Exhibit 10.2

TERM LOAN AGREEMENT

between

SEVCON, INC.

and

BANCA MONTE DEI PASCHI DI SIENA S.p.A.
acting through its New York branch

January 27, 2016

 

 

 

 

 

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS 1 ARTICLE II. TERM LOAN 9 2.1   Term Loan. 9 2.2   Use of
Proceeds. 10 ARTICLE III. THE NOTE 10 3.1   Note. 10 ARTICLE IV. INTEREST RATES
AND FEES 10 4.1   Interest Rate. 10 4.2   Facility Fee. 11 4.3   Prepayment. 11
4.4   Late Charges and Default Interest. 11 ARTICLE V. PAYMENTS AND PRINCIPAL 11
5.1   Type and Manner of Payment. 11 5.2   Payments of Principal and Interest.
12 5.3   Indemnity. 12 5.4   Regulatory Change. 12 ARTICLE VI. SECURITY 13
6.1   Security. 13 ARTICLE VII. REPRESENTATIONS AND WARRANTIES 13
7.1   Corporate Matters. 13 7.2   Subsidiaries. 14 7.3   Litigation. 15 7.4   No
Default. 15 7.5   Solvency. 15 7.6   Employee Benefit Plans. 15
7.7   Environmental. 16 7.8   Brokerage Fees. 16 7.9   Intellectual Property. 16
7.10   Title to Properties; Liens. 16

 

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TABLE OF CONTENTS

 

  Page     7.11   Leases. 16 7.12   Transactions with Affiliates. 16
7.13   Complete Disclosure. 17 7.14   Compliance with Laws. 17 7.15   Patriot
Act. 17 7.16   Margin Stock. 17 7.17   Governmental Regulation. 17 7.18   OFAC.
17 7.19   Indebtedness. 18 ARTICLE VIII. COVENANTS OF BORROWER 18
8.1   Corporate Status, Financial Information and Obligations. 18
8.2   Financial Covenant. 19 8.3   Environmental. 19 8.4   Taxes. 19
8.5   Insurance. 19 8.6   Employee Benefits. 20 8.7   Other Agreements. 20
8.8   Use of Proceeds. 20 8.9   Corporate Organization. 21 8.10   Continuation
of Business. 21 8.11   Additional Indebtedness and Activities. 21
8.12   Disposal of Assets. 21 8.13   Future Acquisitions. 21 8.14   Change Name.
21 8.15   Change of Control. 21 8.16   No Liens on Target’s Assets. 21
8.17   Dividends. 21 8.18   Restricted Payments. 22 8.19   No Issuance of New
Preferred Stock. 22 8.20   Further Assurances; Power of Attorney. 22
8.21   Access to Books and Records. 22

 

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TABLE OF CONTENTS

 

  Page     ARTICLE IX. EVENTS OF DEFAULT 22 9.1   Events of Default. 22 ARTICLE
X. CONDITIONS PRECEDENT 24 ARTICLE XI. MISCELLANEOUS PROVISIONS 26
11.1   Waiver. 26 11.2   Consent to Jurisdiction; Service of Process and Waiver
of Jury Trial. 26 11.3   Notices. 27 11.4   Costs, Expenses and Taxes. 28
11.5   Captions. 28 11.6   Governing Law. 28 11.7   Successors and Assigns. 28
11.8   Counterparts. 28 11.9   Revival and Reinstatement of Obligations. 28
11.10   Amendments. 29 11.11   Inconsistencies. 29 11.12   Performance of
Obligations. 29 11.13   Assignments and Participations. 29 11.14   Right of
Set-Off. 29 11.15   Severability. 29 11.16   Limitation of Liability. 30
11.17   Entire Agreement. 30 11.18   Patriot Act. 30 EXHIBIT A PROMISSORY NOTE  
EXHIBIT B FORM OF GUARANTY   EXHIBIT C FORM OF SECURITY AGREEMENT   EXHIBIT D
FORM OF PLEDGE AGREEMENT   EXHIBIT E FORM OF OPINION OF COUNSEL  

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TERM LOAN AGREEMENT

This TERM LOAN AGREEMENT, dated as of January 27, 2016, between SEVCON, INC., a
Delaware corporation with offices at 155 Northboro Road, Southborough,
Massachusetts 01772 (the “Borrower”) and BANCA MONTE DEI PASCHI DI SIENA S.p.A.,
acting through its New York branch, having an office at 55 East 59th Street, New
York, New York 10022 (the “Bank”).

W I T N E S S E T H:

WHEREAS, the Borrower intends to acquire, through an indirect wholly-owned
Subsidiary, the Target, as defined below (the “Acquisition”).

WHEREAS, in connection with the Acquisition, the Borrower has requested that the
Bank make available to the Borrower an amount not to exceed the lesser of
FIFTEEN MILLION and 00/100 EUROS (€15,000,000.00) or eighty percent (80%) of the
Acquisition purchase price, which aggregate amount the Bank is willing to make
available to the Borrower subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and to induce the Bank to make
the Loan and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:

ARTICLE I.
DEFINITIONS

As used herein, the following capitalized terms shall have the meaning set forth
below:

"Acquisition" shall mean the meaning set forth in the recitals above.

"Acquisition Note" shall mean the promissory note in the approximate principal
amount of the Loan delivered by Sevcon Limited to the Borrower.

“Affiliate” shall mean, as applied to any Person, any other Person who, directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person. For purposes of this definition,
“control” shall mean the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person,
whether through the ownership of Stock, by contract, or otherwise.

“Agreement” shall mean this Term Loan Agreement, as the same may be amended or
modified from time to time.

“Applicable EURIBOR Margin” shall mean 300 basis points (3.00%) per year.

“Applicable EUROLIBOR Margin” shall mean 300 basis points (3.00%) per year.

1

 

“Bank” has the meaning set forth in the preamble to this Agreement.

“Benefit Plan” shall mean a “defined benefit plan” (as defined in Section 3(35)
of ERISA) for which the Borrower or any Subsidiary or ERISA Affiliate of the
Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the
past six years.

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Break Costs” shall mean such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate the Bank for any actual loss,
cost, or expense incurred as a result of (i) any prepayment of the EUROLIBOR
Loan other than on the last day of the applicable Interest Period for such
EUROLIBOR Loan, or (ii) any failure by the Borrower to prepay the Loan on any
date for payment specified in the Borrower’s written notice of intention to
prepay such Loan.

“Business Day” shall mean a day other than a Saturday, Sunday or other day on
which banking institutions are authorized or obligated to close under the laws
of the United States of America or the State of New York.

“Change of Control” shall mean (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) other than
the Permitted Investor, of Stock representing more than 40% of the aggregate
ordinary voting power represented by the issued and outstanding Stock of the
Borrower; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Borrower by Persons who were neither (i) nominated
or approved by the board of directors of the Borrower nor (ii) appointed by
directors so nominated or approved; or (c) the Borrower shall cease to own,
directly or indirectly, free and clear of all Liens or other encumbrances, at
least 100% of the outstanding Stock of any Subsidiary except as may result from
any merger, consolidation or other reorganization permitted under this
Agreement.

“Code” shall mean the United States Internal Revenue Code of 1986, as revised
from time to time.

“Default Rate” shall mean a per annum rate of interest equal to the rate of
interest applicable to an Obligation determined pursuant to Section 4.1, plus
three percent (3%).

“EBITDA” shall mean, for any period of determination and without duplication,
the sum of (i) consolidated net income of the Borrower and its Subsidiaries for
such period (computed without regard to any extraordinary items of gain or
loss), plus (ii) to the extent included in the calculation of consolidated net
income for such period, the sum of (A) interest expense, (B) income tax expense,
(C) depreciation and amortization, (D) any extraordinary charges for such
period, (E) any non-cash charges for such period related to stock options and
restricted stock granting, (F) any other nonrecurring non-cash charges for such
period (but excluding any non-cash charge in respect of an item that was
included in consolidated net income in a prior period), (G) fees and expenses
incurred in connection with the negotiation, execution and delivery on the
Funding Date of this Agreement and the other Loan Documents and the transactions
contemplated herein and therein, (H) fees and expenses incurred in connection
with the negotiation, execution and delivery of the documents related to the
Acquisition and (I) reasonable non-recurring cash expenses and losses arising
from any integration costs, severance costs, retention costs, relocation costs,
termination costs, consolidated of facilities costs and losses, minus (iii)
non-cash gains.

