Document:

Exhibit 10.3 to IntriCon Corporation Form 10-Q for quarter ended September 30, 2009

Exhibit 10.3 

TERM NOTE

	
  

 	
  

 
	
 $3,500,000

 	
 Minneapolis, Minnesota

 August 13, 2009 

 

          FOR VALUE
RECEIVED, the undersigned, INTRICON CORPORATION, a Pennsylvania corporation,
INTRICON, INC. (formerly known as Resistance Technology, Inc.), a Minnesota
corporation, RTI ELECTRONICS, INC., a Delaware corporation, INTRICON TIBBETTS
CORPORATION (formerly known as TI Acquisition Corporation), a Maine
corporation, and JON BARRON, INC. (d/b/a Datrix), a California corporation
(each a “Borrower” and collectively, the “Borrowers”), hereby JOINTLY AND
SEVERALLY promise to pay to the order of THE PRIVATEBANK AND TRUST COMPANY, a
an Illinois state banking corporation (the “Bank”), the principal sum of THREE MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($3,500,000), payable in periodic
installments on the dates and in the amounts set forth in Loan Agreement (as
hereinafter defined), with one final balloon payment on the Term Loan Maturity
Date. The actual amount due and owing from time to time hereunder shall be
evidenced by Bank’s records of receipts and disbursements with respect to the
Term Loan, which shall, absent manifest error, be conclusive evidence of such
amount.  

          Each
Borrower further promises to pay interest on the aggregate unpaid principal
amount hereof at the rates provided in the Loan Agreement from the date hereof
until payment in full hereof. Accrued interest shall be payable on the dates
specified in the Loan Agreement. 

          All
payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
Bank’s office at 50 South 6th Street, Suite 1415, Minneapolis, MN 55402, or at
such other place as may be designated by the Bank to the Borrowers in writing. 

          This Note
is the Term Note referred to in, and evidences indebtedness incurred under, a
Loan and Security Agreement dated as of August 13, 2009 (herein, as it may be
amended, modified or supplemented from time to time, called the “Loan
Agreement”), among the Borrowers and the Bank, to which Loan Agreement
reference is made for a statement of the terms and provisions thereof,
including those under which the Borrowers are permitted and required to make
prepayments and repayments of principal of such indebtedness and under which
such indebtedness may be declared to be immediately due and payable.  

          All parties
hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note. 

          This Note
is made under and governed by the internal laws of the State of Minnesota. 

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

          IN WITNESS
WHEREOF, the undersigned have caused this Note to be executed as of the date
first set forth above. 

	
  

 	
  

 	
  

 	
  

 
	
 BORROWERS:

 	
 INTRICON
 CORPORATION

 
	
  

 	
 a
 Pennsylvania corporation

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott
 Longval

 	
  

 
	
  

 	
 Name:   Scott
 Longval

 	
  

 
	
  

 	
 Title:     Chief
 Financial Officer

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 INTRICON,
 INC. (formerly known as Resistance

 
	
  

 	
 Technology,
 Inc.), a Minnesota corporation

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott
 Longval

 	
  

 
	
  

 	
 Name:   Scott
 Longval

 	
  

 
	
  

 	
 Title:     Chief
 Financial Officer

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 RTI
 ELECTRONICS, INC.

 
	
  

 	
 a Delaware
 corporation

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott
 Longval

 	
  

 
	
  

 	
 Name:   Scott
 Longval

 	
  

 
	
  

 	
 Title:     Chief
 Financial Officer

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 INTRICON
 TIBBETTS CORPORATION

 
	
  

 	
 (formerly
 known as TI Acquisition corporation),

 
	
  

 	
 a Maine
 corporation

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott
 Longval

 	
  

 
	
  

 	
 Name:   Scott
 Longval

 	
  

 
	
  

 	
 Title:     Chief
 Financial Officer

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 JON BARRON,
 INC. (d/b/a Datrix),

 
	
  

 	
 a California
 corporation

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott
 Longval

 	
  

 
	
  

 	
 Name:   Scott
 Longval

 	
  

