each February during the term
hereof, commencing February 10, 1995 and continuing until February 10, 1997, at
which time the entire unpaid principal balance of this Note, all interest
accrued thereon and all other sums payable hereunder shall be due and payable in
full.
Interest on the outstanding Principal Sum shall be payable
simultaneously with the payment of each installment of principal.
2. Place of Payment. All payments due under this Note shall be
----------------
payable in cash, wire transfer or other immediately available funds without
set-off or deduction, by direct delivery to Payee at the address of the Payee
set forth in the heading hereof or such other place as Payee, from time to time,
may designate in writing.
3. Prepayment. Maker shall have the right to prepay the Principal
----------
Sum of this Note, in whole or in part, at any time, without notice and without
prepayment penalty or premium. Each partial prepayment of the Principal Sum
shall be accompanied by accrued interest on the amount prepaid to the date of
prepayment. All partial prepayments shall be applied to installments of the
Principal Sum in the inverse order in which such installments of the Principal
Sum are due under this Note. Maker's partial prepayments of the Principal Sum
shall not affect in any way whatsoever the due dates or dollar amounts of any
subsequent schedule of Principal Sum payments in regard to this Note unless and
until Maker has paid in full the Principal Sum of this Note.
4. Security; Escrow Agent.
----------------------
(a) As collateral security for payment of the Principal Sum and
all other obligations of Maker under the Stock Purchase Agreement between Maker
and Payee, dated
<PAGE>
February 11, 1994 (the "Stock Purchase Agreement"), Maker hereby pledges and
creates a first priority security interest in all of his shares (the "Shares")
of the Company, to Payee, together with all "proceeds" (as defined in Section
9-306(a) of the Uniform Commercial Code as adopted in Pennsylvania) thereof,
including, without limitation, all dividends or other income from the Shares.
In furtherance of this security interest, Maker agrees to place his Share
certificates (including any additional Share certificates of the Company
acquired by Maker as a result of subsequent stock dividends, splits, mergers or
other actions) and undated stock powers covering such certificates duly executed
in blank and endorsed for assignment in accordance with the terms of this Note,
in escrow with Payee as Escrow Agent ("Escrow Agent"), to hold such certificates
and assignments and act with respect thereto, in accordance with this Note.
(b) Subject to the provisions of Paragraph 6 hereof, the Escrow
Agent shall distribute the Share certificates:
(i) to Maker in accordance with joint written instructions
of Payee and Maker upon full payment of the Principal Sum and accrued interest,
and satisfaction and termination of this Note;
(ii) to Payee in accordance with Payee's written
instructions and in accordance with Paragraph 6; or
(iii) pursuant to an order, decree or judgment by a court of
competent jurisdiction which, by lapse of time or otherwise, shall no longer be
subject to appeal or review.
(c) If at any time the Escrow Agent determines that it is
uncertain as to the disposition of all or any portion of the Share certificates
held in escrow, it may continue to hold the Share certificates or deposit them
in any court of competent jurisdiction pending the final determination of
disputes regarding the disposition of the Share certificates between Maker and
Payee, in which case all of the Escrow Agent's costs and expenses in connection
with the making of such deposit (including reasonable attorneys' fees) shall be
paid to the Escrow Agent in equal amounts by Maker and Payee, provided, however,
that Maker and Payee are jointly and severally liable for such costs and
expenses as set forth in Paragraph 4(d), below.
(d) Maker and Payee acknowledge and agree that the Escrow Agent
shall not be liable for the conduct of its duties except in the event of
conviction and final adjudication of willful misconduct or final adjudication of
gross negligence, and shall be indemnified by each of them, jointly and
severally, for any costs of expenses, including attorneys' fees, arising out of
conduct of such escrow, except in the even of such a finding of willful
misconduct or gross negligence.
(e) Maker acknowledges, and waives any rights arising therefrom,
that Payee is both the Payee and Escrow Agent pursuant hereto and may have
conflicting duties and loyalties in connection therewith.
-2-
<PAGE>
5. Cash Dividends; Voting Rights. Unless a default shall have occurred
-----------------------------
and be continuing and Payee shall have given notice to the Maker of Payee's
intent to exercise its corresponding rights pursuant to Paragraph 6 below, the
Maker shall be permitted to receive all cash dividends, if any, paid in the
normal course of business of the Company and consistent with past practice in
respect of the Share certificates and to exercise all voting and corporate
rights with respect to the Share certificates, provided, however, that no vote
shall be cast or corporate right exercised or other action taken by Maker, or
given effect by the Company or anyone else, which, in Payee's reasonable
judgment, would impair Payee's security interest under Paragraph 4 or be
inconsistent with any of the Stock Purchase Agreement, this Note, any other
documents related thereto, or any of the above, including, without limitation,
any merger, exchange or sale of the Shares.
