Document:

SECURITIES AND EXCHANGE COMMISSION

 

Exhibit

10.17 Fourth Amendment to credit agreement dated February 13, 2002 with Wells

Fargo Bank, National Association

 

FOURTH AMENDMENT TO

CREDIT AGREEMENT

 

THIS FOURTH

AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of February

13, 2002, by and between DATALINK CORPORATION, a Minnesota corporation

(“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

WHEREAS, Borrower

is currently indebted to Bank pursuant to the terms and conditions of that

certain Credit Agreement between Borrower and Bank dated as of June 30, 2000,

as amended from time to time (“Credit Agreement”).

 

WHEREAS, Bank and

Borrower have agreed to certain changes in the terms and conditions set forth

in the Credit Agreement and have agreed to amend the Credit Agreement to

reflect said changes.

 

NOW, THEREFORE,

for valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereto agree that the Credit Agreement shall be

amended as follows:

 

1.             The following is hereby added to

the Credit Agreement as Section 6.1. COLLATERAL:

 

“SECTION 6.1.COLLATERAL.

As security for all indebtedness of Borrower to Bank subject hereto, Borrower

hereby grants to Bank security interests of first priority in all Borrower’s

Accounts Receivable and Inventory.”

 

2.             Section 7.2 (e). NET PROFIT is hereby deleted in its

entirety, and the following

substituted therefore:

 

“SECTION

7.2 (e). NET LOSS. Maximum net loss of $1,000,000.00 for the quarter ending

March 31, 2002.”

 

3.             The following is hereby added to the Credit Agreement as

Section 7.3 (n) PURCHASE OF ASSETS:

 

“SECTION 7.3 (n). PURCHASE OF ASSETS. Refrain from

purchasing or otherwise acquiring during any fiscal year, all or substantially

all, of the assets of any other person, firm, corporation or other entity with

any proceeds of Line of Credit A without prior consent of the bank.”

 

4.             Except as specifically provided herein, all terms and

conditions of the Credit Agreement remain in full force and effect, without

waiver or modification.  All terms

defined in the Credit Agreement shall have the same meaning when used in this

Amendment.  This Amendment and the

Credit Agreement shall be read together, as one document.

 

5.             Borrower hereby remakes all representations and

warranties contained in the Credit Agreement and reaffirms all covenants set

forth therein.  Borrower further

certifies that as of the date of this Amendment there exists no Event of

Default as defined in the Credit Agreement, nor any condition, act or event

which with the giving of notice or the passage of time or both would constitute

any such Event of Default.

 

IN WITNESS

WHEREOF, the parties hereto have caused this Amendment to be executed as of the

day and year first written above.

 

	

  DATALINK CORPORATION

  	

  WELLS FARGO BANK, NATIONAL

  ASSOCIATION

  	 

	

   

  	

   

  	 

	

  By:

  

  	

  /s/ Daniel J. Kinsella

  	

   

  	

  By:

  

  	

  /s/ Jacob B. Johnson

  	

   

  
	

   

  	

  Daniel

  J. Kinsella, Chief Financial Officer

  	

   

  	

  Jacob

  B. Johnson, Officer.

Exhibit 10W

 

THE SECURITIES

REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT

BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF

SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE

BLUE SKY LAWS.  ADDITIONALLY, THE

TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTE

PURCHASE AGREEMENT, DATED AS OF DECEMBER 24, 2001, AMONG THE ISSUER HEREOF AND

CERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE

VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.  UPON THE FULFILLMENT OF CERTAIN OF SUCH

CONDITIONS, THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW

CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY

REGISTERED IN THE NAME OF THE HOLDER HEREOF. 

COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST

MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER

HEREOF.

 

10% SENIOR SUBORDINATED CONVERTIBLE NOTE

 

	

  No.  

  	

   

  	

   

  
	

  U.S. $[                            ]

  	

   

  	

  Dated:  December 24, 2001 

  

 

FOR VALUE RECEIVED, the undersigned, MICRO COMPONENT TECHNOLOGY, INC., a

Minnesota corporation (the “Company”),

hereby promises to pay to the order of [             ] or its assign (the “Holder”),

with a place of business at [                              ] the principal sum of

[                              

$(            )] (plus any

additional amounts payable as set forth herein) in immediately available lawful

money of the United States of America, payable as set forth in Section 2,

with interest payable as set forth in Section 3 until such unpaid

principal amount shall become due and payable.

 

This Note is one of the Notes

(herein called the “Notes”)

issued pursuant to the Note Purchase Agreement, dated as of December 24, 2001

(as amended, supplemented or otherwise modified from time to time, the “Note

Purchase Agreement”), by and among the Company, and the other

signatories thereto as purchasers.  The

Holder of this Note will be deemed, by its acceptance hereof: (i) to have made

the representations set forth in Article IV of the Note Purchase Agreement; and

(ii) to have agreed to be bound by the terms and provisions of the Note

Purchase Agreement.

 

No reference herein and no provision of this Note

shall alter or impair the obligation of the Company, which is absolute and

unconditional, to pay the principal of and interest on this Note at the times,

place and rate, and in the coin or currency, as prescribed herein or to convert

this Note as provided.  Capitalized

terms used herein and not otherwise defined shall have the meanings ascribed

thereto in the Note Purchase Agreement.

