Document:

MXWL EX 10.32

Exhibit 10.32

FORBEARANCE AND FIFTH AMENDMENT TO CREDIT AGREEMENT

This FORBEARANCE AND FIFTH AMENDMENT TO CREDIT AGREEMENT (“Agreement”) is made and entered into as of June 30, 2014 by and among WELLS FARGO BANK, NATIONAL ASSOCIATION (herein called “Bank”) and MAXWELL TECHNOLOGIES, INC. (“Borrower”), with reference to the following facts and intentions of the parties: 

RECITALS

A.    Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of December 5, 2011, as such may have been amended or modified from time to time (the “Credit Agreement”).  In connection with the Credit Agreement, Bank provided Borrower (a) a revolving line of credit in the maximum principal amount of Fifteen Million Dollars ($15,000,000.00) (the “Line of Credit”) which is evidenced by that revolving line of credit note executed by Borrower in favor of Bank in the amount of the Line of Credit and dated as of December 5, 2011, as such may have been amended or modified from time to time (the “Revolving Line of Credit Note”) and (b) an equipment term loan in the maximum principal amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) (the “Equipment Term Commitment”) which is evidenced by that term commitment note executed by Borrower in favor of Bank in the amount of the Equipment Term Commitment and dated as of December 5, 2011, as such may have been amended or modified from time to time (the “Equipment Term Commitment Note”).  The Line of Credit was to mature and become due and payable in full on June 30, 2014.  The Equipment Term Commitment will mature and become due and payable on April 30, 2015.  The Line of Credit and the Equipment Term Commitment shall together be referred to herein as the “Loan”.  

B.    For purposes hereof, the term “Obligations”  shall mean the Loan, and all other loans, advances, debts, liabilities and obligations, tasks or duties for the performance of covenants or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrower to Bank, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Credit Agreement or any of the other Loan Documents (as defined in the Credit Agreement).  The term Obligation includes but is not limited to all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy, whether or not allowed in such case or proceeding), fees, charges, expenses, attorneys’ fees and any other sum chargeable to Borrower under the Credit Agreement or any of the other Loan Documents.

C.    The Obligations are secured by, among other things, a security interest granted by Borrower to Bank in all of Borrower’s accounts, deposit accounts, accounts receivable, chattel paper, instruments, documents, general intangibles, equipment, inventory and other rights to payment (collectively, the “Collateral”) pursuant to that certain Security Agreement dated December 5, 2011, as such may have been amended or modified from time to time (the “Security Agreement”).

D.    Borrower has informed Bank that (i) Borrower is in default under the Loan Documents due to Borrower’s violation of Section 4.9(a) of the Credit Agreement as a result of Borrower’s failure to maintain at all times the Minimum Liquidity Coverage Ratio and (ii) Borrower will be in default under the Loan Documents due to Borrower’s violation of Section 4.9(c) of the Credit Agreement as a result of Borrower’s failure to maintain the required EBITDA set forth therein for the quarter ending June 30, 2014 (collectively, the “Existing Defaults”).   

E.    Borrower acknowledges that Borrower is in default under the Loan Documents as a consequence of the Existing Defaults; that such Existing Defaults have not been cured, waived or excused by Bank at any time or in any manner; and that there are no claims, demands, offsets or defenses at law or in equity that would defeat or diminish Bank’s present and unconditional right to collect any of the Obligations, and to proceed to enforce the rights and remedies available to Bank as provided in any of the Loan Documents or otherwise at law.  

F.    Borrower has requested that Bank provide Borrower a period of forbearance that will enable Borrower, at or prior to the expiration of such forbearance period, to provide Bank with certain information related to Borrower’s performance going forward.  Borrower has also requested that Bank amend the Credit Agreement to 

extend the maturity date of the Line of Credit and make certain other revisions to the Credit Agreement as more fully set forth herein.