6. Default.
-------
(a) The occurrence of any one or more of the following events with
respect to Maker shall, at Payee's option, constitute an event of default: (i)
the failure of Maker to make payment to Payee of any sum or sums due under this
Note within ten (10) days after they are due; (ii) the commencement of any
proceeding in bankruptcy, rehabilitation, creditor adjustment, or insolvency by
or against Maker which is not discharged within forty-five (45) days thereafter;
(iii) a general assignment by Maker for the benefit of creditors or others; (iv)
the appointment of a trustee, receiver, executor, conservator, liquidator, or
other judicial representative for Maker or any of Maker's property; (v) the
attachment of any of Maker's property which is not released or provided for to
the satisfaction of Payee within ten (10) days of such attachment or; (vi) the
failure to Maker and Company with any of the provisions of the Stock Purchase
Agreement or of this Note. Maker agrees to provide notice to Escrow Agent and
Payee of the occurrence of any of the events described in (ii) through (vi),
above, within twenty-four (24) hours thereof.
(b) In the event of a default pursuant to subparagraph (a) of this
Section, Payee may elect to notify both Escrow Agent and Maker in writing that
there has been a default and if such default is not cured by Maker within ten
(10) days of receipt by Maker of his copy of such notice, Payee may (A) have the
certificates representing the Shares, and all assignments relative thereto,
delivered and assigned by Escrow Agent to Payee and to be registered in Payee's
name, in which event Payee shall return to Maker the lesser of the fair market
value of the Shares represented by the certificates to be registered or the
aggregate purchase price paid to such date pursuant to the Stock Purchase
Agreement and this Note, in both cases, less the aggregate of all dividends and
distributions paid to Maker to such date on the Shares or (B) accelerate the
payment of the unpaid Principal Sum due under this Note, and all accrued
interest, to the date of such acceleration and to do any and all other things
which Payee deems necessary to enforce the provisions of this Note with respect
to any such unpaid amount, as permitted by applicable law; provided, however,
that at such time as the unpaid Principal Sum due is fully paid to Payee, Payee
shall instruct Escrow Agent to deliver to Maker the certificates representing
the Shares, and all assignments relative thereto;
-3-
<PAGE>
In the event that Maker disputes the existence of a default which is the
subject of the notice to the Escrow Agent under Paragraph 6, he shall notify the
Escrow Agent and Payee within ten (10) days of the existence of such dispute,
and the Escrow Agent shall continue to hold the Share certificates or deposit
them in any court of competent jurisdiction as provided in Paragraph 4(c)
herein.
(c) All of Maker's voting rights with respect to the Shares, and
all other rights of Maker in the Company, shall be suspended upon the occurrence
of an event of default under subparagraph (a) of this Section, except that the
right to receive dividends from the Company shall not be suspended, until either
the default is cured or the delivery and assignment of Shares occurs pursuant to
Section 6(b)(i).
(d) The failure by Payee to declare, or the delay in declaring,
a default under subparagraph (b), above, shall not in any way constitute a
waiver, or otherwise prejudice, Payee's rights to assert default with respect to
any such occurrence at some later time or to take any other action pursuant to
this Note with respect to such or any other occurrence.
7. Severability. If any provision of this Note is held to be
------------
invalid or unenforceable by a Court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect and shall be
construed liberally in favor of Payee in order to effectuate the provisions of
this Note.
8. Governing Law. This Note shall be governed by and construed
-------------
according to the laws of the State of New Jersey.
9. Successors and Assigns. The provisions of this Note shall be
----------------------
binding upon and inure to the benefit of Maker and Payee and their respective
heirs, executors or administrators and successors and assigns.
10. No Presentment, Etc. Maker hereby waives presentment for
--------------------
payment, demand, notice of demand, notice of nonpayment or dishonor, protest and
notice of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of
this Note. Maker agrees that, other than as set forth in this Note or the Stock
Purchase Agreement, Maker's liability shall be unconditional, without regard to
the liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee. Maker agrees that additional makers, endorsers,
guarantors, or sureties may become parties hereto without notice to Maker or
affecting its liability hereunder.
11. Rights Cumulative; No Waiver. All rights and remedies of Payee
----------------------------
under this Note and any applicable law are separate and cumulative, and the
exercise of one shall not limit or prejudice the exercise of any other such
rights or remedies. The enumeration in this Note of any waivers or consents by
Maker shall not be deemed exclusive of any additional waivers or consents by
Maker which may be deemed to exist in law or equity. No delay or omission by
Payee in exercising any right or remedy shall operate as a waiver thereof. No
waiver of any
-4-
<PAGE>
rights and remedies hereunder, and no modification or amendment of this Note,
shall be deemed made by Payee unless in writing and duly signed by Payee. Any
such written waiver shall apply only to the particular instance specified
therein and shall not impair the further exercise of such right or remedy or of
any other right or remedy of Payee, and no single or partial exercise of any
right or remedy under this Note shall preclude any other or further exercise
thereof or any other right or remedy.
12. Notices. All notices, request, demands and other communications
-------
hereunder shall be deemed to have been duly given or received if delivered,
telegraphed, telecopied or mailed by certified or registered mail to the parties
at the addresses first above written or to such other address of which any party
may notify the other party as provided above.
13. Assignment. Payee shall not assign or transfer his rights under
----------
this Note without the prior consent of Maker.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Note as of the date and year set forth above.