 
	
  

 	
 Title:     Chief
 Financial Officer

 	
  

 

SIGNATURE PAGE TO TERM NOTEExhibit 10.4 to IntriCon Corporation Form 10-Q for quarter ended September 30, 2009

Exhibit 10.4 

EXECUTION VERSION

ALL OF THE INDEBTEDNESS EVIDENCED HEREBY OR ARISING HEREUNDER
IS JUNIOR AND SUBORDINATE (IN RIGHT OF PAYMENT, COLLATERAL SECURITY AND
ENFORCEMENT) TO THE INDEBTEDNESS, OWED BY THE MAKER OR ANY OTHER OBLIGOR, OR
ANY SUCCESSOR THERETO, TO THE PRIVATE BANK AND TRUST COMPANY, TO THE EXTENT AND
PURSUANT TO THE TERMS OF A CERTAIN SUBORDINATION AGREEMENT DATED AS OF AUGUST
13, 2009 (OR ANY SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH
AGREEMENT). 

SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE

	
  

 	
  

 
	
 $1,050,000.00

 	
 August
 13, 2009 

 

          FOR
VALUE RECEIVED, IntriCon Corporation (“Maker”), a Pennsylvania corporation,
promises to pay to Jon V. Barron (“Payee”), an individual resident in the State
of California, in lawful money of the United States of America, the principal
sum of One Million, Fifty Thousand Dollars ($1,050,000.00), together with
interest in arrears on the unpaid principal balance at an annual rate equal to
6%, in the manner provided below; provided, however, at the Payee’s option upon
the occurrence of any Event of Default (as hereinafter defined) and during the
continuance thereof, the principal outstanding under this Note shall bear
interest at an annual rate equal to 10%. Interest shall be calculated on the
basis of a year of 365 or 366 days, as applicable, and charged for the actual
number of days elapsed. 

          This
Subordinated Non-Negotiable Promissory Note (“Note”) has been executed and
delivered pursuant to and in accordance with the terms and conditions of the
Stock Purchase Agreement, dated the date hereof by and between Maker and Payee
(the “Agreement”), and is subject to the terms and conditions of the Agreement,
which are, by this reference, incorporated herein and made a part hereof.
Capitalized terms used in this Note without definition shall have the
respective meanings set forth in the Agreement. In the event of a conflict or
inconsistency between the provisions of this Note and the provisions of the
Agreement, the provisions of the Agreement will prevail. This Note is unsecured.

	
  

 	
  

 
	
 1.

 	
 PAYMENTS 

 
	
  

 	
  

 
	
  

 	
 1.1          PRINCIPAL AND INTEREST 

 
	
  

 	
  

 
	
  

 	
 The principal amount of this Note shall be due and payable in three installments payable as follows: 

 

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Payment Date

 	
  

 	
 Principal Amount

 	
  

 
	
 August 13, 2010

 	
  

 	
 $

 	
 350,000

 	
  

 
	
 August 13, 2011

 	
  

 	
 $

 	
 350,000

 	
  

 
	
 August 13, 2012

 	
  

 	
 $

 	
 350,000

 	
  

 

All accrued interest on the
unpaid principal balance of this Note, through each payment date set forth
above, shall also be due and payable with each payment of principal as set
forth above. Notwithstanding anything to the contrary, all outstanding
principal and accrued interest due hereunder may become immediately due and
payable upon the occurrence of an Event of Default (as defined in Section 3
below), and shall automatically become immediately due and payable upon: (i) a
sale of the assets of the Maker (including the stock or assets of subsidiaries
of the Company) to which are attributable 90% or more of the consolidated sales
volume of the Company or (ii) the acquisition by any “person” (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”), including any affiliate or associate as defined in Rule 12b-2
under the Exchange Act of such person, or any group of persons acting in
concert (excluding the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation or
other entity owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportion as their ownership of capital stock of the
Company) of “beneficial ownership” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 50% or more of the combined voting power of
the Company’s then outstanding voting securities. 