G.    In response to Borrower’s request, and in reliance upon Borrower’s representations made to Bank in support thereof and the other terms and conditions of this Agreement, Bank is willing to so amend certain provisions of the Credit Agreement and forbear during the Forbearance Period (as herein below defined) from the further exercise of Bank’s rights and remedies under the Loan Documents, upon and subject to the terms and conditions, and only for the purposes set forth herein, all as more particularly set forth and described in this Agreement.  The “Forbearance Period” as used herein shall refer to that period beginning on the date of this Agreement and terminating on the earlier of (i) August 31, 2014, and (ii) the occurrence of any default (other than the Existing Defaults).

AGREEMENT

NOW, THEREFORE, Bank and Borrower hereby agree as follows:

1.    Adoption of Recitals.  The recitals set forth above are adopted as a part of the agreement of the parties, and the facts set forth therein are acknowledged and agreed to be true, accurate and complete.

2.    Conditions Precedent.  The following are conditions precedent to Bank’s obligations under this Agreement, each of which must have been (and remain) satisfied or waived (as determined by Bank in its sole discretion) in order for this agreement to become effective. 

(a)    Approval of Bank Counsel.  All legal matters incidental to the forbearance by Bank shall be satisfactory to Bank’s counsel.

(b)    Documentation.  Bank shall have received, in form and substance satisfactory to Bank, duly executed counterparts of each of the following:

(i)    This Agreement; 
(ii)    The Fourth Amended and Restated Revolving Line of Credit Note; and
(iii)    Corporate Resolutions.

(c)    Representations and Warranties.  The representations and warranties contained herein are true and correct.

3.    Representations and Warranties.  Borrower hereby represents and warrants that: (i) other than the Existing Defaults, no default, event of default, breach or failure of condition has occurred or exists, or would exist with notice or lapse of time, or both, under any of the Loan Documents; (ii) the parties and signatories hereto have the authority to execute this Agreement; (iii) all representations and warranties of Borrower in this Agreement and the other Loan Documents including those contained in the Recitals to this Agreement continue to be true and correct as of the time of execution of this Agreement and shall survive the execution of this Agreement; and (iv) Bank’s liens and security interests with respect to the Collateral are of the priority required under the Loan Documents and are valid and enforceable in accordance with their terms.  

4.    Forbearance.  So long as no other breach, default or event of default shall occur under any of the Loan Documents, and otherwise subject to and upon all the terms and conditions set forth herein, Bank agrees that during the Forbearance Period, Bank shall refrain from exercising its default rights and remedies in connection with the Existing Defaults.   Notwithstanding the preceding grant of forbearance, Borrower understands, acknowledges and agrees that: Bank has not waived the Existing Defaults; the Loan is not hereby reinstated or extended and will remain in default throughout the Forbearance Period; and the Forbearance Period will expire automatically and without notice immediately upon the occurrence of any breach, default or Event of Default under this Agreement or any of the other Loan Documents, including without limitation, any such default relating to a further breach of the Existing Defaults.  Borrower understands that Bank has made no commitment and is under no obligation whatsoever to grant any additional extensions of time at the end of the Forbearance Period.  As a result of the Existing Defaults, Borrower understands and agrees that bank is not obligated to make advances or otherwise extend credit pursuant to the Credit Agreement or the Loan Documents until such time as Bank in its sole discretion decides that any further advances shall be made. 

5.    Amendments.

(a)Section 1.1(a) of the Credit Agreement hereby is amended and restated in its entirety as follows:
    
“(a)    Line of Credit.  Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including August 31, 2014, not to exceed at any time the aggregate principal amount of Fifteen Million Dollars ($15,000,000) (“Line of Credit”), the proceeds of which shall be used to finance Borrower’s working capital requirements and general corporate purposes.  Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of even date herewith as amended, restated, modified or supplemented from time to time (“Line of Credit Note”), all terms of which are incorporated herein by this reference.”

6.    Other Provisions.    

(a)    During the Forbearance Period, Borrower shall maintain domestic unrestricted cash and cash equivalents on deposit with Bank and/or subject to control agreements in favor of Bank in an amount equal to or greater than the outstanding advances under the Line of Credit (including the Letters of Credit Sublimit and Credit Card Sublimit).

(b)    During the Forbearance Period, the aggregate principal amount of advances outstanding under the Line of Credit (excluding the Letters of Credit Sublimit and Credit Card Sublimit) shall not exceed Three Million Dollars ($3,000,000).