2

 

“Environmental Law” shall mean any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on the
Borrower or its Subsidiaries, relating to the environment, the effect of the
environment on employee health, or Hazardous Materials, including the
Comprehensive Environmental Response Compensation and Liability Act, 42 USC §
9601 et seq.; the Resource Conservation and Recovery Act, 42 USC § 6901 et seq.;
the Federal Water Pollution Control Act, 33 USC § 1251 et seq.; the Toxic
Substances Control Act, 15 USC § 2601 et seq.; the Clean Air Act, 42 USC § 7401
et seq.; the Safe Drinking Water Act, 42 USC § 3803 et seq.; the Oil Pollution
Act of 1990, 33 USC § 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 USC § 11001 et seq.; the Hazardous Material
Transportation Act, 49 USC § 1801 et seq.; and the Occupational Safety and
Health Act, 29 USC §651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of the Borrower or its
Subsidiaries under Code Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of the Borrower or its Subsidiaries under Code Section 414(c), (c)
solely for purposes of Section 302 of ERISA and Section 412 of the Code, any
organization subject to ERISA that is a member of an affiliated service group of
which the Borrower or any of its Subsidiaries is a member under Code Section
414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of
the Code, any Person subject to ERISA that is a party to an arrangement with the
Borrower or any of its Subsidiaries and whose employees are aggregated with the
employees of the Borrower or its Subsidiaries under Code Section 414(o).

“EURIBOR Loan” shall mean the Term Loan when the interest thereon is determined
by reference to the EURIBOR Rate.

“EURIBOR Rate” shall mean with respect to the EURIBOR Loan, for any Interest
Period applicable thereto, the rate per annum as determined on the basis of the
euro interbank offered rate administered by the Banking Federation of the
European Union (or any other person which takes over the administration of that
rate), as quoted by such electronic or other quotation sources as it considers
appropriate (rounded upwards, if necessary, to the next 1/100%) for a period of
time comparable to such Interest Period for such EURIBOR Loan as of 11:00 a.m.
central European time on the day that is two (2) Business Days preceding the
first day of such Interest Period for such EURIBOR Loan. In the event that the
Bank is unable to obtain any such quotation as provided above, it shall be
deemed that the EURIBOR Rate pursuant to a EURIBOR Loan cannot be determined.

“Euro” and “€” shall mean lawful currency of the European Union.

“EUROLIBOR Loan” shall mean the Term Loan when the interest thereon is
determined on the basis of rates referred to in the definition of “EUROLIBOR
Rate,” below. All computations of interest for a EUROLIBOR Loan shall be made on
the basis of a three hundred sixty (360) day year and the actual number of days
elapsed.

3

 

“EUROLIBOR Rate” shall mean with respect to the EUROLIBOR Loan, for any Interest
Period applicable thereto, the rate per annum as determined on the basis of the
London Interbank offered rates for deposits in Euros, as quoted by such
electronic or other quotation sources as it considers appropriate (rounded
upwards, if necessary, to the next 1/100%) for a period of time comparable to
such Interest Period for such EUROLIBOR Loan as of 11:00 a.m. London time on the
day that is two (2) London Business Days preceding the first day of such
Interest Period for such EUROLIBOR Loan. In the event that the Bank is unable to
obtain any such quotation as provided above, it shall be deemed that the
EUROLIBOR Rate pursuant to a EUROLIBOR Loan cannot be determined. In the event
that the Board of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to EUROLIBOR deposits of any Bank, then for any period
during which such Reserve Percentage shall apply, the EUROLIBOR Rate shall be
equal to the amount determined above divided by an amount equal to 1 minus the
Reserve Percentage. “Reserve Percentage” shall mean the maximum aggregate
reserve requirement (including all basic, supplemental, marginal and other
reserves), which is imposed on member banks of the Federal Reserve System
against “Euro-currency Liabilities” as defined in Regulation D of the Board of
Governors of the Federal Reserve System, as in effect from time to time. The
Bank shall use its best efforts to advise the Borrower of the EUROLIBOR Rate as
soon as practicable after each change in the EUROLIBOR Rate; provided, however,
that the failure of the Bank to so advise the Borrower on any one or more
occasions shall not affect the rights of the Bank or the obligations of the
Borrower hereunder.

“Event of Default” has the meaning set forth in ARTICLE IX hereof.

“Excluded Subsidiaries” shall mean Sevcon Asia Limited and Sevcon Japan KK.

“Execution Date” shall mean the date first set forth above in this Agreement.

4

 

“Funding Date” shall mean a date not more than 30 days subsequent to the
Execution Date on which all of the conditions set forth in ARTICLE X have been
satisfied.

“GAAP” for any Person, shall mean generally accepted accounting principles in
the United States of America as in effect from time to time, applied by the
Borrower on a basis consistent with the Borrower’s most recent financial
statements furnished to the Bank pursuant to the provisions of this Agreement.
All accounting terms used in this Agreement, unless otherwise defined, shall
have the meanings ascribed to them under GAAP. If at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
any Loan Document, and either the Borrower or the Bank shall so request, the
Bank and the Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided that, until so amended, such ratio or requirement shall continue
to be computed in accordance with GAAP prior to such change therein.

“Governmental Authority” shall mean any domestic or foreign, federal, state,
local, or other governmental or administrative body, instrumentality, board,
department, or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body.

“Guarantors” shall mean Sevcon USA, Inc., a Delaware corporation and Sevcon
Security Corporation, a Massachusetts corporation.

“Guaranties” shall mean the unconditional guaranties by the Guarantors of the
Obligations, substantially in the form attached hereto as Exhibit B.

“Hazardous Materials” shall mean (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

“Indebtedness” shall mean any obligation of a Person for the payment of money to
any other Person, including without limitation (i) indebtedness for money
borrowed, (ii) purchase money obligations, (iii) leases evidencing the
acquisition of capital assets, (iv) reimbursement obligations; provided,
however, that reimbursement obligations supporting credit or liquidity
facilities shall not constitute Indebtedness until such time as a reimbursement
payment becomes due and payable under the agreement entered into in connection
with such reimbursement obligations, and (v) guaranteed indebtedness, but
excluding (a) obligations for supplies, services and pensions allocable to
current operating expenses during the current or future fiscal years in which
the supplies are to be delivered, the services rendered, or the pensions paid
and (b) rentals payable in the current or future fiscal years under leases that
are not capital leases and not required to be included as indebtedness under
GAAP.

5

 

“Interest Period” shall mean with respect to the EUROLIBOR Loan, each period
commencing on the date such Loan is made (or the last day of the next preceding
Interest Period with respect to the Loan), and ending on the day that is 1, 2 or
3 months thereafter as selected by the Borrower (except that each such Interest
Period that commences on the last London Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last London Business Day of the
appropriate subsequent calendar month). Notwithstanding the foregoing: (i) each
Interest Period that would otherwise end on a day that is not a London Business
Day shall end on the next succeeding London Business Day; and (ii) no Interest
Period shall end later than the Term Loan Maturity Date.

“Leverage Ratio” shall mean, as of any date of determination, the ratio of
consolidated Indebtedness of the Borrower and its Subsidiaries minus cash and
marketable securities of the Borrower and its Subsidiaries to EBITDA of the
Borrower and its Subsidiaries for the 12 month period ended as of such date of
determination.

“Lien” shall mean any interest in an asset securing an obligation owed to, or a
claim by, any Person other than the owner of the asset, irrespective of whether
(a) such interest is based on the common law, statute, or contract, (b) such
interest is recorded or perfected, and (c) such interest is contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term “Lien” includes the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, option, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting real property.

“Loan” shall mean the Term Loan.

“Loan Documents” shall mean this Agreement, the Note, the Guaranty, the Security
Agreement, the Pledge Agreements and all documents, instruments and agreements
relating to the foregoing, and any amendment, modification or supplement, from
time to time, to any of the foregoing.

“Loan Parties” shall mean the Borrower and the Guarantors.

“London Business Day” shall mean a Business Day on which dealings in Euro
deposits are carried out in the London interbank market.

6

 

“Margin Stock” has the meaning set forth in Regulation U of the Board of
Governors as in effect from time to time.

“Material Adverse Change” shall mean a material adverse change with respect to
(a) the business, operations, property, or financial condition of the Loan
Parties and their Affiliates, or (b) the ability of the Loan Parties to perform
their obligations under the Loan Documents.

“Multiemployer Plan” shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which a Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Code Section 414) is making or accruing an obligation to make contributions or
has within any of the preceding five plan years made or accrued an obligation to
make contributions.

“Note” shall mean the Promissory Note dated the Funding Date made by the
Borrower to the Bank pursuant to this Agreement, substantially in the form
attached as Exhibit A to this Agreement.

“OFAC” shall mean The Office of Foreign Assets Control of the U.S. Department of
the Treasury.

“Obligations” shall mean all of the Borrower’s liabilities, obligations and
indebtedness to the Bank of any and every kind and nature arising under this
Agreement.