Attest: [SIGNATURE APPEARS HERE] /s/ Joseph Stach
---------------------------- ---------------------------
Joseph Stach
ACCEPTED:
RF POWER PRODUCTS, INC.
By: /s/ Christopher Ben
---------------------------
Christopher Ben
Secretary
-5-
<PAGE>
AMENDMENT TO
PROMISSORY NOTE AND SECURITY AGREEMENT
THIS AMENDMENT, is entered into on this 21st day of January, 1997 by
and between RF Power Products, Inc., a New Jersey Corporation, (the "Company"),
and Joseph Stach, an individual (the "Maker").
WHEREAS, the Company and the Maker are parties to the Promissory Note
and Security Agreement dated February 11, 1994 (the "Promissory Note and
Security Agreement").
WHEREAS, the Company and the Maker wish to amend the Promissory Note
and Security Agreement as set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenant set forth herein, the parties hereby agree as follows:
1. The introduction of the Promissory Note and Security Agreement is
hereby deleted and replaced in its entirety as follows:
"FOR VALUE RECEIVED Joseph Stach, an individual residing at 4 Wiltsire
Court, Medford, New Jersey 08055 ("Maker") agrees to pay to the order of RF
Power Products, Inc., a New Jersey Corporation, having its principal
business office at 1007 Laurel Oak Road, Vorhees, New Jersey 08043 (the
"Company" or "Payee"), the principal sum of One Hundred Thirty-Two Thousand
Dollars (the "Principal Sum"), plus interest accrued on the unpaid balance
of the Principal Sum outstanding from time to time compounded annually at
the rate of 6.5% calculated on a 360 day year and the actual number of days
elapsed, on the terms and conditions set forth below:"
1. Section 1 of the Promissory Note and Security Agreement is hereby
deleted and replaced in its entirety as follows:
"1. Payment. The Principal Sum shall be payable in three (3) annual
-------
installments of Forty-Four Thousand Dollars ($44,000) each. The first
installment shall be due on February 10, 1995, the second installment shall
be due on February 10, 1996, and the third installment shall be due on
February 10, 2000, at which time the entire unpaid principal balance of
this Note, all interest accrued thereon and all other sums payable
hereunder shall be due and payable in full."
<PAGE>
2. Except as expressly modified hereby, the Promissory Note and Security
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties, hereto have executed this Amendment
as the date first above written.
RF POWER PRODUCTS, INC.
/s/ Joseph Stach By: /s/ Domenic N. Galato
- -------------------------------- ---------------------------------
Joseph Stach Name: Domenic N. Galato
Title: Treasurer
2
<PAGE>
PROMISSORY NOTE AND SECURITY AGREEMENT
--------------------------------------
$66,000 Dated: February 11, 1994
FOR VALVE RECEIVED Christopher Ben, an individual residing at 1 Ashley
Court, Medford, New Jersey 08055 ("Maker") agrees to pay to the order of RF
Power Produce, Inc. a New Jersey Corporation, having its principal business
office at 502 Gibbsboro-Marlton Road, Voorhees, New Jersey 08043 (the "Company"
or "Payee"), the principal sum of Sixty-Six Thousand Dollars ($66,000) (the
"Principal Sum"), plus interest accrued on the unpaid balance of the Principal
Sum outstanding from time to time compounded annually at the prime rate of
National Westminster Bank NJ in effect on the first day of each calendar quarter
(or portion thereof) during which this Note is outstanding, calculated based on
a 360 day year and the actual number of days elapsed, on the terms and
conditions set forth below:
1. Payment. The Principal Sum shall be payable in three (3)
-------
consecutive annual installments of Twenty-Two Thousand Dollars ($22,000) each.
Each installment shall be due on the 10th day of each February during the term
hereof, commencing February 10, 1995 and continuing until February 10, 1997 at
which time the entire unpaid principal balance of this Note, all interest
accrued thereon and all other sums payable hereunder shall be due and payable in
full.
Interest on the outstanding Principal Sum shall be payable
simultaneously with the payment of each installment of principal.
2. Place of Payment. All payments due under this Note shall be
----------------
payable in cash, wire transfer or other immediately available funds without
set-off or deduction, by direct delivery to Payee at the address of the Payee
set forth in the heading hereof or such other place as Payee, from time to
time, may designate in writing.
3. Prepayment. Maker shall have the right to prepay the Principal
----------
Sum of this Note, in whole or in part, at any time, without notice and without
prepayment penalty or premium. Each partial prepayment of the Principal Sum
shall be accompanied by accrued interest on the amount prepaid to the date of
prepayment. All partial prepayments shall be applied to installments of the
Principal Sum in the inverse order in which such installments of the Principal
Sum are due under this Note. Maker's partial prepayments of the Principal Sum
shall not effect in any way whatsoever the due dates or dollar amounts of any
subsequent schedule of Principal Sum payments in regard to this Note unless and
until Maker has paid in full the Principal Sum of this Note.