(c)    During the Forbearance Period, Borrower agrees to provide Bank by 3 pm Pacific Standard Time on each Friday a domestic cash forecast in form and substance satisfactory to Bank.

(d)    Borrower agrees and acknowledges that notwithstanding anything to contrary contained in the Loan Agreement or the other Loan Documents, Bank shall not be obligated to make any advances or otherwise extend credit to Borrower pursuant to the Credit Agreement or the other Loan Documents.

7.    Events of Default.  The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:
(a)    Borrower shall fail to pay any principal, interest, fees or other charges when due under this Agreement. 
(b)     Borrower shall fail to perform any covenant or satisfy any condition under this Agreement. 
(c)    Any of the representations and warranties contained herein shall prove to have been untrue either when made or when reaffirmed herein.
(d)    Except as expressly modified herein, any Event of Default shall occur under any of the Loan Documents, other than the Existing Defaults.
(e)    Any further default, failure or violation of the kind described in the Recitals which occurs after the date of this Agreement shall be considered an Event of Default under this Agreement
8.    Remedies.      Upon the occurrence of an Event of Default, the Forbearance Period shall expire automatically, immediately, and without notice, and Bank shall have all rights and remedies available to it under the Loan Documents or otherwise at law.  
9.    Default Interest.  From and after the date of any Event of Default under this Agreement, the outstanding principal balance of the Line of Credit Note and the principal balance of the Equipment Term Commitment Note, shall bear interest until paid in full at the Default Rate set forth in the their respective agreements. 

10.    Counterparts.  This Agreement may be executed in any number of counterparts, each of which when executed and delivered to Bank will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument.

11.    Non-Impairment.  Except as expressly provided herein, nothing in this Agreement shall alter or affect any provision, condition or covenant contained in the Line of Credit Note, the Equipment Term Commitment Note or other Loan Documents, or affect or impair any rights, powers, or remedies thereunder, it being the intent of the parties hereto that the provisions of the Line of Credit Note, Equipment Term Commitment Note and the other Loan Documents shall continue in full force and effect except as expressly modified hereby.

12.    Release.  Borrower hereby absolutely and unconditionally releases and forever discharges Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands, debts, liabilities, obligations, promises, acts agreements, costs and expenses, or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort under any state or federal law or otherwise, which Borrower has had or now has against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Agreement, whether such claims, demands and causes of action are matured or unmatured, known or unknown, suspected or unsuspected, absolute or contingent (collectively, the “Released Claims”).  Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.  Borrower hereby further acknowledges and agrees that as of the date hereof they have no existing defenses to the enforcement of any of the Loan Documents and to the extent that any exist as of the date hereof, each of them are hereby absolutely and forever waived. 

By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever.  Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release.  Borrower acknowledges that the release contained herein constitutes a material inducement to Bank to enter into this Agreement, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

13.    Choice of Law.  This Agreement and the other Loan Documents shall be governed by and interpreted in accordance with the laws of the State of California, except if preempted by Federal law.  

14.    Arbitration. 

(a)    The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) this Agreement, any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b)    Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the 

AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least One Million Dollars ($1,000,000.00) exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”).  If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c)    The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d)    Any arbitration proceeding in which the amount in controversy is Five Million Dollars ($5,000,000.00) or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than Five Million Dollars ($5,000,000.00).  Any dispute in which the amount in controversy exceeds Five Million Dollars ($5,000,000.00) shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years’ experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e)    In any arbitration proceeding, discovery will be permitted in accordance with the Rules.  All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than twenty (20) days before the hearing date.  Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

(f)    No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity. 

(g)    The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h)    Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable.  If any 

such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638.  A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures.  Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

(i)    To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within one hundred eighty (180) days of the filing of the dispute with the AAA.  No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation.  If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control.  This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

(j)    Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction.  Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

15.    Integration; Interpretation.  The Loan Documents, including this Agreement, contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein, and supersede all prior negotiations.  The Loan Documents shall not be modified except by written instrument executed by all parties.  Any reference to the Loan Documents in any of the Loan Documents includes any amendments, renewals or extensions approved by Bank in writing. 