 

1

 

1.  Certain Definitions.

 

Capitalized terms used in this Note and not defined

herein shall have the meanings ascribed to them in the Note Purchase

Agreement.  As used in this Note, the

following terms shall have the following meanings:

 

“Change

in Control”  shall

be deemed to have occurred at such time as any of the following events shall

occur:

 

(a)           the consummation of any transactions,

the result of which is that any “person” or “group” (as such terms are used in

Section 13(d)(3) of the Exchange Act), owns directly or indirectly,

beneficially or of record, 35% or more of the issued and outstanding Common

Stock on a fully diluted basis;

 

(b)           any transaction or event occurs as a

result of which the Common Stock of the Company ceases (or will cease upon

consummation or immediately following such transaction or event) to be listed

on a United States national securities exchange or approved for quotation on

the Nasdaq National Market or any similar United States system for automated

dissemination of quotations of securities prices;

 

(c)           the Company consolidates with or

merges with or into another Person (other than a Subsidiary of the Company), or

sells, conveys, transfers or leases all or substantially all of its properties

and assets to any Person (other than a Subsidiary of the Company) or any Person

(other than a Subsidiary of the Company) consolidates with or merges with or

into the Company, and the outstanding voting stock of the Company is

reclassified into, converted for or converted into the right to receive any

other property or security;

 

(d)           any change in control (or similar

event, however denominated) with respect to the Company shall occur under and

as defined in any indenture or agreement in respect of any Senior Indebtedness

regardless of the amount of Senior Indebtedness involved.

 

“Conversion

Notice” has the meaning given to such term in Section

8(e) herein.

 

“Conversion

Price” means $2.60, subject to adjustment from time to

time as set forth in Section 7(c) below.

 

“Gap

Amount” means an amount equal to $2,720,000 of the

principal amount of this Note.

 

“Initial

Amount” means an amount equal to $7,280,000 of the

principal amount of this Note.

 

“Market Price” means the average of the

closing price of the Common Stock on the Nasdaq National Market, averaged over

a period of 20 consecutive Business Days consisting of the day prior to the

date of conversion with respect to a particular Note and the 19 consecutive

Business Days prior to such day.

 

2

 

“Prepayment

Price” means the average of the bid price of the Common

Stock on the Nasdaq National Market or any other United States securities

exchange on which the Common Stock may at the time be listed, averaged over a

period of 20 consecutive Business Days consisting of the day prior to the

determination of the “Prepayment Price” and the 19 consecutive Business Days

prior to such day.

 

“Sale Price” on any date means the

closing per share of Common Stock sale price (or, if no closing sale price is

reported, the average of the bid and ask prices or, if more than one in either

case, the average of the average bid and average ask prices) on such date as

reported in composite transactions for the principal United States securities

exchange on which the Common Stock is traded or, if the Common Stock is not

listed on a United States national or regional securities exchange, (i) as

reported by the National Association of Securities Dealers Automated Quotation

System or by the National Quotation Bureau Incorporated, or (ii) if such bid

and ask prices are not reported by the National Association of Securities

Dealers Automated Quotation System or by the National Quotation Bureau

Incorporated, in a manner to be determined by the Company on the basis of such

quotation as the Company considers appropriate in its sole and absolute

discretion.

 

“Senior

Credit Documents” means the documents executed among the

Company and the lenders thereunder in connection with the Senior Indebtedness,

as the same shall be amended, modified and supplemented and in effect from time

to time.

 

“Senior Indebtedness”  means all Obligations of the Company

under the Senior Credit Documents; provided, however, that the

aggregate principal amount of Indebtedness (or any refinancing, replacement or

refunding thereof) constituting “Senior Indebtedness” hereunder shall not

exceed, at any time outstanding, $5,000,000.

 

“Senior Subordinated Indebtedness”  means all Obligations of the Company to

the Holder in respect of this Note or any other Note Document.

 

2.  Payments; Maturity; Restrictions on

Distributions.

 

(a)           Payment of principal of, and accrued

and unpaid interest on, this Note or any other amounts then due to the Holder

under this Note or any other Note Document, shall be made no later than 2:00 p.m.,

New York City Time, in whole, on December 24, 2006 (the “Maturity Date”), by wire transfer of immediately available funds

to such account as the Holder shall have specified by written notice to the

Company as provided in the Note Purchase Agreement, or in such other

manner as instructed from time to time in writing by the Holder.

 

(b)           Whenever any payment (including

principal of, premium, if any, or interest on this Note or other amount)

hereunder or under any other Note Document shall become due, or otherwise would

occur, on a day that is not a Business Day, such payment shall be made on the

next succeeding Business Day, and such extension of time shall in such case be

included in the computation of such interest, or other amount, if applicable.

 

(c)           Neither the Company nor any of its

Subsidiaries shall purchase, redeem or otherwise acquire this Note from the

Holder except upon payment or prepayment thereof in accordance with the

specific terms hereof and of the Note Purchase Agreement and, in any such 

 

3

 

purchase, redemption, prepayment or otherwise,

the Company or such Subsidiary shall have offered to purchase, redeem or

otherwise acquire, as the case may be, Notes from each holder of the other

Notes at the time outstanding upon the same terms and conditions and on a pro

rata basis (based upon the aggregate principal amount of the Notes then

held by each such holder).  Any Notes so

purchased, redeemed or otherwise acquired by the Company or any Subsidiary of

the Company shall be cancelled and not be deemed outstanding for any purpose.

 

(d)           Except

to the extent otherwise provided herein, each payment of principal of the Notes

by the Company shall be made for the account of the holders thereof pro  rata

in accordance with the respective unpaid principal amounts of the Notes held by

them and each payment of interest on the Notes shall be made for the account of

the holders thereof pro  rata in accordance with the amounts of

interest on such Notes then due and payable to the respective Purchasers.

 

(e)           All payments by the Company hereunder

shall be made without set-off or counterclaim and in such amounts as may be

necessary in order that all such payments shall not be less than the amounts

otherwise specified to be paid hereunder.

 

(f)            So long as any Notes shall be

outstanding, no dividend, whether in cash or property, shall be paid or

declared, nor shall any other distribution be made, on any Common Stock of the

Company, nor shall any shares of Common Stock of the Company be purchased,

redeemed, or otherwise acquired for value by the Company until all amounts then

due hereunder or any amounts hereunder in arrears shall have been paid in full,

including any amounts due under Section 3(b) hereof.