4. Security; Escrow Agent.
----------------------
(a) As collateral security for payment of the Principal Sum and
all other obligations of Maker under the Stock Purchase Agreement between Maker
and Payee, dated February 11, 1994 (the "Stock Purchase Agreement"), Maker
hereby pledges and creates a first
<PAGE>
priority security interest in all of his shares (the "Shares") of the Company,
to Payee, together with all "proceeds" (as defined in Section 9-306(a) of the
Uniform Commercial Code as adopted in Pennsylvania) thereof, including, without
limitation, all dividends or other income from the Shares. In furtherance of
this security interest, Maker agrees to place his Share certificates (including
any additional Share certificates of the Company acquired by Maker as a result
of subsequent stock dividends, splits, mergers or other actions) and undated
stock powers covering such certificates duly executed in blank and endorsed for
assignment in accordance with the terms of this Note, in escrow with Payee as
Escrow Agent ("Escrow Agent"), to hold such certificates and assignments and act
with respect thereto, in accordance with this Note.
(b) Subject to the provisions of Paragraph 6 hereof, the Escrow
Agent shall distribute the Share certificates:
(i) to Maker in accordance with joint written instructions
of Payee and Maker upon full payment of the Principal Sum and accrued interest,
and satisfaction and termination of this Note;
(ii) to Payee in accordance with Payee's written
instructions and in accordance with Paragraph 6; or
(iii) pursuant to an order, decree or judgment by a court of
competent jurisdiction which, by lapse of time or otherwise, shall no longer be
subject to appeal or review.
(c) If at any time the Escrow Agent determines that it is
uncertain as to the disposition of all or any portion of the Share certificates
held in escrow, it may continue to hold the Share certificates or deposit them
in any court of competent jurisdiction pending the final determination of
disputes regarding the disposition of the Share certificates between Maker and
Payee, in which case all of the Escrow Agent's costs and expenses in connection
with the making of such deposit (including reasonable attorneys' fees) shall be
paid to the Escrow Agent in equal amounts by Maker and Payee, provided, however,
that Maker and Payee are jointly and severally liable for such costs and
expenses as set forth in Paragraph 4(d), below.
(d) Maker and Payee acknowledge and agree that the Escrow Agent
shall not be liable for the conduct of its duties except in the event of
conviction and final adjudication of willful misconduct or final adjudication of
gross negligence, and shall be indemnified by each of them, jointly and
severally, for any costs of expenses, including attorneys' fees, arising out of
conduct of such escrow, except in the event of such a finding of willful
misconduct or gross negligence.
(e) Maker acknowledges, and waives any rights arising therefrom,
that Payee is both the Payee and Escrow Agent pursuant hereto and may have
conflicting duties and loyalties in connection therewith.
5. Cash Dividends; Voting Rights. Unless a default shall have
-----------------------------
occurred and be continuing and Payee shall have given notice to the Maker of
Payee's intent to exercise its
-2-
<PAGE>
corresponding rights pursuant to Paragraph 6 below, the Maker shall be permitted
to receive all cash dividends, if any, paid in the normal course of business of
the Company and consistent with past practice in respect of the Share
certificates and to exercise all voting and corporate rights with respect to the
Share certificates, provided, however, that no vote shall be cast or corporate
right exercised or other action taken by Maker, or given effect by the Company
or anyone else, which, in Payee's reasonable judgment, would impair Payee's
security interest under Paragraph 4 or be inconsistent with any of the Stock
Purchase Agreement, this Note, any other documents related thereto, or any of
the above, including, without limitation, any merger, exchange or sale of the
Shares.
6. Default.
-------
(a) The occurrence of any one or more of the following events
with respect to Maker shall, at Payee's option, constitute an event of default:
(i) the failure of Maker to make payment to Payee of any sum or sums due under
this Note within ten (10) days after they are due; (ii) the commencement of any
proceeding in bankruptcy, rehabilitation, creditor adjustment, or insolvency by
or against Maker which is not discharged with forty-five (45) days thereafter;
(iii) a general assignment by Maker for the benefit of creditors or others; (iv)
the appointment of a trustee, receiver, executor, conservator, liquidator, or
other judicial representative for Maker or any of Maker's property; (v) the
attachment of any of Maker's property which is not released or provided for to
the satisfaction of Payee within ten (10) days of such attachment or; (vi) the
failure to Maker and Company with any of the provisions of the Stock Purchase
Agreement or of this Note. Maker agrees to provide notice to Escrow Agent and
Payee of the occurrence of any of the events described in (ii) through (vi),
above, within twenty-four (24) hours thereof.