“Organizational Documents” shall mean the certificate of incorporation and
by-laws of each of the Borrower and Guarantors, as applicable, together with any
and all other consents or resolutions and such other agreements related to the
corporate governance of the Loan Parties; in each case including any and all
modifications thereof as of the date of the document referring to such
Organizational Document and any and all future modifications thereof.

“Patriot Act” has the meaning set forth in Section 7.15.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

“Permitted Investor” shall mean, collectively, Mario J. Gabelli/GGCP, Inc./GAMCO
Investors, Inc.

“Person” shall mean any natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.

“Plan” shall mean any employee pension benefit plan, as defined in Section 3(2)
of ERISA (other than a Multiemployer Plan), subject to the provisions of
Title IV of ERISA or Section 412 of the Code sponsored, maintained or
contributed to by the Borrowers or any ERISA Affiliate.

7

 

“Pledge Agreements” shall mean (a) the pledge agreement substantially in the
form attached hereto as Exhibit D pursuant to which the Borrower shall pledge to
the Bank (i) 100% of the Stock of the Guarantors, and (ii) the Acquisition Note.
and (b) with the exception of the Excluded Subsidiaries as to which no pledge is
required, the documents governed by the laws of each of the Borrower’s
first-tier non-U.S. Subsidiaries local jurisdiction of organization, pursuant to
which the Borrower will pledge sixty percent (60%) of the Stock of such
Subsidiaries to the Bank.

“Proceeds” shall mean “proceeds,” as such term is defined in Section 9 102(64)
of the UCC and, to the extent not included in such definition, shall include,
without limitation, (a) any and all proceeds of any insurance, indemnity,
warranty, guaranty or letter of credit payable to any Loan Party from time to
time with respect to any of the collateral, (b) all payments (in any form
whatsoever) paid or payable to any Loan Party from time to time in connection
with any taking of all or any part of the collateral by any Governmental
Authority or any Person acting under color of any Governmental Authority, (c)
all judgments in favor of any Loan Party in respect of the collateral and (d)
all other amounts from time to time paid or payable or received or receivable
under or in connection with any of the collateral.

“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.

“Regulatory Change” has the meaning set forth in Section 5.4 hereof.

“Reportable Event” shall mean any reportable event as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than a
Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Code Section 414).

“Requirement of Law” shall mean, as to any Person, any law, rule, treaty,
regulation or determination of any Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or assets or to
which any such Person or any of its Property or assets may be bound or affected.

“Sanctioned Entity” shall mean (a) a country or a government of a country, (b)
an agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals maintained by OFAC.

“Security Agreement” shall mean the security agreement of even date herewith
substantially in the form attached hereto as Exhibit C, pursuant to which Sevcon
USA, Inc. grants a security interest to the Bank in all its right, title and
interest in all of the collateral described therein.

8

 

“Solvent” shall mean, with respect to any Person as of any date of
determination, that (a) valued on a going concern basis, the sum of such
Person’s debts (including contingent liabilities) is less than all of such
Person’s assets, (b) such Person is not engaged or about to engage in a business
or transaction for which the remaining assets of such Person are unreasonably
small in relation to the business or transaction or for which the property
remaining with such Person is an unreasonably small capital, and (c) such Person
has not incurred and does not intend to incur, or reasonably believe that it
will incur, debts beyond its ability to pay such debts as they become due
(whether at maturity or otherwise), and (d) such Person is “solvent” or not
“insolvent,” as applicable within the meaning given those terms and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability (irrespective of whether
such contingent liabilities meet the criteria for accrual under Statement of
Financial Accounting Standard No. 5).

“Stock” shall mean all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, limited liability
company interests or any other equity security.

“Subsidiary” of a Person shall mean a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity, but
shall specifically exclude Sevcon New Energy Technology (Hubei) Company Limited.

“Target” shall mean Bassi S.r.l., an Italian limited liability company.

“Term Loan” has the meaning set forth in Section 2.1 hereof.

“Term Loan Maturity Date” shall mean the earliest to occur of (i) the fifth
anniversary of the Funding Date, (ii) the date (if any) that the Bank declares
an Event of Default pursuant to Article IX of this Agreement whereupon the Loan
becomes or is declared to be immediately due and payable by the Bank or (iii)
the date (if any) that the Borrower prepays in full the outstanding principal
balance of the Loan.

“UCC” shall mean the Uniform Commercial Code in effect from time to time in the
State of New York or, when the laws of any other state govern the method or
manner of the perfection or enforcement of any security interest in any of the
collateral, the Uniform Commercial Code as in effect from time to time in such
state.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

9

 

ARTICLE II.
TERM LOAN

2.1              Term Loan. Subject to the terms and conditions of this
Agreement, the Bank shall make a term loan (the “Term Loan”) to the Borrower in
the principal amount of Fifteen Million and 00/100 Euros (€15,000,000.00) or, if
lower, the amount equal to eighty percent (80%) of the Acquisition purchase
price. The final principal amount of the Term Loan shall be determined on the
Funding Date.

2.2              Use of Proceeds. The Term Loan shall be used to pay a portion
of the purchase price for the Acquisition.

ARTICLE III.
THE NOTE

3.1              Note. The Term Loan made by the Bank shall be evidenced by the
Note, substantially in the form of Exhibit A attached hereto, which shall be
payable to the order of the Bank and shall bear interest as provided in Article
IV.

ARTICLE IV.
INTEREST RATES AND FEES

4.1              Interest Rate. (a) Outstanding amounts under the Note shall
bear interest, at a variable rate per annum equal to the EUROLIBOR Rate in
effect from time to time plus the Applicable EUROLIBOR Margin. Such EUROLIBOR
Loan shall automatically be renewed on the last day of the current Interest
Period for an Interest Period having the same duration as the current Interest
Period unless the Borrower provides written notice to the Bank that it elects a
different renewal Interest Period not less than two (2) Business Days prior to
the expiration of the current Interest Period.

(b)               If the Bank shall determine that for any reason adequate and
reasonable means do not exist for ascertaining EUROLIBOR with respect to the
Loan, the Bank will give notice of such determination to the Borrower. Upon such
determination and notice, the Bank may convert the EUROLIBOR Loan to a EURIBOR
Loan and the Loan shall thereinafter bear interest at a variable rate per annum
equal to the EURIBOR Rate in effect from time to time plus the Applicable
EURIBOR Rate Margin. Thereafter, the Bank may not maintain the Loan as a
EUROLIBOR Loan hereunder until the Bank revokes such notice in writing. If the
Bank shall determine that the introduction of any law (statutory or common),
treaty, rule, regulation, guideline or determination of an arbitrator or of a
Governmental Authority or in the interpretation or administration thereof, has
made it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful for the Bank to make a Loan as a EUROLIBOR Loan
then, on notice thereof by the Bank to the Borrower, the Bank may suspend
maintaining this Loan as a EUROLIBOR Loan until the Bank shall have notified the
Borrower that the circumstances giving rise to such determination shall no
longer exist and the Bank may convert the Loan from a EUROLIBOR Loan to a
EURIBOR Loan. The Bank may, in its sole discretion, convert the EUROLIBOR Loan
to a EURIBOR Loan upon the occurrence of an Event of Default. The Loan shall
automatically convert from a EUROLIBOR Loan to a EURIBOR Loan on the date the
Borrower commences, or has commenced against it, any proceeding or request for
relief under any bankruptcy, insolvency or similar laws now or hereafter in
effect in the United States of America or any state or territory thereof or any
foreign jurisdiction or any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against or winding up of affairs of the
Borrower. The Borrower shall be responsible for all Break Costs, if any, with
respect to prepayment of the Loan or conversion of the Loan to a EURIBOR Loan as
provided in Section 4.1(a).

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4.2              Facility Fee. A facility fee of .75% of the principal amount of
the Term Loan shall be paid by the Borrower to the Bank at or prior to the
Funding Date.

4.3              Prepayment.

(a)                The Borrower may prepay all or any portion of the principal
outstanding under the Note, at any time, upon at least three (3) Business Days
prior written notice to the Bank (which notice shall be irrevocable), and any
such prepayment shall occur only on the last day of the applicable Interest
Period. No amount that is prepaid may be reborrowed. The Borrower shall pay to
the Bank, Break Costs if any in the event that such prepayment is not made on
the last day of the applicable Interest Period. If the prepayment is made on or
before the six-month anniversary of the Funding Date, the Borrower shall pay to
the Bank together with such prepaid an amount equal to one percent (1%) of the
amount of the prepayment. All prepayments must be in a minimum amount of One
Million Euros (€1,000,000) or whole multiples in excess thereof of Five Hundred
Thousand Euros (€500,000).