 

3.  Interest.

 

(a)           Interest (computed on the basis of a

360-day year consisting of twelve 30-day months) on this Note is payable in

cash on the unpaid principal amount hereof, accruing from the date hereof at a

rate of ten percent (10%) per annum, payable semi-annually in arrears each June

30 and December 31, commencing June 30, 2002, until the principal hereof shall

have become due and payable; (b) if any payment (including principal of,

premium, if any, or interest on this Note or other amount) due to a Holder

hereunder or under any other Note Document is not paid when due hereunder or

thereunder, then the overdue amount shall bear interest at a rate of (12%) per

annum compounded quarterly, which interest shall accrue from the date such

overdue amount was originally due to the date of payment of such amount,

including interest thereon, has been made. 

All such interest on overdue amounts shall be payable upon demand.

 

4.  Ranking.

 

(a)           The obligations of the Company under

the Notes shall rank senior, including without limitation, with respect to

rights to principal, interest and other payments, and with respect to the

distribution of assets upon liquidation, dissolution or winding up of the

Company, whether voluntary or involuntary, to all other Indebtedness of the

Company and to all classes and series of Capital Stock of the Company, and

shall be subordinate only to Senior Indebtedness of the Company only as set

forth in this Section 4.

 

4

 

(b)           The Company and the Holder, for

itself and its successors and assigns, hereby agree that all of the Obligations

in respect of the Senior Subordinated Indebtedness, including, without

limitation, all payments in respect thereof (prior to the payment in full in

cash of all Obligations in respect of Senior Indebtedness (subject, however, to

the provisions of Section 4(h)) and any renewals, refinancings or

extensions thereof shall be subordinate and junior in right of payment to all

Senior Indebtedness as set forth and subject to the terms in this Section 4.

 

(c)           Without prejudice to Section 3(b) of

this Note, during the continuance of any default in the payment of any Senior

Indebtedness, whether at maturity, pursuant to acceleration or otherwise (a “Payment Default”), no direct or

indirect payment of any kind shall be accepted, received or retained with

respect to principal, interest or other amounts due under the Senior

Subordinated Indebtedness.

 

(d)           Without prejudice to Section 3(b) of

this Note, subject to the provisions of paragraph (c) above, during the

continuance of any default on or in respect of Senior Indebtedness (other than

a Payment Default) that entitles the holders of such Senior Indebtedness to

accelerate the maturity of the Obligations outstanding thereunder (a “Non-payment Default”), no direct or

indirect payment of any kind shall be accepted, received or retained with

respect to principal, interest or other amounts due under the Senior

Subordinated Indebtedness for a period (the “Blockage

Period”) beginning on the date on which written notice of such

default (a “Blockage Notice”)

is given to the Company by the holders of Senior Indebtedness in respect of the

Senior Credit Documents, if the Senior Credit Documents are then in effect, and

ending on the earlier of (x) 60 days after delivery of such Blockage Notice or

(y) the date on which such Non-payment Default is cured or waived, after which

period the Company shall be entitled to make all past-due payments and shall

resume all other required payments under the Senior Subordinated Indebtedness,

including any payments omitted pursuant to this Section 4; provided that

(i) no event which, with the giving of notice and/or lapse of time, would

become an Event of Default which existed on the date of the commencement of a

Blockage Period may be used as the basis for any subsequent Blockage Notice

unless such event shall, in the interim, have been cured or waived for a period

of not less than 10 consecutive days and (ii) Blockage Notices may not be in

effect for more than 120 days in any 360-day period.  The Company agrees to deliver copies of all Blockage Notices to

the Holders immediately upon receipt, although the failure of the Company to do

so shall not affect the rights of holders of Senior Indebtedness under this Section

4.

 

(e)           Upon any distribution of assets of

the Company of any kind or character upon any dissolution, winding-up, total or

partial liquidation or reorganization of the Company (whether in bankruptcy,

insolvency or receivership proceedings or upon an assignment for the benefit of

creditors or otherwise) (each, a “Distribution

Event”):

 

(i)    the holders of all Senior Indebtedness shall

first be entitled to receive payment in full in cash of all Obligations in

respect thereof before the Holder is entitled to receive any payment on account

of the principal of or interest on or any other amount owing hereunder or

otherwise with respect to the Senior Subordinated Indebtedness, except that the

Holder will be permitted to receive and retain, and the holders of Senior Indebtedness

shall have no claim to, instruments or securities issued by the Company in a

bankruptcy proceeding that consist of (i) shares of capital stock of the

Company as 

 

5

 

reorganized or readjusted or any other successor

corporation or entity (provided, that the holders of Senior Indebtedness

receive instruments or securities consisting of indebtedness equal to the

Obligations in respect of the Senior Indebtedness); or (ii) any payment or

distribution of securities or instruments of the Company or any other successor

corporation or entity which are subordinated, to at least the same extent as

the Senior Subordinated Indebtedness, to the payment of the Senior Indebtedness

outstanding immediately prior to the commencement of any action or proceeding

resulting in such Distribution Event, in each case authorized by an order or

decree giving effect, and stating in such order or decree that effect is given,

to the subordination of the Senior Subordinated Indebtedness to the Senior

Indebtedness, and made by a court of competent jurisdiction in a bankruptcy

proceeding; and

 

(ii)   any payment or distribution of assets to any

holder of Senior Indebtedness of any kind or character, whether in cash,

property or securities, to which the Holder would be entitled except for the

provisions of this Section 4 shall be paid by the liquidating trustee or

agent or other person making such payment or distribution directly to the

holders of Senior Indebtedness or their representative or representatives under

the agreements pursuant to which the Senior Indebtedness may have been issued

to the extent necessary to make payment in full of all Senior Indebtedness

remaining unpaid after giving effect to any concurrent payment or distribution

to the holders of such Senior Indebtedness.

 

(f)            If any holder of Senior Indebtedness

receives any payment or distribution which, except for the provisions of this Section

4, would have been payable or deliverable under the Senior Subordinated

Indebtedness, the Holder shall (after all Senior Indebtedness has been paid in

full) be subrogated to the rights of the holders of such Senior Indebtedness

against the Company.

 

(g)           If, at any time, all or part of any

payment with respect to Senior Indebtedness theretofore made by the Company or

any other person is rescinded or must otherwise be returned by the holders of

Senior Indebtedness due to the insolvency, bankruptcy or reorganization of the

Company or such other person, the subordination provisions set forth herein

shall continue to be effective or be reinstated, as the case may be, all as

though such payment had not been made.