(b) In the event of a default pursuant to subparagraph (a) of
this Section, Payee may elect to notify both the Escrow Agent and Maker in
writing that there has been a default and if such default is not cured by Maker
within ten (10) days of receipt by Maker of his copy of such notice, Payee may
(A) have the certificates representing the Shares, and all assignments relative
there to, delivered and assigned by Escrow Agent to Payee and to be registered
in Payee's name, in which event Payee shall return to Maker the lesser of the
fair market value of the Shares represented by the certificates to be registered
or the aggregate purchase price paid to such date pursuant to the Stock Purchase
Agreement and this Note, in both cases, less the aggregate of all dividends and
distributions paid to Maker to such date on the Shares or (B) accelerate the
payment of the unpaid Principal Sum due under this Note, and all accrued
interest, to the date of such acceleration and to do any and all other things
which Payee deems necessary to enforce the provisions of this Note with respect
to any such unpaid amount, as permitted by applicable law; provided, however,
that at such time as the unpaid Principal Sum due is fully paid to Payee, Payee
shall instruct Escrow Agent to deliver to Maker the certificates representing
the Shares, and all assignments relative thereto;
In the event that Maker disputes the existence of a default which is the
subject of the notice to the Escrow Agent under Paragraph 6, he shall notify the
Escrow Agent and Payee within ten (10) days of the existence of such dispute,
and the Escrow Agent shall continue to
-3-
<PAGE>
hold the Share certificates or deposit them in any court of competent
jurisdiction as provided in Paragraph 4(c) herein.
(c) All of Maker's voting rights with respect to the Shares,
and all other rights of Maker in the Company, shall be suspended upon the
occurrence of an event of default under subparagraph (a) of this Section, except
that the right to receive dividends from the Company shall not be suspended,
until either the default is cured or the delivery and assignment of Shares
occurs pursuant to Section 6(b)(i).
(d) The failure by Payee to declare, or the delay in declaring,
a default under subparagraph (b), above, shall not in any way constitute a
waiver, or otherwise prejudice, Payee's rights to assert default with respect to
any such occurrence at some later time or to take any other action pursuant to
this Note with respect to such or any other occurrence.
7. Severability. If any provision of this Note is held to be
------------
invalid or unenforceable by a Court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect and shall be
construed liberally in favor of Payee in order to effectuate the provisions of
this Note.
8. Governing Law. This Note shall be governed by and construed
-------------
according to the laws of the State of New Jersey.
9. Successors and Assigns. The provisions of this Note shall be
----------------------
binding upon and inure to the benefit of Maker and Payee and their respective
heirs, executors or administrators and successors and assigns.
10. No Presentment, Etc. Maker hereby waives presentment for
-------------------
payment, demand, notice of demand, notice of nonpayment or dishonor, protest and
notice of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of
this Note. Maker agrees that, other than as set forth in this Note or the Stock
Purchase Agreement, Maker's liability shall be unconditional, without regard to
the liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee. Maker agrees that additional makers, endorsers,
guarantors, or sureties may become parties hereto without notice to Maker or
affecting its liability hereunder.
11. Rights Cumulative; No Waiver. All rights and remedies of Payee
---------------------------
under this Note and any applicable law are separate and cumulative, and the
exercise of one shall not limit or prejudice the exercise of any other such
rights or remedies. The enumeration in this Note of any waivers or consents by
Maker shall not be deemed exclusive of any additional waivers or consents by
Maker which may be deemed to exist in law or equity. No delay or omission by
Payee in exercising any right or remedy shall operate as a waiver thereof. No
waiver of any rights and remedies hereunder, and no modification or amendment of
this Note, shall be deemed made by Payee unless in writing and duly signed by
Payee. Any such written waiver shall apply only to the particular instance
specified therein and shall not impair the further exercise of such
-4-
<PAGE>
right or remedy or of any other right or remedy of Payee, and no single or
partial exercise of any right or remedy under this Note shall preclude any
other or futher exercise thereof or any other right or remedy.
12. Notices. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been duly given or received if delivered,
telegraphed, telecopied or mailed by certified or registered mail to the parties
at the addresses first above written or to such other address of which any party
may notify the other party as provided above.
13. Assignment. Payee shall not assign or transfer his rights under
----------
this Note without the prior consent of Maker.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Note as of the date and year set forth above.
Attest: [SIGNATURE APPEARS HERE] /s/ Christopher Ben
--------------------------- --------------------------
Christopher Ben,
ACCEPTED:
RF POWER PRODUCTS, INC.
By: /s/ Joseph Stach
---------------------
Joseph Stach,
President
<PAGE>
AMENDMENT TO
PROMISSORY NOTE AND SECURITY AGREEMENT
THIS AMENDMENT, is entered into on this 21st day of January, 1997 by and
between RF Power Products, Inc., a New Jersey Corporation, (the "Company"), and
Christopher Ben, an individual (the "Maker").
WHEREAS, the Company and the Maker are parties to the Promissory Note
and Security Agreement dated February 11, 1994 (the "Promissory Note and
Security Agreement").