[Balance of Page Intentionally Left Blank]

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

	
		
	“BANK”

WELLS FARGO BANK, NATIONAL ASSOCIATION
	“BORROWER”

MAXWELL TECHNOLOGIES, INC.

	By:               /s/ Dennis Kim                           
Name:          Dennis Kim                                
Title:            V.P., Team Leader    _                 
	By:         /s/ Kevin Royal                                       
Name:     Kevin Royal                                       
Title:          Sr. V.P. and Chief Financial Officer   

[Signature Page to Forbearance and Fifth Amendment to Credit Agreement]MXWL EX 10.33

Exhibit 10.33

FOURTH AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE
	
			
	$15,000,000.00
	 
	San Diego, California

	 
	 
	June 30, 2014

FOR VALUE RECEIVED, the undersigned MAXWELL TECHNOLOGIES, INC. (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 10421 Wateridge Court, Suite 150, San Diego, CA 92121, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Fifteen Million Dollars ($15,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.

DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(a)“Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.
(b)“Fixed Rate Term” means a period commencing on a Business Day and continuing for a period of thirty (30) days, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Million Dollars ($1,000,000); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day
(c)“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
	
			
	LIBOR =
	Base LIBOR
	 

	 
	100% - LIBOR Reserve Percentage
	 

(i)“Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of thirty (30) days and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.
(ii)“LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during a one (1) month period.
(d)“Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate.

INTEREST:
(a)Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a three hundred sixty (360) day year, actual days elapsed) either (i) at a floating rate per annum equal to the Prime Rate in effect from time to time or (ii) at a fixed rate per annum determined by Bank to be two and one quarter of one percent (2.25%) above LIBOR in effect on the first day of the Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the interest rate shall become effective each Business Day that the Bank determines that the Prime Rate has changed.  Bank is hereby authorized to note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
(b)Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR for a Fixed Rate Term, it may be continued by Borrower at the end of the Fixed Rate Term so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may at any time convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term.  At such time as Borrower requests an advance hereunder or wishes to select an interest rate determined in relation to the Prime Rate or a Fixed Rate Term for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower and (ii) the principal amount subject thereto.  Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection for a Fixed Rate Term, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank (i) prior to 10:00 a.m. Pacific time, on the first day of the Fixed Rate Term, or (ii) at a later time during any Business Day if Bank, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.
(c)Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
(d)Payment of Interest.  Interest accrued on this Note shall be payable on the last day of each month, commencing December 31, 2011, in the case of loans accruing interest at Prime Rate, and on the last day of each Fixed Rate Term for loans accruing interest for a Fixed Rate Term.
(e)Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank’s option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a three hundred sixty (360) day year, actual days elapsed) equal to five percent (5%) above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a)Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note, the Credit Agreement and any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be 

endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on August 31, 2014 or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise.
(b)Advances.  Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Borrower’s chief executive officer or chief financial officer, or their designees, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
(c)Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR.
PREPAYMENT:

(a)    Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.

(b)    LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR for a fixed rate at any time and in the minimum amount of One Million Dollars ($1,000,000); provided however, that if the outstanding principal balance of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee, calculated as follows for each such Fixed Rate Term:

		
	(i)
	Determine the amount of interest which would have accrued on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term.

		
	(ii)
	Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.

		
	(iii)
	If the result obtained in (ii) for any Fixed Rate Term is greater than zero, discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum seven and three-quarters of one percent (7.75%) above the Prime Rate in effect from time to time (computed on the basis of a three hundred sixty (360) day year, actual days elapsed).
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of the date hereof, as amended, restated, modified or supplemented from time to time (the “Credit Agreement”).  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note.

MISCELLANEOUS:
(a)Remedies.  Upon the occurrence and during the continuance of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
(b)Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
(c)Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of California.

[Balance of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
	
	
	MAXWELL TECHNOLOGIES, INC.

	 

	 

	By:     /s/ Kevin Royal                                                

	 

	Name:     Kevin Royal                                                

	 

	Title:   Sr. V.P. and Chief Financial Officer

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