          1.2          MANNER
OF PAYMENT 

          All
payments of principal and interest on this Note shall be made by wire transfer
of immediately available federal funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day, such payment shall be due on the next succeeding
Business Day, and such extension of time shall be taken into account in
calculating the amount of interest payable under this Note. “Business Day”
means any day other than a Saturday, Sunday or legal holiday in the
Commonwealth of Pennsylvania. 

1.3      PREPAYMENT

          Maker
may, without premium or penalty, at any time and from time to time, prepay all
or any portion of the outstanding principal balance due under this Note,
provided that each such prepayment is accompanied by accrued interest on the
amount of principal prepaid calculated to the date of such prepayment. Any
partial prepayments shall be applied to installments of principal in inverse
order of their maturity. 

1.4      RIGHT
OF SET-OFF 

          Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for Losses
under the Agreement to the extent provided in Section 11.6 of the Agreement and
such withholding or set-off shall not be considered an Event of Default
hereunder. 

2.       SUBORDINATION.

                    Notwithstanding
anything to the contrary herein, but subject to the Subordination Agreement
referenced in the legend set forth at the top of the first page of this Note, all present 

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and future indebtedness,
obligations and liabilities of Maker under this Note shall be subject and
subordinate in right and priority of payment to all present and future
indebtedness, obligations and liabilities of Maker to Maker’s current lender in
respect of borrowed money (“Current Senior Lender”) under and pursuant to the
notes, documents, agreements and instruments executed and/or delivered between
Maker and Current Senior Lender and such notes, documents, agreements and
instruments, as any of them may have been and may hereafter be from time to
time amended, collectively, the “Current Senior Credit Documents”, and/or to
any lender or lenders who may hereafter provide loans and/or credit facilities
to refinance or replace the credit facilities provided to Maker by Current
Senior Lender under the Current Senior Credit Documents (such present and
future indebtedness, obligations and liabilities owed to Current Senior Lender
under the Current Senior Credit Documents and owed to any such replacement or
refinancing lender or lenders in connection with such replacement or
refinancing loans and/or credit facilities, collectively, the “Senior
Indebtedness”);provided that notwithstanding such subordination, but subject
to the terms of any applicable subordination or-inter-creditor agreement,
Holder may receive and retain payments hereunder (including all regularly
scheduled payments of principal and/or interest) for so long as Maker is not in
default, or by such payment would not become in default, under the terms of the
Current Senior Credit Documents, or the credit agreements, documents, agreement
or instruments representing any such replacement or refinancing loans or credit
facilities (collectively, as any of them may have been and may hereafter be
from time to time amended, the “Senior Credit Documents”), and as a result of
such default, Maker would be prohibited under the Senior Credit Documents from
making such payment; provided, however, that, subject to the terms of any
applicable subordination or-inter-creditor agreement, Maker shall make any such
payment promptly after any such default is cured. By acceptance of this Note,
the Holder covenants and agrees, for itself and on behalf of its successors and
permitted assigns, to execute and deliver from time to time any subordination
or inter-creditor agreement reasonably required by any Senior Lender to further
evidence the foregoing subordination. 

3.         DEFAULTS

          3.1          EVENTS
OF DEFAULT 

          The
occurrence of any one or more of the following events with respect to Maker
shall constitute an event of default hereunder (“Event of Default”): 

          (a)          If
Maker shall fail to pay when due any payment of principal or interest on this
Note and such failure continues for ten (10) days after the due date therefor. 

          (b)          If,
pursuant to or within the meaning of the United States Bankruptcy Code or any
other federal or state law relating to insolvency or relief of debtors (a
“Bankruptcy Law”), Maker shall (i) commence a voluntary case or proceeding;
(ii) consent to the entry of an order for relief against it in an involuntary
case; (iii) consent to the appointment of a trustee, receiver, assignee,
liquidator or similar official; (iv) make an assignment for the benefit of its
creditors; or (v) admit in writing its inability to pay its debts as they
become due. 

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          (c)          If
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (i) is for relief against Maker in an involuntary case, (ii) appoints
a trustee, receiver, assignee, liquidator or similar official for Maker or
substantially all of Maker’s properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within 90 days. 