WHEREAS, the Company and the Maker wish to amend the Promissory Note and
Security Agreement as set for herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenant set forth herein, the parties hereby agree as follows:
1. The introduction of the Promissory Note and Security Agreement is hereby
deleted and replaced in its entirety as follows:
"FOR VALUE RECEIVED Christopher Ben, an individual residing at 4 Taisley
Drive, Medford, New Jersey 08055 ("Maker") agrees to pay to the order of RF
Power Products, Inc., a New Jersey Corporation, having its principal
business office at 1007 Laurel Oak Rod, Vorhees, New Jersey 08043 (the
"Company" or "Payee"), the principal sum of Sixty-Six Thousand Dollars (the
"Principal Sum"), plus interest accrued on the unpaid balance of the
Principal Sum outstanding from time to time compounded annually at the rate
of 6.5% calculated on a 360 day year and the actual number of days elapsed,
on the terms and conditions set forth below:"
1. Section 1 of the Promissory Note and Security Agreement is hereby
deleted and replaced in its entirety as follows:
"1. Payment The Principal Sum shall be payable in three (3) annual
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installments of Twenty-Two Thousand Dollars (22,000) each. The first
installment shall be due on February 10, 1995, the second installment shall
be due on February 10, 1996, and the third installment shall be due February
10, 2000, at which time the entire unpaid principal balance of this Note,
all interest accrued thereon and all other sums payable hereunder shall be
due and payable in full."
<PAGE>
2. Except as expressly modified hereby, the Promissory Note and Security
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties, hereto have executed this Amendment as
of the date first above written.
RF POWER PRODUCTS, INC.
/s/ Christopher Ben By: /s/ Joseph Stach
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Christopher Ben Name: Joseph Stach
Title: President
2
<PAGE>
PROMISSORY NOTE AND SECURITY AGREEMENT
--------------------------------------
$33,000 Dated: February 11, 1994
FOR VALVE RECEIVED Domenic Golato, an individual residing at 12 Sherwood
Drive, Medford, New Jersey 08055 ("Maker") agrees to pay to the order of RF
Power Produce, Inc., a New Jersey Corporation, having its principal business
office at 502 Gibbsboro-Marlton Road, Voorhees, New Jersey 08043 (the "Company"
or "Payee"), the principal sum of Thirty-Three Thousand Dollars ($33,000) (the
"Principal Sum"), plus interest accrued on the unpaid balance of the Principal
Sum outstanding from time to time compounded annually at the prime rate of
National Westminster Bank NJ in effect on the first day of each calendar quarter
(or portion thereof) during which this Note is outstanding, calculated based on
a 360 day year and the actual number of days elapsed, on the terms and
conditions set forth below:
1. Payment. The Principal Sum shall be payable in three (3)
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consecutive annual installments of Eleven Thousand Dollars ($11,000) each. Each
installment shall be due on the 10th day of each February during the term
hereof, commencing February 10, 1995 and continuing until February 10, 1997, at
which time the entire unpaid principal balance of this Note, all interest
accrued thereon and all other sums payable hereunder shall be due and payable in
full.
Interest on the outstanding Principal Sum shall be payable
simultaneously with the payment of each installment of principal.
2. Place of Payment. All payments due under this Note shall be
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payable in cash, wire transfer or other immediately available funds without
set-off or deduction, by direct delivery to Payee at the address of the Payee
set forth in the heading hereof or such other place as Payee, from time to time,
may designate in writing.
3. Prepayment. Maker shall have the right to prepay the Principal
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Sum of this Note, in whole or in part, at any time, without notice and without
prepayment penalty or premium. Each partial prepayment of the Principal Sum
shall be accompanied by accrued interest on the amount prepaid to the date of
prepayment. All partial prepayments shall be applied to installments of the
Principal Sum in the inverse order in which such installments of the Principal
Sum are due under this Note. Maker's partial prepayments of the Principal Sum
shall not affect in any way whatsoever the due dates or dollar amounts of any
subsequent schedule of Principal Sum payments in regard to this Note unless and
until Maker has paid in full the Principal Sum of this Note.
4. Security; Escrow Agent.
----------------------
(a) As collateral security for payment of the Principal Sum and
all other obligations of Maker under the Stock Purchase Agreement between Maker
and Payee, dated February 11, 1994 (the "Stock Purchase Agreement"), Maker
hereby pledges and creates a first
<PAGE>
priority security interest in all of his shares (the "Shares") of the Company,
to Payee, together with all "proceeds" (as defined in Section 9-306(a) of the
Uniform Commercial Code as adopted in Pennsylvania) thereof, including, without
limitation, all dividends or other income from the Shares. In furtherance of
this security interest, Maker agrees to place his Share certificates (including
any additional Share certificates of the Company acquired by Maker as a result
of subsequent stock dividends, splits, mergers or other actions) and undated
stock powers covering such certificates duly executed in blank and endorsed for
assignment in accordance with the terms of this Note, in escrow with Payee as
Escrow Agent ("Escrow Agent"), to hold such certificates and assignments and act
with respect thereto, in accordance with this Note.
(b) Subject to the provisions of Paragraph 6 hereof, the Escrow
Agent shall distribute the Share certificates:
(i) to Maker in accordance with joint written instructions
of Payee and Maker upon full payment of the Principal Sum and accrued interest,
and satisfaction and termination of this Note;
(ii) to Payee in accordance with Payee's written
instructions and in accordance with Paragraph 6; or
(iii) pursuant to an order, decree or judgment by a court of
competent jurisdiction which, by lapse of time or otherwise, shall no longer be
subject to appeal or review.