(b)               Required prepayments shall be applied to scheduled
amortization installments set forth on the amortization schedule annexed to the
Note as Schedule I in reverse order of maturity. Voluntary prepayments shall be
applied to scheduled amortization installments in the order directed by the
Borrower.

4.4              Late Charges and Default Interest. In the event that any
payment of principal or interest due hereunder is not received by the Bank
within fifteen (15) days following the date such payment is due, the Bank may
assess the Borrower a late charge equal to four percent (4%) of the amount of
the payment then due and owing. Notwithstanding anything herein to the contrary,
upon the occurrence and continuation of an Event of Default, the Borrower shall
pay interest at a rate equal to the Default Rate.

ARTICLE V.
PAYMENTS AND PRINCIPAL

5.1              Type and Manner of Payment. (a) The Borrower shall make each
payment of principal and interest and any other amounts payable hereunder, not
later than 12:00 noon (New York City time) on the date when due, as provided in
section (b) below. All payments received by the Bank after 12:00 noon shall be
deemed received on the next succeeding Business Day and any applicable interest
or fees shall continue to accrue. Whenever any payment of principal or interest
shall be due on a day which is not a Business Day, the date for such payment
shall be extended to the next succeeding Business Day and interest shall accrue
for such period. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall accrue for such extended
time.

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(b)               Each payment, repayment or prepayment, as applicable, of
principal and interest, and each payment on account of any other fees, charges
or other amounts payable under this Agreement or the Note shall be paid by the
Borrower, without set-off or counterclaim to the Bank, by mail at its office
located at 55 E. 59th Street, New York, New York 10022 for receipt on the day
such payment is due, or by wire transfer to the Bank, in accordance with the
instructions delivered by the Bank to the Borrower, or to such other location or
accounts as the Bank may specify in writing to the Borrower from time to time,
in immediately available funds.

5.2              Payments of Principal and Interest. Commencing on the second
anniversary of the Funding Date and continuing on the last day of each
three-month period thereafter until the Term Loan Maturity Date, the Borrower
shall pay to the Bank installments of principal as set forth on the amortization
schedule annexed to the Note as Schedule I; provided, however, that the final
principal installment shall be in an amount equal to the aggregate principal
amount, plus accrued unpaid interest to date, of the Term Loan outstanding on
the Term Loan Maturity Date. Commencing on the last day of the first Interest
Period after the Funding Date and on the last day of each Interest Period
thereafter, the Borrower shall pay to the Bank interest as provided in Section
4.1 on the unpaid principal amount of the Loan.

5.3              Indemnity. The Borrower agrees to defend, protect, indemnify
and hold harmless the Bank and each of its affiliates, officers, directors,
employees, and agents (the “Indemnitee”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitee incurred in connection with any action or proceeding between
any Loan Party or its Affiliates and any Indemnitee or between any Indemnitee
and any third party or otherwise, whether or not relating to any investigative,
administrative or judicial proceeding and whether or not such Indemnitee shall
be designated a party thereto), imposed on, incurred by, or asserted against
such Indemnitee (whether direct, indirect, special, consequential, punitive or
treble and whether based on any federal, state or local, or foreign, laws or
other statutory regulations, including, without limitation, environmental laws,
securities and commercial laws and regulations, under common law or at equitable
cause, or in contract or otherwise) in any manner relating to or arising out of
the Loan Documents, or any act, event or transaction related or attendant
thereto or contemplated thereby, or any action or inaction by an Indemnitee
under or in connection therewith, any commitments of the Bank hereunder, or the
making of the Loan, or the management of such Loan, or the use or intended use
of the proceeds of any Loan, advance or other financial accommodation provided
hereunder including, in each such case, any allegation of any such matters,
whether meritorious or not (collectively, the “Indemnified Matters”); provided,
however, that the Borrower shall not have any obligation to any Indemnitee
hereunder with respect to Indemnified Matters to the extent caused by or
resulting from the willful misconduct or gross negligence of an Indemnitee. The
covenants of the Borrower contained in this Section 5.3 shall survive the
payment in full of all amounts due and payable under the Loan Documents and the
full satisfaction of all other obligations of the Borrower.

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5.4              Regulatory Change. After the date hereof, if the introduction
of any new, or any change in existing, applicable laws, rules or regulations or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, including, without
limitation, the issuance of any rules, regulations or directives under the
Dodd-Frank Wall Street Reform and Consumer Protection Act and any requests,
rules, guidelines or directives thereunder or compliance by the Bank, with any
new request or directive by any Governmental Authority (whether or not having
the force of law); (hereinafter the “Regulatory Change”) (i) shall subject the
Bank to any tax, duty or other charge with respect to this Agreement, based upon
the charging and collecting of interest hereunder, or shall change the basis of
taxation or payments to the Bank of the principal or interest on the Loan (other
than imposition of, or a change in the rate of, net income or franchise or
similar tax on the Bank); (ii) shall result in the imposition, modification or
deemed applicability of any account of, or credit extended by the Bank; or (iii)
shall impose on the Bank any other condition affecting the Loan or the charging
and collecting of interest hereunder; and the result of any of the foregoing is
to increase the cost to the Bank of charging and collecting interest hereunder,
or to reduce the amount of any sum received or receivable by the Bank under the
Loan by an amount deemed by the Bank to be material, then, upon notice by the
Bank to the Borrower setting forth in reasonable detail the circumstances of
such increase or reduction and the calculation of the amount thereof, the
Borrower at its sole discretion shall either repay the Loan (including all
interest and fees due thereon) in full upon or before any such Regulatory Change
taking effect or pay to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost or reduction. Such payments shall be
made on the first date for payment of interest hereunder following the date of
the demand by the Bank and on each such payment date thereafter or shall be paid
promptly on demand if the Borrower is not advised of the amount of such payment
prior to any such payment date. Determinations by the Bank for purposes of this
paragraph of the effect of any Regulatory Change on its costs of making or
maintaining loans bearing interest, and of the additional amounts required to
compensate the Bank in respect thereof, shall be conclusive, provided that such
determinations are made in good faith and absent manifest error.

ARTICLE VI.
SECURITY

6.1              Security. As a condition precedent and material inducement to
the Bank making the Loan:

(a)                the Guarantors shall deliver the Guaranties;

(b)               Sevcon USA, Inc. shall deliver the Security Agreement; and

(c)                the Borrower shall deliver the Pledge Agreements.

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ARTICLE VII.
REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement and to make the Loan, the
Borrower makes the following representations and warranties.

7.1              Corporate Matters.

(a)                Each of the Loan Parties and the Borrower’s Subsidiaries are
duly organized, validly existing corporations subsisting under the laws of their
jurisdictions of formation; have the power to own and hold the property they
purport to own and hold and to carry on business as now being conducted and
proposed to be conducted. Each Loan Party has the power to execute, deliver and
perform its obligations under the Loan Documents.

(b)               The execution, delivery and performance of the Loan Documents
by the Loan Parties have been duly authorized by all necessary corporate action;
the Loan Documents are duly executed and validly delivered by the Loan Parties.

(c)                The execution, delivery and performance of the Loan Documents
by the Loan Parties, and consummation by the Loan Parties of the transactions
herein and therein contemplated, and compliance by the Loan Parties with the
terms, conditions and provisions of the Loan Documents will not conflict with or
result in a breach of any of the terms, conditions or provisions of (i) the
Organizational Documents of the Loan Parties, (ii) any agreement or instrument
to which any Loan Party or any of its Affiliates are now a party or by which
they or their Property are bound, or result thereunder in the creation or
imposition of any Lien of any nature whatsoever upon any of the properties or
assets of the Borrower, the Guarantors or the Borrower’s Subsidiaries except as
may be provided in the Loan Documents, (iii) any judgment or order, writ,
injunction, decree or demand of any Governmental Authority, or (iv) any
applicable Requirement of Law.

(d)               No material authorization, consent, approval or action of, or
filing with or notice to, any Governmental Authority or any other Person, which
has not been obtained, is required to authorize, or is otherwise required in
connection with, the execution, delivery and performance of the Loan Documents
and the performance of the Loan Parties’ obligations thereunder. All material
permits, licenses, authorizations, consents and approvals of all Governmental
Authorities necessary for the Loan Parties and their Subsidiaries to conduct
their businesses have been obtained and are in full force and effect and the
Loan Parties and their Subsidiaries have obtained any and all consents from any
Person required to effect the terms and conditions of Loan Documents.

(e)                All financial statements of the Loan Parties and their
Subsidiaries delivered to the Bank have been prepared in accordance with GAAP,
are true and correct in all material respects and fairly present the financial
condition of the Loan Parties and their Subsidiaries as of the respective dates
thereof and results of operations for the period then ended, and no Material
Adverse Change has occurred in the financial condition reflected therein since
the respective dates thereof.