 

(h)           The Holder agrees and consents that

without notice to or assent by the Holder, and without affecting the

liabilities and obligations of the Company and the rights and benefits of the

holders of the Senior Indebtedness set forth in this 

Section 4:

 

(i)    the holders of Senior Indebtedness, and any

representative or representatives acting on behalf thereof, may exercise or

refrain from exercising any right, remedy or power granted by or in connection

with any agreements relating to the Senior Indebtedness; and

 

(ii)   any balance or balances of funds with any

holder of Senior Indebtedness at any time outstanding to the credit of any of

the holders of Senior Indebtedness may, from time to time, in whole or in part,

be surrendered or released;

 

6

 

all as the holders of any Senior Indebtedness, or any representative or

representatives acting on behalf thereof, may deem advisable, and all without

impairing, abridging, diminishing, releasing or affecting the subordination of

the Obligations hereunder to Senior Indebtedness.

 

(i)            The holders from time to time of

Senior Indebtedness are third party beneficiaries and shall be entitled to the

benefits of this Section 4 and, so long as any Senior Indebtedness

remains outstanding, this Section 4 may not be modified, rescinded or

canceled in whole or in part without the prior written consent thereto of the holders

of a majority of the outstanding Senior Indebtedness.

 

(j)            Notwithstanding anything to the

contrary in Sections 4(c) and 4(d), if an Event of Default shall

exist at any time that any Senior Indebtedness shall be outstanding, the Holder

shall be permitted to take any action to accelerate or to collect payment on

the Senior Subordinated Indebtedness or to pursue any other remedy with respect

to the Senior Subordinated Indebtedness in accordance with Section 8

herein.

 

(k)           The Holder shall not hereafter (A)

take any security or collateral to secure the Senior Subordinated Indebtedness

or any other Obligations hereunder or (B) sell, assign, transfer or pledge the

Senior Subordinated Indebtedness unless expressly subject to the terms of this Section

4.

 

(l)            The Holder hereby undertakes and

agrees for the benefit of the holders of Senior Indebtedness that, upon the

occurrence and during the continuance of any events set forth in Sections

4(c) and 4(d), the Holder shall take any actions reasonably

requested by the holders of a majority of the outstanding Senior Indebtedness

to effectuate the full benefit of the subordination contained herein.

 

(m)          The Holder hereby undertakes and

agrees for the benefit of the holders of Senior Indebtedness that the Holder

will not vote its claim or claims with respect to this Agreement in a manner

inconsistent with the terms of this Section 4.

 

(n)           To the extent permitted by applicable

law, the Company and the Holder hereby waive (A) notice of acceptance hereof by

the holders of the Senior Indebtedness and (B) all diligence in the collection

or protection of or realization upon the Senior Indebtedness.

 

(o)           The Company and the Holder each

hereby expressly agree that the holders of Senior Indebtedness may enforce any

and all rights derived herein by suit, either in equity or at law, for specific

performance of any agreement contained in this Section 4 or for judgment

at law and any other relief whatsoever appropriate to such action or procedure.

 

(p)           If any payment or other distribution

of assets which the Holder would otherwise have been entitled to receive but

for the provisions of this Section 4 shall have been applied to the

payment of amounts payable under or on account of the Senior Indebtedness,

then, and in such case, the Holder shall be entitled to receive from the

holders of such Senior Indebtedness the amount, if any, of any such

distribution of assets received by such holders of Senior Indebtedness in

excess of the amount sufficient to pay in full in cash all amounts payable 

 

7

under or in respect of the Senior Indebtedness on a pro  rata

basis (based on the aggregate principal amounts of the Notes then outstanding).

 

(q)           This Section 4 is intended to

define the rights between the holders of Senior Indebtedness and the

Holder.  Nothing contained in this Section

4 shall affect the Company’s obligations hereunder and under the other Note

Documents to repay in full all amounts owing hereunder or under any other Note

Documents, respectively.

 

(r)            Notwithstanding the prohibitions

imposed by this Section 4, the Holder shall be entitled to appear in,

join, intervene or otherwise become involved in, any judicial enforcement

actions undertaken by the holders of Senior Indebtedness to the extent

reasonably necessary to protect and defend the rights of the Holder with

respect to the Senior Subordinated Indebtedness, provided that the Holder shall

not in such proceeding take any action to (a) contest the validity, perfection,

priority or enforceability of any Senior Indebtedness or any collateral

therefor or guaranties thereof; (b) contest the relative rights and duties of

any holders of any Senior Indebtedness established in any instruments or

agreements creating or evidencing any of the Senior Indebtedness with respect

to any of such collateral; or (c) contest or affect the obligations and

agreements of the Holder set forth in this Section 4.

 

(s)           Nothing in this Section 4

shall affect the Holder’s right to convert this Note into Common Stock pursuant

to the terms hereof.

 

                The provisions of this Section 4 may be amended by

the Company with the unanimous consent of all holders of $1,000,000 or more of

principal amount of the Notes.

 

5.  Optional Prepayment.

 

(a)           If at any time after January 3, 2004,

the Prepayment Price is greater than the product obtained by multiplying the

Conversion Price and one hundred and fifty percent (150%), the Company may, at

its sole option, upon not less than sixty (60) Business Days prior written

notice to the Holder (the “Prepayment

Notice”), prepay this Note in whole but not in part; and provided,

further, that any such prepayment of this Note shall include the payment

in cash of the principal amount of this Note and all accrued but unpaid

interest hereon to the date of such prepayment (collectively, the “Prepayment Amount”).

 

(b)           Notwithstanding

the provisions of this Section 5, the Holder may, at any time during the

sixty (60) Business Day period after receipt of the Prepayment Notice, convert

the full amount of the Prepayment Amount into Common Stock in accordance with

the terms of Section 8, in which case the Company shall not prepay this

Note.