(c) If at any time the Escrow Agent determines that it is
uncertain as to the disposition of all or any portion of the Share certificates
held in escrow, it may continue to hold the Share certificates or deposit them
in any court of competent jurisdiction pending the final determination of
disputes regarding the disposition of the Share certificates between Maker and
Payee, in which case all of the Escrow Agent's costs and expenses in connection
with the making of such deposit (including reasonable attorneys' fees) shall be
paid to the Escrow Agent in equal amounts by Maker and Payee, provided, however,
that Maker and Payee are jointly and severally liable for such costs and
expenses as set forth in Paragraph 4(d), below.
(d) Maker and Payee acknowledge and agree that the Escrow Agent
shall not be liable for the conduct of its duties except in the event of
conviction and final adjudication of willful misconduct or final adjudication of
gross negligence, and shall be indemnified by each of them, jointly and
severally, for any costs of expenses, including attorneys' fees, arising out of
conduct of such escrow, except in the event of such a finding of willful
misconduct or gross negligence.
(e) Maker acknowledges, and waives any rights arising therefrom,
that Payee is both the Payee and Escrow Agent pursuant hereto and may have
conflicting duties and loyalties in connection therewith.
5. Cash Dividends; Voting Rights. Unless a default shall have
-----------------------------
occurred and be continuing and Payee shall have given notice to the Maker of
Payee's intent to exercise its
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<PAGE>
corresponding rights pursuant to Paragraph 6 below, the Maker shall be permitted
to receive all cash dividends, if any, paid in the normal course of business of
the Company and consistent with past practice in respect of the Share
certificates and to exercise all voting and corporate rights with respect to the
Share certificates, provided, however, that no vote shall be cast or corporate
right exercised or other action taken by Maker, or given effect by the Company
or anyone else, which, in Payee's reasonable judgment, would impair Payee's
security interest under Paragraph 4 or be inconsistent with any of the Stock
Purchase Agreement, this Note, any other documents related thereto, or any of
the above, including, without limitation, any merger, exchange or sale of the
Shares.
6. Default.
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(a) The occurrence of any one or more of the following events with
respect to Maker shall, at Payee's option, constitute an event of default: (i)
the failure of Maker to make payment to Payee of any sum or sums due under this
Note within ten (10) days after they are due; (ii) the commencement of any
proceeding in bankruptcy, rehabilitation, creditor adjustment, or insolvency by
or against Maker which is not discharged within forty-five (45) days thereafter;
(iii) a general assignment by Maker for the benefit of creditors or others; (iv)
the appointment of a trustee, receiver, executor, conservator, liquidator, or
other judicial representative for Maker or any of Maker's property; (v) the
attachment of any of Maker's property which is not released or provided for to
the satisfaction of Payee within (10) days of such attachment or; (vi) the
failure to Maker and Company with any of the provisions of the Stock Purchase
Agreement or of this Note. Maker agrees to provide notice to Escrow Agent and
Payee of the occurrence of any of the events described in (ii) through (vi),
above, within twenty-four (24) hours thereof.
(b) In the event of a default pursuant to subparagraph (a) of this
Section, Payee may elect to notify both the Escrow Agent and Maker in writing
that there has been a default and if such default is not cured by Maker within
ten (10) days of receipt by Maker of his copy of such notice, Payee may (A) have
the certificates representing the Shares, and all assignments relative thereto,
delivered and assigned by Escrow Agent to Payee and to be registered in Payee's
name, in which event Payee shall return to Maker the lesser of the fair market
value of the Shares represented by the certificates to be registered or the
aggregate purchase price paid to such date pursuant to the Stock Purchase
Agreement and this Note, in both cases, less the aggregate of all dividends and
distributions paid to Maker to such date on the Shares or (B) accelerate the
payment of the unpaid Principal Sum due under this Note, and all accrued
interest, to the date of such acceleration and to do any and all other things
which Payee deems necessary to enforce the provisions of this Note with respect
to any such unpaid amount, as permitted by applicable law; provided, however,
that at such time as the unpaid Principal Sum due is fully paid to Payee, Payee
shall instruct Escrow Agent to deliver to Maker the certificates representing
the Shares, and all assignments relative thereto.
In the event that Maker disputes the existence of a default which is the
subject of the notice to the Escrow Agent under Paragraph 6, he shall notify the
Escrow Agent and Payee within ten (10) days of the existence of such dispute,
and the Escrow Agent shall continue to
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<PAGE>
hold the Share certificates or deposit them in any court of competent
jurisdiction as provided in Paragraph 4(c) herein.
(c) All of Maker's voting rights with respect to the Shares, and
all other rights of Maker in the Company, shall be suspended upon the occurrence
of an event of default under subparagraph (a) of this Section, except that the
right to receive dividends from the Company shall not be suspended, until either
the default is cured or the delivery and assignment of Shares occurs pursuant to
Section 6(b)(i).
(d) The failure by Payee to declare, or the delay in declaring,
a default under subparagraph (b), above, shall not in any way constitute a
waiver, or otherwise prejudice, Payee's rights to assert default with respect to
any such occurrence at some later time or to take any other action pursuant to
this Note with respect to such or any other occurrence.