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(f)                The Loan Documents to which it is party are the legal, valid
and binding obligations of the Borrower and the Guarantors as applicable,
enforceable against the Borrower and the Guarantors, as applicable, in
accordance with their respective terms, subject to limitations imposed by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity) and the effect of applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting creditors’ rights.

7.2              Subsidiaries. Schedule 7.2 sets forth the name and jurisdiction
of incorporation of each Subsidiary of the Borrower or its Subsidiaries and, as
to each such Subsidiary, the percentage of each class of Stock owned by the
Borrower or by any Borrower’s Subsidiary. There are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than those granted to employees, consultants or directors and
directors’ qualifying shares) of any nature relating to any Stock of any of the
Borrower’s Subsidiaries, except under the Loan Documents.

7.3              Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower, threatened against or affecting any of the
Loan Parties or any of their Subsidiaries or any material Property of any of the
Loan Parties or any of their Subsidiaries, at law or in equity or before or by
any Governmental Authority, which involve any of the transactions contemplated
herein or which, if adversely determined against the applicable Person, could
reasonably be expected to result in a Material Adverse Change. No Loan Party or
any of their Subsidiaries is in default with respect to any judgment, order,
writ, injunction, decree, rule or regulation of any Governmental Authority or
any agreement with any Person, which involves a reasonable possibility of any
Material Adverse Change.

7.4              No Default. There is no default on the part of any Loan Party
under the Loan Documents and no event has occurred and is continuing which with
notice or the passage of time or both would constitute a default or an Event of
Default.

7.5              Solvency. Each Loan Party is Solvent and the Loan Parties on a
consolidated basis are Solvent. No transfer of Property is being made by any
Loan Party or its Subsidiaries and no obligation is being incurred by any Loan
Party or its Subsidiaries in connection with the transactions contemplated by
this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Loan Party or its
Subsidiaries.

7.6              Employee Benefit Plans. Each of the Borrower and the ERISA
Affiliates is in compliance with the applicable provisions of ERISA and the
provisions of the Code relating to ERISA and the regulations and published
interpretations thereunder and any similar applicable non-U.S. law, except for
such noncompliance which could not reasonably be expected to result in a
Material Adverse Change. No Reportable Event has occurred as to which the
Borrower or any ERISA Affiliate was required to file a report with the PBGC,
other than reports for which the 30 day notice requirement is waived, reports
that have been filed and reports the failure of which to file could not
reasonably be expected to result in a Material Adverse Change. There has been no
failure by any Plan to meet the minimum funding standards (as defined in Section
412 of the Code or Section 302 of ERISA) applicable to such Plan, in each
instance, whether or not waived, nor has there been a filing pursuant to
Sections 412 and 430 of the Code or Section 302(c) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan where such
events could reasonably be expected to result in a Material Adverse Change. None
of the Borrower and the ERISA Affiliates has incurred or could reasonably be
expected to incur any Withdrawal Liability that could reasonably be expected to
result in a Material Adverse Change. None of the Borrower and the ERISA
Affiliates has received any written notification that any Multiemployer Plan is
in reorganization or has been terminated within the meaning of Title IV of
ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization
or to be terminated, where such reorganization or termination has resulted or
could reasonably be expected to result, through increases in the contributions
required to be made to such Plan or otherwise, in a Material Adverse Change.

15

 

7.7              Environmental. (a) None of the Borrower’s or its Subsidiaries’
properties or assets has ever been used by the Borrower, or to the knowledge of
Borrower, by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials, where such
use, production, storage, handling, treatment, release or transport was in
violation, in any material respect, of any applicable Environmental Law, (b)
none of the Borrower’s or its Subsidiaries’ properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) neither the Borrower nor any
of its Subsidiaries has received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any real property owned or
operated by the Borrower or its Subsidiaries, and (d) neither the Borrower nor
any of its Subsidiaries has received a summons, citation, notice, or directive
from the United States Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by the Borrower or
its Subsidiaries resulting in the releasing or disposing of Hazardous Materials
into the environment that individually or in the aggregate could reasonably be
expected to result in a Material Adverse Change.

7.8              Brokerage Fees. No Loan Party nor any of its Subsidiaries has
utilized the services of any broker or finder in connection with the Borrower’s
obtaining financing from the Bank under this Agreement and no brokerage
commission or finders fee is payable by any Loan Party or its Subsidiaries in
connection herewith.

7.9              Intellectual Property. Each Loan Party and each of its
Subsidiaries owns, or holds licenses in, or otherwise has the right to use all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted.

7.10          Title to Properties; Liens. Each Loan Party and each of its
Subsidiaries has (i) valid leasehold interests in (in the case of material
leasehold interests in real or personal property), or (ii) good title to (in the
case of all other personal property), all of its material properties and assets
reflected in the financial statements referred to in Section 7.1(e), except for
assets disposed of since the date of such financial statements. Except as
expressly permitted by this Agreement, all such properties and assets are free
and clear of Liens.

16

 

7.11          Leases. Each Loan Party and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases material to its business
and to which it is a party or under which it is operating, and all of such
leases are valid and subsisting and no material default by any Loan Party or its
Subsidiaries exists under any of them.

7.12          Transactions with Affiliates. No Loan Party or any Borrower’s
Subsidiary has, directly or indirectly, entered into or permitted to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate on terms that are less
favorable to a Loan Party or the Borrower’s Subsidiaries than those that might
be obtained at the time from Persons who are not such an Affiliate.

7.13          Complete Disclosure. All factual information furnished by or on
behalf of each Loan Party or its Subsidiaries in writing to the Bank or in the
other Loan Documents for purposes of or in connection with this Agreement, the
other Loan Documents, or any transaction contemplated herein or therein is, and
all other such factual information hereafter furnished by or on behalf of each
Loan Party or its Subsidiaries in writing to the Bank will be, true and
accurate, in all material respects, on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information not misleading in any material respect at such time in
light of the circumstances under which such information was provided.

7.14          Compliance with Laws. No Loan Party nor any of its Subsidiaries
(a) is in violation of any applicable Requirements of Law (including
Environmental Laws) that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Change, or (b) is subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any Governmental Authority, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.

7.15          Patriot Act. To the extent applicable, each Loan Party and its
Subsidiaries is in compliance, in all material respects, with the (a) Trading
with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act
of 2001) (the “Patriot Act”). No part of the proceeds of the loans made
hereunder will be used by any Loan Party or any of their Affiliates, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.

7.16          Margin Stock. No Loan Party or any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the loans made to the Borrower will be used to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock or for any purpose that violates the provisions of
Regulation T, U or X of the Board of Governors.

17

 

7.17          Governmental Regulation. No Loan Party or any of its Subsidiaries
is subject to regulation under the Federal Power Act or the Investment Company
Act of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. No Loan Party or any of its
Subsidiaries is a “registered investment company” or a company “controlled” by a
“registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

7.18          OFAC. No Loan Party or any of its Subsidiaries is in violation of
any of the country- or list-based economic and trade sanctions administered and
enforced by OFAC. No Loan Party or any of its Subsidiaries (a) is a Sanctioned
Person or a Sanctioned Entity, (b) has its assets located in Sanctioned
Entities, or (c) derives revenues from investments in, or transactions with
Sanctioned Persons or Sanctioned Entities. No proceeds of any loan made
hereunder will be used to fund any operations in, finance any investments or
activities in, or make any payments to, a Sanctioned Person or a Sanctioned
Entity.

7.19          Indebtedness. Neither Loan Party has any Indebtedness that is
senior to the Indebtedness evidenced by the Note and this Agreement.