 

(c)           On the Business Date that is

sixty-one (61) Business Days after

the receipt of the Prepayment Notice, the Holder shall be entitled to

receive the Prepayment Amount upon physical delivery to the Company or its

agents of this Note.  On such date, all

rights in respect of this Note, except the right to receive the Prepayment Amount

and any applicable amounts due under Section 3(b) hereof, shall cease and

terminate, and the Obligations under the Note shall no longer be deemed to be

outstanding (unless Default shall be made by the Company in the payment of the

Prepayment Amount, in which event such rights shall be exercisable and such 

 

8

 

Obligations shall be outstanding until such Default is cured), whether

or not the Note has been received by the Company.

 

(d)           Notwithstanding the provisions

of this Section 5, the Company shall only make a prepayment hereunder to

the extent that such prepayment is permissible pursuant to the terms of the

Senior Credit Documents.

 

5.A.  Prepayment at Option of Holder.

 

(a)           If the Company in its amended Form

10-Q filed with the SEC for the quarter ended September 29, 2001 reports Total

Stockholders’ Equity as defined in

accordance with GAAP of less than $6,200,000, it will provide Holder with a

written notice within five (5) Business Days of such filing (the “Optional

Prepayment Notice”).

 

(b)           The Holder may at any time during the

ten (10) Business Days after receipt of the Optional Prepayment Notice provide

written notice to the Company to prepay this Note and all accrued but unpaid

interest through the date of Prepayment. 

After receipt of such request for prepayment, the Company shall, within

ten (10) Business Days thereafter, deliver the Prepayment Amount upon physical

delivery to the Company or its agents of this Note.  On such date, all rights with respect to the Note except the right

to receive the Prepayment Amount and any applicable amounts due under Section 3

hereof, shall cease and terminate, and the Obligation under the Note shall no

longer be deemed to be outstanding (unless Default shall be made by the Company

in the payment of the Prepayment Amount in which event such Obligations shall

be outstanding until such Default is cured) whether or not the Note has been

received by the Company.

 

(c)           The Company shall not enter into

Senior Indebtedness as set forth in Section 4 prior to the filing of the

amended Form 10-Q for the quarter ended September

29, 2001.

 

6.  Change in Control Prepayment.

 

(a)           Notice of Change in Control.  The Company shall, within five (5) days

following the occurrence of the Change in Control, give written notice of such

Change in Control (a “Change in Control

Notice”) to the Holder and such Change in Control Notice shall

specify (i) the aggregate principal amount of the Indebtedness then outstanding

hereunder, (ii) the amount of unpaid interest that will have accrued with

respect to such Indebtedness to be

prepaid as of the thirtieth (30th) day following the date of the Change in

Control Notice (the “Change in Control

Prepayment Date”) and (iii) the event or events constituting

such Change of Control.

 

(b)           Right to Prepayment.  Notwithstanding any other terms of this

Note, the Holder shall have the right, but not the obligation, to require the

Company to prepay all, but not less than all, of the Indebtedness (including

accrued and unpaid interest) outstanding hereunder, by delivering to the

Company within fifteen (15) days after the Holder’s receipt of a Change in

Control Notice, written notice of the Holder’s demand for prepayment (“Change in Control Prepayment Notice”).

 

9

 

(c)           Prepayment of Obligations.  In the event that the Holder has delivered a

Change in Control Prepayment Notice, on the Change in Control Prepayment Date

the Company shall, notwithstanding any other terms of this Note, pay to the

Holder, in cash, a repayment price equal to the sum of (i) the principal amount

of the Indebtedness then outstanding hereunder, plus (ii) all accrued and

unpaid interest to the Change in Control Prepayment Date.

 

7.  Mandatory Prepayment.

 

(a)           Prepayment.  Notwithstanding any other terms of this

Note, any other Note Document or any other Obligation of the Company, in the

event that the conditions set forth in Sections 6.6(a) and 6.6(b) of the Note

Purchase Agreement are not fully satisfied by April 30, 2002, the Company

shall, within ten (10) Business Days after April 30, 2002, without any action

required on the part of the Holder, prepay an amount equal to the Gap Amount,

plus all accrued but unpaid interest thereon to the date of such prepayment; provided,

however, that any such prepayment shall be subject to the provisions of Section

2(c) and 2(d) above.  Until the date

of prepayment or the date the conditions in Sections 6.6(a) and 6.6(b) of

the Purchase Agreement are satisfied, whichever is earlier, the Company shall

keep the entire Gap Amount invested in cash or cash equivalents.

 

(b)           Penalty.  In addition to the amounts payable under

Section 7(a), the Company shall pay, to each Holder on a pro rata basis, an

amount equal to twenty percent (20%) of the Gap Amount less any interest that

has accrued and been paid thereon from the date of issuance through the date of

such penalty payment (including the interest paid pursuant to Section 7(a)).

 

(c)           Extension.  Notwithstanding paragraphs (a) or (b), the

Holders of 71 percent or more of the principal amount of the Notes then

outstanding may, by written notice to the Company at least five (5) business

days prior to April 30, 2002 (and any extensions of such date), extend one or

more times the date the Company must make such prepayment and penalty and

penalty payments to the Holders by 30 days or more provided, however, that any

such extension of such date of payment shall not otherwise affect the

obligation of the Holders under this Note or the other Note documents.

 

8.  Conversion.

 

(a)           Conversion.  Subject to and in compliance with the

applicable provisions of this Section 8, the Holder shall have the

right, at such Holder’s option, at any time and from time to time, to convert

all or any portion of the principal amount of this Note in increments of

$100,000 (the “Conversion Amount”) into

that number of fully paid and nonassessable shares of Common Stock equal to the

quotient obtained by dividing (x) the portion of the Conversion Amount being

converted by (y) the Conversion Price (as defined above), as last adjusted

pursuant to Section 8(d) and then in effect, by surrender of this

Note.  Conversion shall be deemed to

have been effected on the date when delivery of this Note is made pursuant to

the provisions of the previous sentence. 