7. Severability. If any provision of this Note is held to be
------------
invalid or unenforceable by a Court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect and shall be
construed liberally in favor of Payee in order to effectuate the provisions of
this Note.
8. Governing Law. This Note shall be governed by and construed
-------------
according to the laws of the State of New Jersey.
9. Successors and Assigns. The provisions of this Note shall be
----------------------
binding upon and inure to the benefit of Maker and Payee and their respective
heirs, executors or administrators and successors and assigns.
10. No Presentment, Etc. Maker hereby waives presentment for
--------------------
payment, demand, notice of demand, notice of nonpayment or dishonor, protest and
notice of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of
this Note. Maker agrees that, other than as set forth in this Note or the Stock
Purchase Agreement, Maker's liability shall be unconditional, without regard to
the liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee. Maker agrees that additional makers, endorsers,
guarantors, or sureties may become parties hereto without notice to Maker or
affecting its liability hereunder.
11. Rights Cumulative; No Waiver. All rights and remedies of Payee
----------------------------
under this Note and any applicable law are separate and cumulative, and the
exercise of one shall not limit or prejudice the exercise of any other such
rights or remedies. The enumeration in this Note of any waivers or consents by
Maker shall not be deemed exclusive of any additional waivers or consents by
Maker which may be deemed to exist in law or equity. No delay or omission by
Payee in exercising any right or remedy shall operate as a waiver thereof. No
waiver of any rights and remedies hereunder, and no modification or amendment of
this Note, shall be deemed made by Payee unless in writing and duly signed by
Payee. Any such written waiver shall apply only to the particular instance
specified therein and shall not impair the further exercise of such
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<PAGE>
right or remedy or of any other right or remedy of Payee, and no single or
partial exercise of any right or remedy under this Note shall preclude any other
or further exercise thereof or any other right or remedy.
12. Notices. All notices, requests, demands and other communications
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hereunder shall be deemed to have been duly given or received if delivered,
telegraphed, telecopied or mailed by certified or registered mail to the parties
at the addresses first above written or to such other address of which any party
may notify the other party as provided above.
13. Assignment. Payee shall not assign or transfer his rights under
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this Note without the prior consent of Maker.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Note as of the date and year set forth above.
Attest: [SIGNATURE APPEARS HERE] /s/ Domenic Golato
---------------------------- -----------------------------
Domenic Golato
ACCEPTED:
RF POWER PRODUCTS, INC.
By: /s/ Joseph Stach,
--------------------------------
Joseph Stach,
President
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<PAGE>
AMENDMENT TO
PROMISSORY NOTE AND SECURITY AGREEMENT
THIS AMENDMENT, is entered into on this 21st day of January, 1997 by and
between RF Power Products, Inc., a New Jersey Corporation, (the "Company"), and
Domenic N. Golato, an individual (the "Maker").
WHEREAS, the Company and the Maker are parties to the Promissory Note
and Security Agreement dated February 11, 1994 (the "Promissory Note and
Security Agreement").
WHEREAS, the Company and the Maker wish to amend the Promissory Note and
Security Agreement as set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenant set forth herein, the parties hereby agree as follows:
1. The introduction of the Promissory Note and Security Agreement is hereby
deleted and replaced in its entirety as follows:
"FOR VALUE RECEIVED Domenic N. Golato, an individual residing at
12 Sherwood Drive, Medford, New Jersey 08055 ("Maker") agrees to pay to the
order of RF Power Products, Inc., a New Jersey Corporation, having its
principal business office at 1007 Laurel Oak Road, Vorhees, New Jersey 08043
(the "Company" or "Payee"), the principal sum of Thirty-Three Thousand
Dollars (the "Principal Sum"), plus interest accrued on the unpaid balance
of the Principal Sum outstanding from time to time compounded annually at
the rate of 6.5% calculated on a 360 day year and the actual number of days
elapsed, on the terms and conditions set forth below:"
1. Section 1 of the Promissory Note and Security Agreement is hereby
deleted and replaced in its entirety as follows:
"1. Payment The Principal Sum shall be payable in three (3) annual
-------
installments of Eleven Thousand Dollars ($11,000) each. The first
installment shall be due on February 10, 1995, the second installment shall
be due on February 10, 1996, and the third installment shall be due on
February 10, 2000, at which time the entire unpaid principal balance of this
Note, all interest accrued thereon and all other sums payable hereunder
shall be due and payable in full."
<PAGE>
2. Except as expressly modified hereby, the Promissory Note and Security
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties, hereto have executed this Amendment as
of the date first above written.
RF POWER PRODUCTS, INC.
/s/ Domenic N. Golato By: /s/ Joseph Stach
- ------------------------------ --------------------------
Domenic N. Golato Name: Joseph Stach
Title: President
2
<PAGE>
Exhibit 21
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RP POWER PRODUCTS, INC.
Subsidiaries of the Registrant
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Subsidiary Jurisdiction of Incorporation
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RFPP Foreign Sales Corporation
Territory of The U.S. Virgin Islands