ARTICLE VIII.
COVENANTS OF BORROWER

From the date of this Agreement and thereafter until the Loan (including
interest due thereon) and all fees to be paid by the Borrower to the Bank
hereunder or under any of the Loan Documents are paid in full:

8.1              Corporate Status, Financial Information and Obligations.

The Borrower shall:

(a)                at all times preserve and keep in full force and effect the
Borrower’s and its Subsidiaries’ valid existence and good standing and any
rights and franchises material to its businesses;

(b)               furnish to the Bank (i) within ninety (90) days following the
end of each respective fiscal year, copies of the audited consolidated financial
statements of the Borrower and its Subsidiaries together with copies of
management letters, prepared by independent certified public accountants
selected by the Borrower and reasonably satisfactory to the Bank, all such
financial statements to be prepared in accordance with GAAP; and (ii) as soon as
available and in any event within sixty (60) days after the close of each
quarter, a copy of the unaudited consolidated financial statements of the
Borrower as of the end of such quarter and the related statements of income,
balance sheets, revenue and expense statements, cash flow statements, balances,
earnings, retained earnings and changes in financial position for such period,
prepared in accordance with GAAP, certified by the chief financial or accounting
officer of the Borrower, together with quarterly variance reports;

18

 

(c)                provide the Bank with copies of any audit reports or other
material regulatory communications received from any Governmental Authority
which could reasonably be expected to have a material impact on the Guarantor's
or the Borrower’s ability to perform its obligations under the Loan Documents,
and, from time to time, provide such other information regarding the operations,
business affairs and financial condition of the Borrower as the Bank may
reasonably request;

(d)               promptly, but in any event within 5 days after a senior
officer of the Borrower has knowledge of any event or condition that constitutes
a default or an Event of Default, notice thereof and a statement of the curative
action that the Borrower proposes to take with respect thereto (if any);

(e)                promptly after the commencement thereof, but in any event
within 5 days after the service of process with respect thereto on any Loan
Party or any of its Subsidiaries, notice of all actions, suits, or proceedings
brought by or against any Loan Party or any of its Subsidiaries before any
Governmental Authority which reasonably could be expected to result in a
Material Adverse Change; and

(f)                upon the request of the Bank, any other information
reasonably requested relating to the financial condition of the Guarantors, the
Borrower or its Subsidiaries.

8.2              Financial Covenant. The Borrower together with its Subsidiaries
shall maintain a Leverage Ratio, measured on a fiscal year-end basis of not
greater than 3.5:1.00 through September 30, 2017 and thereafter not greater than
3.0:1.00.

8.3              Environmental.

The Borrower shall, and shall cause its Subsidiaries to:

(a)                comply, in all material respects, with Environmental Laws and
provide to the Bank documentation of such compliance which the Bank reasonably
requests,

(b)               promptly notify the Bank of any release of a Hazardous
Material in any reportable quantity from or onto property owned or operated by
the Borrower or any of its Subsidiaries and take any remedial actions required
by Environmental Law to abate said release or otherwise to come into compliance
with applicable Environmental Law, and

(c)                promptly, but in any event within 5 days of its receipt
thereof, provide the Bank with written notice of any of the following: (i)
notice that any Lien with respect to violation of Environmental Laws has been
filed against any of the real or personal property of the Borrower or its
Subsidiaries, (ii) commencement of any action or notice that an action will be
filed against the Borrower or its Subsidiaries regarding violation of
Environmental Laws, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.

19

 

8.4              Taxes. The Borrower shall cause all assessments and taxes,
whether real, personal, or otherwise, due or payable by, or imposed, levied, or
assessed against any Loan Party, its Subsidiaries, or any of their respective
assets to be paid in full, before delinquency or before the expiration of any
extension period or timely request such extension. The Borrower will and will
cause its Subsidiaries to make timely payment or deposit of all tax payments and
withholding taxes required of it and them by applicable laws, including those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, federal
and foreign income taxes.

8.5              Insurance. The Borrower shall cause each Loan Party and its
Subsidiaries to maintain insurance respecting each of the Loan Parties and their
Subsidiaries’ assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by
other Persons engaged in the same or similar businesses. Each policy of
insurance shall (a) name the Bank as an additional insured thereunder as its
interests may appear, and (b) in the case of any business interruption and
casualty insurance policy, contain a loss payable clause or endorsement,
satisfactory in form and substance to the Bank, that names the Bank as the loss
payee thereunder and (if obtainable by the Loan Parties using commercially
reasonable efforts) provides for at least 30 days prior written notice to the
Bank of any modification or cancellation of such policy.

8.6              Employee Benefits. The Borrower shall comply in all material
respects with the applicable provisions of ERISA and the provisions of the Code
relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the
Bank (i) as soon as possible after, and in any event within 30 days after any
executive officer of the Borrower or any ERISA Affiliate knows or has reason to
know that, any Reportable Event has occurred, a statement of the Borrower signed
by its chief financial officer or treasurer setting forth details as to such
Reportable Event and the action proposed to be taken with respect thereto,
together with a copy of the notice, if any, of such Reportable Event given to
the PBGC, (ii) promptly after any such executive officer learns of receipt
thereof, a copy of any notice that the Borrower or any ERISA Affiliate may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code
Section 414) or to appoint a trustee to administer any such Plan, (iii) within
30 days after the due date for filing with the PBGC pursuant to Section 412(n)
of the Code a notice of failure to make a required installment or other payment
with respect to a Plan, a statement of the Borrower signed by its chief
financial officer or treasurer setting forth details as to such failure and the
action proposed to be taken with respect thereto, together with a copy of any
such notice given to the PBGC and (iv) promptly after any such executive officer
learns thereof and in any event within 30 days after receipt thereof by the
Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy
of each notice received by the Borrower or any ERISA Affiliate concerning
(A) the imposition of Withdrawal Liability or (B) a determination that a
Multiemployer Plan is, or is expected to be, terminated or in reorganization, in
each case within the meaning of Title IV of ERISA.

20

 

8.7              Other Agreements. No Loan Party or any of its Subsidiaries will
enter into any agreement containing any provision which would be violated or
breached by the performance of the Loan Parties’ obligations under the Loan
Documents.

8.8              Use of Proceeds. The proceeds of the Loan made under this
Agreement will be used by the Borrower for the purposes set forth in this
Agreement. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System. The Borrower shall use the proceeds of the Loan
hereunder in compliance with all applicable legal and regulatory requirements of
any Governmental Authority (including, without limitation, Regulations U and X
of the Board of Governors of the Federal Reserve System, the Securities Exchange
Act of 1934 and the Securities Act of 1933, and any regulations thereunder).

8.9              Corporate Organization. The Borrower shall cause each Loan
Party and its Subsidiaries to maintain its corporate existence. Without the
prior written consent of the Bank, the Borrower shall not materially change or
amend its Organizational Documents, provided that Subsidiaries of the Company
will be permitted to merge with one another without the prior written consent of
the Bank.

8.10          Continuation of Business. The Borrower shall cause each Loan Party
and its Subsidiaries to (a) maintain and preserve all of its properties which
are material to the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted, (b) maintain all material licenses,
certifications and permits of all Governmental Authorities necessary to continue
its operations and (c) comply with all of their material agreements and
contracts.

8.11          Additional Indebtedness and Activities. The Borrower shall cause
each Loan Party and its Subsidiaries not to, (a) other than Indebtedness owed to
the Borrower or any of its other Subsidiaries (other than the Excluded
Subsidiaries) and as set forth on Schedule 8.11, without prior written notice to
the Bank incur any Indebtedness other than the Loan and in respect of the
Acquisition, or (b) without the prior written consent of the Bank create or
suffer to exist any Lien on its assets, other than in favor of the Bank and
other than as set forth on Schedule 8.11.

8.12          Disposal of Assets. The Borrower shall cause each Loan Party not
to, convey, sell, lease, license, assign, transfer, or otherwise dispose of (or
enter into an agreement to convey, sell, license, assign, transfer or otherwise
dispose of) any of its assets, without the prior written consent of the Bank,
other than sale of inventory in the ordinary course.

8.13          Future Acquisitions. In the event that the Borrower acquires any
additional Subsidiary, the Borrower shall pledge to the Bank, respectively, one
hundred percent (100%) or sixty percent (60%) of the Stock of such additional
U.S. or non U.S. Subsidiaries.

21

 

8.14          Change Name. The Borrower shall cause the Guarantors not to
change, without providing thirty (30) days’ prior written notice of the Bank,
such Guarantor’s name, organizational identification number, state of
organization or organizational identity.

8.15          Change of Control. The Borrower shall not cause, permit, or
suffer, directly or indirectly, any Change of Control.

8.16          No Liens on Target’s Assets. The Borrower shall cause the Target
not to grant or permit to exist any Lien on any of its tangible and intangible
personal property, including without limitation its accounts, equipment,
contracts, patents, copyrights, trademarks, other general intangibles,
intercompany notes and, in each case, proceeds thereof, without the prior
written consent of the Bank.

8.17          Dividends. Subject to applicable Requirements of Law, the Borrower
shall cause its Subsidiaries to pay dividends or other distributions to the
Borrower in amounts sufficient to make the required payments of principal and
interest on the Loan on or before the date such payments are due.

8.18          Restricted Payments. So long as (A) after giving pro forma effect
to such payment, the Borrower remains in compliance with Section 8.2, (B) no
Event of Default shall have occurred and be continuing and (C) the Borrower has
provided prior written notice to the Bank, the Borrower may declare and pay any
dividends or other distributions upon the common Stock of the Borrower.