All accrued but unpaid interest due on the Conversion Amount shall be

paid in cash to the Holder in the manner specified in Section 2(a) on

the date that such conversion shall be deemed to have been made pursuant to Section

8(e).

 

10

 

(b)           Fractional Shares.  The Company shall not issue fractional

shares of Common Stock or scrip upon any conversion of this Note.  The number of full shares of Common Stock

issuable upon conversion shall be computed on the basis of the portion of the

Conversion Amount to be converted. 

Instead of any fractional shares of Common Stock which would otherwise

be issuable upon conversion of the full amount of the Conversion Amount, the

Company shall pay a cash adjustment in respect of such fractional interest in

an amount equal to the product of (i) the Market Price of one share of such

Common Stock and (ii) such fractional interest.

 

(c)           Adjustments to Conversion Price.

 

If, after the Issue Date of the Notes, the

Company:

 

(1)     pays a dividend or makes a distribution on

its Common Stock payable in shares of its Common Stock or shares of other

Capital Stock;

 

(2)     subdivides its shares of Common Stock;

 

(3)     combines its shares of Common Stock;

 

(4)     issues by reclassification of its Common

Stock any shares of its Capital Stock (other than rights, warrants or options

for its Capital Stock);

 

(5)     makes a distribution to all holders of its

Common Stock of rights to purchase shares of its Common Stock for a period

expiring within 60 days after the record date for such distribution at less

than the Conversion Price at the time of the distribution; or

 

(6)     makes a distribution to the holders of its

Common Stock of its assets including shares of any Subsidiary or business unit

of the Company or debt securities or rights to purchase the Notes (excluding

ordinary cash dividends from current or retained earnings);

 

then the conversion privilege and the Conversion Price

in effect immediately prior to such action shall be adjusted so that the Holder

of a Note thereafter converted may receive the number of shares of Common Stock

and/or assets of the Company which such  

Holder would have owned immediately following such action if such Holder

had converted the Note immediately prior to such action.  The adjustment shall become effective

immediately after the record date in the case of a dividend or distribution and

immediately after the effective date in the case of a subdivision, combination

or reclassification.

 

If after an adjustment a Holder of a Note upon

conversion of such Note may receive shares of two or more classes of Captial

Stock of the Company, the Conversion Price shall thereafter be subject to

adjustment upon the occurrence of an action taken with respect to any such

class of Capital Stock as is contemplated by this subsection (c) with respect

to the Common Stock, on terms comparable to those applicable to Common Stock in

this subsection (c).

 

11

 

(d)           Notice of Adjustment.  Upon each adjustment of the Conversion

Price, the Company shall give prompt written notice thereof to the Holder,

which notice shall state the Conversion Price resulting from such adjustment

and the increase or decrease, if any, in the number of shares issuable upon the

conversion of this Note, setting forth in reasonable detail the method of

calculation and the facts upon which such calculation is based.

 

(e)           Exercise of Conversion Right.  In order to exercise the Holder’s conversion

right hereunder, the Holder shall surrender this Note to the office of the

Company and shall deliver to the Company written notice of such conversion (the

“Conversion Notice”) at least two (2) Business Days prior to the

intended exercise thereof specifying the portion of the Conversion Amount to be

converted into Common Stock.  Upon

receipt of any Conversion Notice, the Company shall within two (2) Business

Days (or at such later time as to which the Company and the Holder may agree)

deliver to the address of the Holder as set forth above, (i) at the Company’s

expense (including any stamp taxes or similar governmental charges), the

appropriate number of duly or validly issued and fully paid and nonassessable

shares of Common Stock and one or more stock certificates therefor (in such

number and registered in such names as the Holder may direct), (ii) to the

extent this Note is converted in part only, a new Note (with the same terms as

this Note) in principal amount equal to the unconverted portion of such Note

and, to the extent that the entire Conversion Amount is converted and

fractional shares would otherwise be issued, cash pursuant to Section 8(b).  Such conversion shall be deemed to have been

made immediately at the close of business on the Business Day of such surrender

of this Note, and the Holder shall be treated for all purposes as the record

holder of such shares of Common Stock as of such date.

 

(f)            Sufficient Shares of Equity

Securities. Upon receipt of any Conversion Notice, the Company shall take

all necessary measures, including the filing of an amendment to its Articles of

Incorporation, to make available enough shares of Common Stock to allow the

conversion to occur as promptly as practicable.  If at any time the number of authorized but unissued shares of

Common Stock shall not be sufficient to effect such conversion, the Company

will take such corporate actions as may, in the opinion of Holder’s counsel, be

necessary to increase the Company’s authorized, unreserved and unissued shares

of Common Stock to such number of shares as shall be sufficient for such

purposes.  Upon delivery, such shares

shall be duly and validly issued and fully paid and nonassessable.

 

(g)           Restrictions on Conversion of Gap

Amount.  Notwithstanding any other

provision of this Note or any other Note Document, each Holder may not convert

any portion of the principal amount of its Note in excess of its pro rata share

of the Initial Amount until such time as the conditions set forth in Sections

6.6(a) and 6.6(b) of the Note Purchase Agreement have been fully satisfied.

 

(h)           Merger, Reorganization, etc.  If at any time or from time to time while

any principal amount of this Note is outstanding, there is a capital

reorganization of the Common Stock or the merger or consolidation of the

Company with or into another corporation or another entity or person or a

recapitalization, subdivision, combination, reclassification, exchange or

substitution of shares, as a part of such capital reorganization, provision

shall be made so that the Holder shall thereafter be entitled to receive upon

conversion of this Note the number of shares of stock or other securities or

property of the Company to which a holder of the number of shares 

 

12

 

of Common Stock deliverable upon conversion would have been entitled on

such capital reorganization.  In any

such case, appropriate adjustment shall be made in the application of the

provision of this subsection (h) with respect to the rights of the Holder after

the capital reorganization to the end that the provisions of this Section 8

(including adjustment of the Conversion Price then in effect and the number of

shares issuable upon conversion of the Note) shall be applicable after that

event and be as nearly equivalent as practicable.