          (d)          Maker
shall: (i) liquidate, wind up or dissolve (or suffer any liquidation, wind-up
or dissolution), (ii) suspend its operations for a period in excess of 90 days
other than in the ordinary course of business or (iii) take any corporate
action to authorize any of the actions or events set in this paragraph (d). 

          (e)          The
occurrence and continuation of an “event of default”, however termed, under any
Senior Credit Documents, which results in the acceleration of the indebtedness
thereunder. 

          3.2          REMEDIES

          Upon
the occurrence of an Event of Default hereunder (unless such Event of Default
have been cured or waived by Payee), Payee may, at its option, (i) by written
notice to Maker, declare the entire unpaid principal balance of this Note,
together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and remedies
available to it under applicable law, including, without limitation, the right
to collect from Maker all sums due under this Note; provided, however, that if
an Event of Default described in paragraph (b) or (c) of Section 3.1 above
shall occur, the acceleration of the unpaid principal balance of this Note and
accrued interest that would otherwise occur only upon giving of notice by Payee
to Maker as specified above shall occur automatically, without the giving of
any such notice. 

4.         ADDITIONAL TERMS

          4.1          NOTICES

          Any
notice required or permitted to be given hereunder shall be given in accordance
with Section 12.3 of the Agreement. 

          4.2          SEVERABILITY

          If
any provision in this Note is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable. 

          4.3          CONTROLLING
LAW 

          THIS
NOTE IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MINNESOTA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED SOLELY THEREIN, WITHOUT 

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GIVING EFFECT TO PRINCIPLES
OF CONFLICTS OF LAW. 

          4.4          JURISDICTION
AND PROCESS 

          In
any action between or among any of the parties, whether arising out of this
Note, the Agreement of any of the agreements contemplated thereby or otherwise,
(a) (i) with respect to any action commenced by Maker, each of the parties
irrevocably consents to the exclusive jurisdiction and venue of the federal and
state courts located in the State of California and (ii) with respect to any
action commenced by Holder, each of the parties irrevocably consents to the
exclusive jurisdiction and venue of the federal and state courts located in the
State of Minnesota, (b) if any such action is properly commenced in a state
court, then, subject to applicable Law, no party shall object to the removal of
such action to any federal court located in such state, (c) EACH OF THE PARTIES IRREVOCABLY WAIVES THE RIGHT TO
TRIAL BY JURY, (d) each of the parties irrevocably consents to
service of process by first class certified mail, return receipt requested,
postage prepaid, to the address at which such party is to receive notice in
accordance with Section 12.3 of the Agreement, and (e) the prevailing parties
shall be entitled to recover their reasonable attorneys’ fees, costs and
disbursements from the other parties (in addition to any other relief to which
the prevailing parties may be entitled). 

          4.5          PARTIES
IN INTEREST 

          This
Note shall bind Maker and its successors and assigns. This Note shall not be
assigned or transferred by Maker or Payee without the express prior written
consent of the other party, except by will or, in default thereof, by operation
of law. 

          4.6          AMENDMENT;
WAIVER 

          Any
term of this Note may be amended and the observance of any term of this Note
may be waived only with the written consent of Payee. Any such amendment or
waiver shall be effective only for the specific instance and for the specific
purpose for which given. 

          4.7          SECTION
HEADINGS, CONSTRUCTION 

          The
headings of Sections in this Note are provided for convenience only and will
not affect its construction or interpretation. All references to “Section” or
“Sections” refer to the corresponding Section or Sections of this Note unless
otherwise specified. 

          All
words used in this Note will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the words “hereof”
and “hereunder” and similar references refer to this Note in its entirety and
not to any specific section or subsection hereof. 

[balance of page intentionally left blank] 

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          IN
WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above. 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 INTRICON CORPORATION

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Mark Gorder

 	
  

 
	
  

 	
 Name: 

 	
 Mark Gorder

 	
  

 
	
  

 	
 Title:

 	
 President and Chief
 Executive Officer

 	
  

 

Signature Page to Note

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