8.19          No Issuance of New Preferred Stock. The Borrower shall not
authorize or issue any shares of preferred Stock, or other Stock providing for
the mandatory payment of dividends, in addition to any shares of preferred Stock
of the Borrower currently outstanding unless at least 25.0% of the net cash
proceeds received by the Borrower from such issuance are used to promptly prepay
the Loan and so long as after giving pro forma effect to the payment of any
dividends, the Borrower remains in compliance with Section 8.2.

8.20          Further Assurances; Power of Attorney. The Borrower shall
promptly, upon the reasonable request of the Bank and at the Borrower’s expense,
execute, acknowledge, and deliver, or cause the execution, acknowledgement, and
delivery of, any document or instrument supplemental to or confirmatory to the
Loan Documents or otherwise necessary or desirable in the Bank’s reasonable
opinion for the creation, preservation, and/or perfection of any security
interests in the collateral that are given by the Borrower to the Bank. The
Borrower hereby irrevocably constitutes and appoints the Bank, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Borrower to take any appropriate action and to execute any and
all documents and instruments that may be necessary or desirable to accomplish
the purposes of the Loan Documents. The powers conferred on the Bank shall not
impose any duty upon the Bank to exercise any such power.

8.21          Access to Books and Records. The Borrower will cause the Loan
Parties and their Subsidiaries to properly maintain their books and records and
permit the Bank, by its officers and representatives, to have reasonable access
to the officers of the Loan Parties and their Subsidiaries and examine, at all
reasonable times and upon reasonable prior written notice to the Borrower, the
properties, minute books and other corporate records and books of account and
financial records of the Loan Parties and their Subsidiaries.

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ARTICLE IX.
EVENTS OF DEFAULT

9.1              Events of Default.

(a)                The occurrence of any one or more of the following events and
the continuation thereof beyond the applicable grace period herein provided, if
any, shall constitute an “Event of Default” under this Agreement:

(1)               the Borrower fails to pay all or any portion of principal due
under the Note on the date due;

(2)               the Borrower fails to pay all or any portion of interest due
under the Note or any fees or other amounts due under this Agreement for a
period of five (5) Business Days after the date due;

(3)               any Loan Party fails to comply with any of the other terms,
conditions, or covenants in the Loan Documents and such default shall continue
for thirty (30) days following written notice, delivered to the Borrower by the
Bank, specifying such default and requiring the same to be remedied;

(4)               any Loan Party fails to pay when due, beyond any applicable
grace or cure period, any indebtedness in excess of $500,000 under any other
loan agreement, or credit facility, or guaranty;

(5)               any representation or warranty made by the Borrower herein or
any Loan Party in any other Loan Document shall, at the time made, be false or
misleading in any material respect;

(6)               any Loan Party or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in the involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors;

(7)               any involuntary case or other proceeding shall be commenced
against the any Loan Party or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property and such case or
proceeding is not dismissed within sixty (60) days;

23

 

(8)               a judgment in excess of $100,000 over the amount of insurance
coverage therefor (where the underwriter has agreed in writing to pay such
judgment) shall be rendered against any Loan Party and shall remain
undischarged, undismissed and unstayed for more than ten (10) days;

(9)               a Change of Control shall occur;

(10)           any judicial decision, legislative or regulatory change or any
change in any Loan Party’s or its Subsidiaries’ right to conduct business
materially and adversely affects the present business, financial condition or
operation of the such Person or its properties and assets in such a manner that
with the passage of time the Borrower could not comply with the terms,
conditions and covenants in this Agreement;

(11)           a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section 412(n)(1)
of the Code), shall have occurred with respect to any Plan, (ii) a trustee shall
be appointed by a United States district court to administer any Plan, (iii) the
PBGC shall institute proceedings (including giving notice of intent thereof) to
terminate any Plan, (iv) the Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan and the Borrower or such ERISA Affiliate
does not have reasonable grounds for contesting such Withdrawal Liability or is
not contesting such Withdrawal Liability in a timely and appropriate manner, (v)
the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or is being
terminated, within the meaning of Title IV of ERISA, (vi) the Borrower or any
ERISA Affiliate shall engage in any “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (vii) a
failure by any Plan to meet the minimum funding standards (as defined in Section
412 of the Code or Section 302 of ERISA) applicable to such Plan, in each
instance, whether or not waived, (viii) a filing pursuant to Section 412(d) of
the Code or Section 302(c) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan or (ix) any other similar
event or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (ix) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to have a
Material Adverse Change; or

(12)           any Lien purported to be created under any Loan Document shall
cease to be, or shall be asserted by any Loan Party or Borrower’s Subsidiary not
to be, a valid and perfected Lien on any collateral, with the priority required
by the applicable security document, or any guarantee purported to be created
under any Loan Document shall cease to be, or shall be asserted by any Loan
Party not to be, in full force and effect, in each such case except as a result
of the sale or other disposition of the applicable collateral in a transaction
permitted under the Loan Documents.

24

 

(b)               If any Event of Default shall occur, the Bank may declare the
entire outstanding principal amount of the Loan or any portion thereof together
with interest thereon and any other fees, costs and charges then payable under
the Loan Documents, immediately due and payable, whereupon the same shall become
immediately due and payable, without presentment, protest or further demand or
notice of any kind, all of which are hereby expressly waived by the Borrower;
and in addition to the foregoing, the Bank may immediately exercise any and all
other rights, remedies, and recourse available to it at law or in equity or
under the Loan Documents. If an Event of Default specified in subsections 5 or 6
of this Section occurs, all amounts payable under the Loan Documents by the
Borrower that would otherwise be due after the date of such Event of Default
shall become immediately due and payable without any declaration or other act on
the part of the Bank.

ARTICLE X.
CONDITIONS PRECEDENT

The obligation of the Bank to make the Loan is subject to the satisfaction, in
the sole judgment of the Bank, of the following conditions:

10.1 The Bank shall receive on or before the Execution Date:

(a)                this Agreement executed by the Borrower;

(b)               the Guaranties executed by the Guarantors;

(c)                the Security Agreement executed by the Sevcon USA, Inc.;

(d)               the Pledge Agreement with respect to the shares of stock of
the Guarantors;

(e)                evidence of termination and release of the lien of RBS
Citizens, National Association against all of the Borrower’s Stock of Sevcon
USA, Inc., including a payoff letter from RBS Citizens, National Association,
and a UCC-3 financing statement termination;

(f)                evidence of termination and release of the lien of RBS
Citizens, National Association against all of the assets of the Sevcon USA, Inc.
including a payoff letter from RBS Citizens, National Association, and a UCC-3
financing statement termination;

(g)               a UCC financing statement against all of the Borrower’s Stock
of the Guarantors in form and substance satisfactory to the Bank;

(h)               a UCC financing statement against all of the assets of Sevcon
USA, Inc. in form and substance satisfactory to the Bank;

(i)                 a certificate of good standing for each of the Borrower and
the Guarantors issued by the Secretary of State of each corporation's state of
incorporation;

25

 

(j)                 resolutions of the Borrower authorizing the borrowing and
the execution and delivery of the Loan Documents, and appointing an authorized
individual of the Borrower to execute and deliver the Loan Documents;

(k)               resolutions of each Guarantor authorizing the execution and
delivery of the Guaranty and, if applicable, the Security Agreement and
appointing an authorized individual of the Guarantors to execute and deliver
such documents;

(l)                 evidence of any third party consent needed to authorize the
execution and delivery of the Loan Documents by the Borrower or the Guarantors;

(m)             certified copies of the Borrower’s and the Guarantors'
Organizational Documents;

(n)               such documents as shall be requested by the Bank in connection
with its Know Your Customer and Anti-Money Laundering Requirements;

(o)               an opinion of counsel to the Borrower substantially in the
form attached hereto as Exhibit E; and

(p)               any other document reasonably requested by the Bank in order
to implement the requirements of this Agreement or any of the Loan Documents.

10.2 The Bank shall receive on or before the Funding Date:

(a)                The Loan Documents other than the Term Loan Agreement, the
Guaranties, the Security Agreement, and the Pledge Agreement with respect to the
Guarantors, including the Note and Pledge Agreements with respect to the shares
of stock of Sevcon SAS and Sevcon Limited, executed by the Borrower and all
other necessary parties, as applicable.

(b)               a copy of the fully executed purchase agreement for the
Acquisition;

(c)                original stock certificates representing the shares of stock
subject to the Pledge Agreement with respect to the shares of stock of Sevcon
Limited, together with appropriate instruments of transfer;

(d)               original stock certificates representing the shares of stock
of the Guarantors subject to the Pledge Agreement referred to in Section 10.1(d)
above, and the original Acquisition Note, together with appropriate instruments
of transfer;

(e)                an opinion of counsel to the Borrower in form and substance
acceptable to the Bank;

(f)                payment of the facility fee provided for in Section 4.2, and
reasonable fees and expenses of counsel to the Bank as well as any other fees
and out-of-pocket expenses of the Bank incurred in connection with the Loan; and

26

 

(g)               any other document reasonably requested by the Bank in order
to implement the requirements of this Agreement or any of the Loan Documents.