 

9.  Events of Default.

 

If any of the following events (each an “Event of

Default”) shall occur and be continuing:

 

(a)           Payment of Principal.  The Company shall fail to make any payment

of principal on this Note when and as the same shall become due and payable

including at the due date thereof, by acceleration or otherwise.

 

(b)           Payment of Interest and Fees.  The Company shall fail to make any payment

of interest on this Note, or any fee or any other amount payable hereunder or

under this Note when and as the same shall become due and payable including at

the due date thereof, by acceleration or otherwise, and such failure shall

continue unremedied for five (5) Business Days after the due date thereof.

 

(c)           Covenant Defaults.  The Company or any of its Subsidiaries shall

default in the due observance or performance of any covenant or agreement to be

observed or performed under any Note Document (other than a covenant which is

dealt with specifically elsewhere in this Section 8) and such default

shall continue unremedied for thirty (30) days after the occurrence of such

default; provided, however, that the failure to fully satisfy the

conditions set forth in Sections 6.6(a) and 6.6(b) of the Note

Purchase Agreement shall not constitute a default if the Company fully

satisfies its obligations pursuant to Section 7 hereof; provided,

further that the failure of the Company to satisfy its obligations

pursuant to Section 7 hereof shall immediately upon the failure thereof

be deemed to be a default hereunder.

 

(d)           Misrepresentations.  Any representation, warranty or other

statement made or furnished to the Purchasers by or on behalf of the Company or

any of its Subsidiaries, any Note Document or any instrument, certificate or

financial statement furnished (in compliance with or in reference thereto)

proves to have been false or misleading in any material respect when made or

furnished and could be reasonably expected to result in a Material Adverse

Effect.

 

(e)           Other Defaults.  The Company or any of its Subsidiaries shall

be in payment default on any Indebtedness (including any of the other Notes)

which is outstanding in a principal amount in excess of $250,000 in the

aggregate beyond any applicable period of grace, or if any event shall occur or

condition shall exist in respect of any Indebtedness which is outstanding in a

principal amount in excess of $250,000 or under any evidence of any such

Indebtedness or of any mortgage, indenture or other agreement relating thereto,

which shall have caused the acceleration of the payment of such Indebtedness

without such Indebtedness being discharged or such acceleration having been

cured, waived, rescinded or annulled.

 

13

 

(f)            Voluntary Insolvency and Related

Proceedings.  The Company or any of

its Subsidiaries shall (i) voluntarily commence any proceeding or file any

petition seeking relief or reorganization under Title 11 of the United States

Code, or any other federal, state or foreign bankruptcy, insolvency or similar

law, (ii) consent to the institution of, or fail to controvert in a timely and

appropriate manner, any such proceeding or the filing of any such petition,

(iii) apply for, consent to the appointment of, or a court of competent

jurisdiction shall enter an order appointing, a receiver, trustee, custodian,

sequestrator or officer with similar powers of itself or for any substantial

part of its property or assets, (iv) file an answer admitting the material

allegations of a petition filed against it in any such proceeding, (v) make a

general assignment for the benefit of creditors, (vi) fail generally to pay its

debts as they become due, (vii) shall be adjudicated insolvent or (viii) take

any corporate or stockholder action in furtherance of any of the foregoing.

 

(g)           Involuntary Insolvency and Related

Proceedings.  (i) An involuntary

proceeding shall be commenced or an involuntary petition shall be filed in a

court of competent jurisdiction seeking (x) relief in respect of the Company or

any of its Subsidiaries or of any substantial part of the property or assets

thereof, under Title 11 of the United States Code or any other federal, state

or foreign bankruptcy, insolvency or similar law, (y) the appointment of a

receiver, trustee, custodian, sequestrator or similar official for any such

Person or for any substantial part of its property or (z) the winding-up or

liquidation of any such Person, and any such proceeding, petition or order

shall continue unstayed and in effect for a period of sixty (60) consecutive

days or (ii) a warrant of attachment, execution or similar process shall be

issued against any substantial part of the Property of the Company or any of

its Subsidiaries and the enforcement of such attachment, execution or similar

process is not stayed pending appeal.

 

(h)           Business Disruption: Condemnation.  There shall occur a cessation of a

substantial part of the business of the Company or any of its Subsidiaries for

a period which significantly affects the Company’s capacity to continue its

business, on a profitable basis; or the Company or any of its Subsidiaries

shall suffer the loss or revocation of any license or permit now held or

hereafter acquired by the Company or such Subsidiaries which is necessary to

the continued or lawful operation of its business; or the Company or such

Subsidiaries shall be enjoined, restrained or in any way prevented by court,

governmental or administrative order from conducting all or any material part

of its business affairs; or any material lease or agreement pursuant to which

the Company or such Subsidiary leases, uses or occupies any Property shall be

canceled or terminated prior to the expiration of its stated term; or any

material portion of any Property of the Company or any Subsidiary of the

Company shall be taken through condemnation or the value of such Property shall

be impaired through condemnation.

 

(i)            Challenge to Note Document.  This Note or any other Note Document shall

cease to be in full force and effect and enforceable in accordance with its

terms, or the Company or any of its Subsidiaries shall assert the invalidity of

any of the foregoing.

 

(j)            Judgments.  A judgment or judgments  for the payment of money in excess of

$200,000 in the aggregate shall be rendered against the Company and/or any

Subsidiary of the Company and the same shall not (i) be fully covered by

insurance or other comparable bond, or (ii) within sixty (60) days after the

entry thereof, have been discharged or execution thereof stayed pending appeal,

or shall not have been discharged within sixty (60) days after the 

 

14

 

expiration of any such stay; then, and in any such event (other than an

event described in paragraphs (f) or (g) above), and at any time thereafter

during the continuance of such event, the Holder may, take any of the following

actions and at the same or different times: 

(i) declare this Note to be forthwith due and payable, whereupon the

entire unpaid principal of this Note, together with accrued but unpaid interest

thereon and all other Obligations under the Note Documents, shall become

forthwith due and payable in full in cash, without presentment, demand, protest

or any other notice of any kind, all of which are hereby expressly waived by

the Company, anything contained herein or in any other Note Document to the

contrary notwithstanding, or (ii) exercise any and all other remedies provided

under any Note Document upon the occurrence and continuance of an Event of

Default; provided, however, that with respect to the occurrence

of an Event of Default described in paragraphs (g) or (h) above, the principal

of this Note, together with accrued but unpaid interest and fees hereon and any

other liabilities of the Company and any of their Subsidiaries to the Holder

accrued hereunder or any other Note Document, shall automatically become due

and payable in full in cash, all without presentment, demand, protest or other

notice of any kind, all of which are hereby expressly waived by the Company,

anything contained herein or in any other Note Document to the contrary

notwithstanding.