ARTICLE XI.
MISCELLANEOUS PROVISIONS

11.1          Waiver. No delay on the part of the Bank in the exercise of any
right, power or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise by the Bank of any right, power or remedy preclude the
further exercise thereof, or the exercise of any other right, power or remedy.

11.2          Consent to Jurisdiction; Service of Process and Waiver of Jury
Trial. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN NEW YORK, NEW YORK, WAIVES ANY OBJECTION WHICH
THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE
CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH FEDERAL OR STATE COURT IN NEW YORK TO THE EXTENT PERMITTED BY LAW. THE
BANK AND THE BORROWER WAIVE TRIAL BY JURY. THE BORROWER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF IN ACCORDANCE WITH SECTION 11.2 OF
THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.

11.3          Notices. Except as otherwise expressly provided herein, all
notices hereunder shall be in writing. Notices given by mail shall be deemed to
have been given five (5) days after the date sent if sent by registered or
certified mail, postage prepaid, the day after the date sent if sent by
overnight mail by means of a reputable overnight delivery service and the date
of delivery if sent by hand delivery. Notice shall be given to the following
addressees:

If to the Borrower, to:

Sevcon, Inc.
155 Northboro Road

Southborough, Massachusetts 01772

 

And with a copy to:

Locke Lord LLP
111 Huntington Avenue
Boston, Massachusetts 02199
Attention: Matthew Dallett, Esq.

27

 

If to the Bank, to:

BANCA MONTE DEI PASCHI DI SIENA S.p.A,
acting through its New York branch
55 East 59th Street
New York, New York 10022
Attention: Nicolas Kanaris

With a courtesy copy to:

Withers Bergman LLP
430 Park Avenue
10th Floor
New York, New York 10022-3505
Attention: Brenda T. Simensky, Esq.

or in the case of either party, such other address as such party may have
designated, by written notice given in accordance with this Agreement and
received by the other party to this Agreement, as its address for notices.

11.4          Costs, Expenses and Taxes. The Borrower agrees to pay the
reasonable fees of the Bank’s counsel arising in connection with the preparation
of the Loan Documents, and the enforcement of the Bank’s rights hereunder, plus
any reasonable out-of-pocket expenses incurred by the Bank’s counsel. In
addition, the Borrower agrees to pay, and to save the Bank harmless from any
liability for, any stamp or other taxes which may be payable in connection with
the execution or delivery of this Agreement, the borrowings hereunder, or the
execution and delivery of the Note. All obligations provided for in this Section
11.4 shall survive any termination of this Agreement.

11.5          Captions. Section captions used in this Agreement are for
convenience only and shall not be deemed to be a part of this Agreement.

11.6          Governing Law. The Loan Documents have been negotiated and
delivered in the State of New York, shall be deemed to have been made in the
State of New York and shall be governed by the laws of the State of New York
without regard to its choice of law provisions. All obligations of the Borrower
and rights of the Bank expressed herein, and in the Note shall be in addition to
and not in limitation of those provided by applicable law.

11.7          Successors and Assigns. This Agreement shall become effective when
it shall have been executed by the Borrower and the Bank, and thereafter shall
be binding upon the Borrower, its successors and assigns, and upon the Bank, its
successors and assigns, and shall inure to the benefit of the Borrower, the Bank
and their respective successors and assigns. In the event this Agreement and the
Note are assigned to another branch of the Bank, the Borrower agrees to
reimburse the Bank for any additional expenses, including any applicable
withholding taxes. However, the Borrower may not assign its rights or
obligations under the Loan Documents without the prior written consent of the
Bank and the Bank may assign its rights in accordance with Section 11.13.

28

 

11.8          Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument and all of which shall constitute a
single agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile, pdf file or other electronic method of transmission shall be
equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
telefacsimile, pdf file or other electronic method of transmission also shall
deliver an original executed counterpart of this Agreement but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Loan Document mutatis mutandis.

11.9          Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by the Borrower or the Guarantors or the transfer to
the Bank of any Property should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors’ rights,
including provisions of the United States Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a “Voidable Transfer”), and if the Bank is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Bank is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Bank related thereto, the liability of the Borrower or the
Guarantors automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.

11.10      Amendments. No amendment, modification or waiver of, or consent with
respect to, any provision of the Loan Documents shall in any event be effective
unless the same shall be in writing and signed and delivered by the Bank and the
Borrower or the Guarantor, as applicable, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given.

11.11      Inconsistencies. The Loan Documents shall be construed to the extent
reasonable to be consistent, one with the other, but to the extent that the
terms and conditions of this Agreement are actually inconsistent with the terms
and conditions of any Loan Document, the terms and conditions of this Agreement
shall govern.

11.12      Performance of Obligations. The Borrower acknowledges and agrees that
if the Borrower has failed to make any payment or to take any action required
under the terms of the Loan Documents, then the Bank may, but shall have no
obligation to, make any payments or perform any act required of the Borrower
under the Loan Documents or take any other action which the Bank in its
discretion deems necessary or desirable to protect or preserve the collateral
including, without limitation, any action to pay or discharge taxes, liens,
security interests, or other encumbrances levied or placed on or threatened to
be placed on any collateral, provided that, in any such case, the Bank shall
have given the Borrower not less than five (5) Business Days’ notice before
taking action and the Borrower shall not have cured or commenced to cure such
failure within such five (5) Business Day period.

29

 

11.13      Assignments and Participations. The Bank shall have the unrestricted
right at any time and from time to time, to assign its obligations and rights
hereunder to one or more banks or other financial institutions (other than a
hedge fund or a competitor of the Borrower) or to grant to one or more banks or
other financial institutions (each, a “Participant”) participating interests in
the Bank’s obligations and rights hereunder. The Bank may furnish any
information concerning the Borrower in its possession from time to time to
prospective assignees and Participants.

11.14      Right of Set-Off. The Bank shall have with respect to the Borrower’s
obligations to the Bank under this Agreement a contractual possessory security
interest in and a contractual right of set-off against all of the Borrower’s
right, title and interest in and to, any depository account of the Borrower
maintained at the Bank. Such right of set-off may be exercised without demand
upon or notice to the Borrower and shall be deemed to have been exercised
immediately upon the occurrence of an Event of Default hereunder without any
action of the Bank, although the Bank may enter such set-off on its books and
records at later time.

11.15      Severability. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.

11.16      Limitation of Liability. The Borrower agrees that no claim may be
made by the Borrower or any other person against the Bank or its affiliates,
directors, officers, employees, or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by the Loan Documents, or any act, omission or event
occurring in connection herewith or therewith; and the Borrower hereby waives,
releases and agrees not to sue upon any claim for any and all special, indirect,
consequential, punitive or treble damages, whether or not accrued and whether or
not known or suspected to exist in its favor. Nothing in this Section 11.16
shall limit the liability of the Bank, its affiliates, directors, officers,
employees, or agents for their gross negligence or willful misconduct.

11.17      Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement between the Bank and the Borrower with respect
to the Loan and the written and executed form of this Agreement and the Loan
Documents expressly supersede any previous writings or oral agreements between
and among the Bank and the Borrower and their Affiliates, agents and employees.

30

 

11.18      Patriot Act. The Bank hereby notifies the Borrower that pursuant to
the requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the credit parties, which information includes the
names and addresses of the Borrower and other information that will allow the
Bank to identify the Borrower in accordance with the Patriot Act and as
specifically requested in writing by the Bank. In addition, if the Bank is
required by law or regulation or internal policies to do so, it shall have the
right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and
customary individual background checks for the Loan Parties and (b) OFAC/PEP
searches and customary individual background checks for the Loan Parties’ senior
management and key principals, and the Borrower agrees to cooperate in respect
of the conduct of such searches and further agrees that the reasonable costs and
charges for such searches shall constitute expenses hereunder and be for the
account of the Borrower.

[Signature pages follow]

 

 

 

31

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be delivered as of
the day and year first written above.

    SEVCON, INC.                 By: /s/ Paul Farquhar       Paul Farquhar      
Treasurer      

 

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    BANCA MONTE DEI PASCHI DI SIENA S.p.A.,     acting through its New York
branch                 By: /s/ Vincenzo Ciancio       Vincenzo Ciancio      
Senior Vice President and       General Manager             By: /s/ Brian R.
Landy       Brian R. Landy       Vice President      

 

 

 

 

 

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