 

(k)           (i) Any Reportable Event with respect

to a Plan shall occur; (ii) the Company of any ERISA Affiliate shall be

notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal

Liability to such Mulitemployer Plan in an amount which, when aggregated with

all other Withdrawal Liabilities incurred by the Company or any ERISA Affiliate

(determined as of the date of such notification) has or is reasonably likely to

have a Material Adverse Effect; (iii) the Company or any ERISA Affiliate shall

be notified by the sponsor of a Mulitemployer Plan that such Multiemployer Plan

is in reorganization or is being terminated, partitioned or reorganized, within

the meaning of Title IV of ERISA, if liability of the Company and its ERISA

Affiliates resulting from such reorganization, termination, partitioning or

reorganization has or is reasonably likely to have a Material Adverse Effect;

or (iv) the Company or any ERISA Affiliate incur aggregate liabilities in

connection with a withdrawal from a Multiple Employer Plan or the termination

of a Multiple Employer Plan that have or are reasonably likely to have a

Material Adverse Effect.

 

10.  Amendments, etc.

 

No amendment or waiver of any provision of this Note,

nor consent to any departure by the Company therefrom, shall in any event be

effective unless the same shall be in writing and signed by the Holder and then

such waiver or consent shall be effective only in the specific instance and for

the specific purpose for which given.

 

11.  Notices, etc.

 

All notices required or permitted hereunder shall be

in writing and shall be deemed effectively given: (i) upon personal delivery to

the party to be notified; (ii) when sent by confirmed facsimile if sent during

normal business hours of the recipient, if not, then on the next business day;

(iii) five (5) days after having been sent by registered or certified mail,

return receipt requested, postage prepaid; or (iv) one (1) day after deposit

with a nationally recognized 

 

15

 

overnight courier, specifying next day delivery, with written

verification of receipt.  All

communications shall be sent to the address as set forth on the first page

hereof or at such other address as such party may designate by five (5) days

advance written notice to the other parties hereto.

 

12.  Lost, Etc. Securities.

 

Upon receipt of evidence reasonably satisfactory to

the Company (an affidavit of the Holder being satisfactory) of the ownership

and the loss, theft, destruction or mutilation of this Note, and in the case of

any such loss, theft or destruction, upon receipt of an indemnity reasonably

satisfactory to the Company (if the Holder is a financial institution or other

institutional investor, its own agreement being satisfactory) or, in the case

of any such mutilation, upon surrender of this Note, the Company shall, without

charge, issue, register and deliver in lieu of such Note a new Note of like

kind representing the same rights represented by and dated the date of such

lost, stolen, destroyed or mutilated Note. 

Any such new Note shall constitute an original contractual obligation of

the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Note

shall be at any time enforceable by any Person.

 

13.  No Waiver; Remedies.

 

No failure on the part of the Holder to exercise, and

no delay in exercising, any right hereunder or under this Note shall operate as

a waiver hereof, nor shall any single or partial exercise of any right

hereunder or under this Note preclude any other or further exercise thereof or

the exercise of any other right.  The

remedies herein provided are cumulative and not exclusive of any remedies

provided by law.

 

14.  Costs, Expenses and Taxes.

 

The Company agrees to pay the Holder on demand after

and during the continuation of an Event of Default all reasonable costs and

expenses arising in connection with the administration, enforcement and

collection of this Note and the other documents to be delivered hereunder, including,

without limitation, reasonable attorneys’ fees and expenses and court costs of

the Holder with respect thereto and with respect to advising the Holder as to

its rights and responsibilities under this Note.  In addition, the Company shall pay any and all stamp and other

taxes payable or determined to be payable in connection with the execution and

delivery of this Note, or the conversion of this Note to Common Stock pursuant

to Section 7 hereof, and any other documents to be delivered hereunder,

and agrees to save the Holder harmless from and against any and all liabilities

with respect to or resulting from any delay in paying or omission to pay such

taxes.

 

15.  Entire Agreement.

 

This Note and the Note Purchase Agreement contain the

entire agreement and understanding among the parties hereto with respect to the

subject matter hereof and supersedes and preempts any prior understandings,

agreements or representations by or among the parties, written or oral, which

may have related to the subject matter hereof in any way.

 

16

 

16.  Successors and Assigns.

 

The respective rights and obligations of the Company

and the Holder shall be binding upon and inure to the benefit of their

respective successors and assigns, except that the Company may not assign this

Note without the consent of the Holder; provided, however, that

subject to the provisions of this Note, such consent shall not be required in

connection with a merger of the Company with or into another Person or the sale

of all or substantially all of the assets of the Company.

 

17.  Governing Law.

 

This Note shall be governed by and construed in

accordance with, and the rights of the parties shall be governed by, the laws

of the State of New York, as if this Note were an agreement to be fully

performed in New York.

 

IN WITNESS WHEREOF, the Company has caused this 10%

Senior Subordinated Convertible Note to be executed by its duly authorized

representative as of the date first above written.

 

17

 

	

   

  	

  MICRO COMPONENT TECHNOLOGY, INC.

  	 

	

   

  	

   

  	 

	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name: 

  Jeffrey S. Mathiesen

  
	

   

  	

   

  	

  Title:  Chief

  Financial Officer

  
				

 

18

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