Document:

Exhibit 10.1

 

LIZ CLAIBORNE, INC. 
 EXECUTIVE SEVERANCE AGREEMENT

 

This Executive Severance Agreement (this “Agreement”), effective as of this      day of       2012 (the “Effective Date”), is by and between Liz Claiborne, Inc. (“Liz”), a Delaware corporation, and      (the “Executive”).

 

WHEREAS, the Compensation Committee of the Board of Directors of Liz (the “Compensation Committee”) has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Executive to his or her assigned duties in the face of possible distraction of the Executive by virtue of the personal uncertainties and risks created by the possibility of termination of, or adverse change to, his or her employment;

 

WHEREAS, the Compensation Committee believes it is in Liz’s best interests to ensure that the Executive will refrain from certain competitive activities with Liz and its affiliates as described herein; and

 

NOW, THEREFORE, to assure Liz it will have the continued undivided attention and services of the Executive and the availability of his or her advice and counsel, and to induce the Executive to remain in the employ of Liz hereinafter, for the benefit of Liz, and for other good and valuable consideration, Liz and the Executive agree as follows:

 

1.                                      Term of Agreement.

 

(a)                                  The term of this Agreement shall commence immediately upon the Effective Date and end on December 31, 2013 (as extended pursuant to the immediately following sentence, if applicable, the “Term”).  The Term shall be automatically extended for additional one-year periods, unless Liz delivers notice to the Executive on or prior to October 31st of the year in which the expiration of the Term occurs of its intent not to extend the Term.  The “Employment Period” means the earlier of the expiration of the Term or the Executive’s termination of employment.

 

(b)                                 If a Change in Control occurs at any time during the period in which this Agreement is effective, then, notwithstanding any provision hereof to the contrary, this Agreement shall continue in effect for (i) the remainder of the month in which the Change in Control occurred and (ii) a term of twelve (12) months beyond the month in which such Change in Control occurred; provided that if any obligations of Liz hereunder shall not have been fully and finally discharged at the end of such twelve (12) month period, this Agreement shall remain in effect until such obligations shall have been finally discharged in full.

 

2.                                      Termination.

 

(a)                                  Cause.  The Executive’s employment may terminate immediately, with or without Cause, at the election of Liz and upon notice from Liz to the Executive.  As used herein, the term “Cause” means:

 

(i)                                     the Executive’s willful and intentional repeated failure or refusal, continuing after notice that specifically identifies the breach(es) complained of, to perform

 

 

substantially his or her material duties, responsibilities and obligations (other than a failure resulting from the Executive’s incapacity due to physical or mental illness or other reasons beyond the control of the Executive), and which failure or refusal results in demonstrable direct and material injury to Liz;

 

(ii)                                  any willful or intentional act or failure to act involving fraud, misrepresentation, theft, embezzlement, dishonesty or moral turpitude (collectively, “Fraud”) which results in demonstrable direct and material injury to Liz;

 

(iii)                               the Executive’s conviction of (or a plea of nolo  contendere to) an offense which is a felony in the jurisdiction involved or which is a misdemeanor in the jurisdiction involved but which involves Fraud; or

 

(iv)                              the Executive’s material breach of a written policy of Liz or the rules of any governmental or regulatory body applicable to Liz.

 

For purposes of this Section 2, no act, or failure to act, on the Executive’s part shall be deemed “willful” or “intentional” unless done, or omitted to be done, by the Executive without reasonable belief that the Executive’s action or omission was in the best interests of Liz.

 

(b)         Cause Determination.  The Executive’s termination for Cause will be determined by the Compensation Committee based upon the recommendation of the Chief Executive Officer and Chief Legal Officer of Liz.

 

(c)          Death; Disability.  The Executive’s employment with Liz terminates upon the Executive’s death or, at Liz’s option, by written notice to the Executive (or the Executive’s legal representative) upon the Executive’s Disability.  As used herein the term “Disability” means any physical or mental condition that would qualify the Executive for a disability benefit under the long-term disability plan maintained by Liz, or, if there is no such plan, a physical or mental condition that prevents the Executive from performing the essential functions of the Executive’s position (with or without reasonable accommodation) for a period of six (6) consecutive months.  A determination of Disability will be made by a physician satisfactory to both the Executive and the Liz; provided  that, if the Executive and Liz cannot agree as to a physician, then each will select a physician and these two together will select a third physician, whose determination as to Disability will be binding on the Executive and Liz.  The Executive, the Executive’s legal representative or any adult member of the Executive’s immediate family shall have the right to present to Liz and such physician such information and arguments on the Executive’s behalf as the Executive or they deem appropriate, including the opinion of the Executive’s personal physician.

 

(d)                                 Performance-Based Termination.  Liz may terminate the Executive’s employment based on performance (“Performance-Based Termination”).  To constitute a Performance-Based Termination, the Executive must receive a written warning setting forth the performance deficiency and be afforded the opportunity to cure performance for a period of 60 days following the date of the written warning.  Following the 60-day cure period, if Liz determines that the Executive’s performance has not improved, Liz shall notify the Executive in writing of the Performance-Based Termination and the Executive shall have the opportunity to

 

 

appeal the Performance-Based Termination to the Board of Directors of Liz within two (2) business days following the date of Liz’s notice of termination.  Any determination by the Board shall be final and binding.

 

(e)                                  Change in Control.  For purposes of this Agreement, a “Change in Control” of Liz shall be deemed to have occurred upon the happening of any of the following events: (i) any “person,” including a “group,” as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, becomes the beneficial owner, directly or indirectly, whether by purchase or acquisition or agreement to act in concert or otherwise, of 35% or more of the outstanding shares of common stock of Liz to an unaffiliated third party; (ii) the sale of all or substantially all of the assets of Liz; or (iii) the election or appointment during any 12-month period of a majority of the members of the Board of Directors of Liz whose election or appointment is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.

 

3.                                      Severance.

 

(a)                                  Termination For Cause; Voluntary Termination Without Good Reason.  In the event that the Executive’s employment is terminated due to (i) a termination by Liz for Cause or (ii) the Executive’s resignation without Good Reason (as defined herein), Liz shall pay to the Executive an amount equal to the Executive’s accrued but unpaid base salary through the date of termination, payable in accordance with Liz’s ordinary payroll practices (“Accrued Salary”).

 

(b)                                 Termination Due to Death or Disability.  In the event that the Executive’s employment is terminated due to the Executive’s death or Disability:

 

(i)                                     Liz shall pay to the Executive an amount equal to the Executive’s Accrued Salary; and

 

(ii)                                  the Executive shall be eligible for a pro-rated bonus (“Pro-Rated Bonus”) in respect of Liz’s fiscal year during which the termination occurs based on (x) Liz’s actual performance as determined pursuant to the provisions of Liz’s relevant bonus plan and (y) a fraction, the numerator of which is the number of whole months in the fiscal year prior to the date on which the Executive’s employment terminates and the denominator of which is twelve (12), payable at the time bonuses would otherwise be paid pursuant to the applicable bonus plan (which shall be within the “short-term deferral” period set forth in Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (the “Code”)).

 

(c)                                  Performance-Based Termination. If a Performance-Based Termination occurs then, subject to Section 3(g):

 

(i)                                     Liz shall pay to the Executive an amount equal to the Executive’s Accrued Salary;

 

(ii)                                  Liz shall provide Benefits Continuation for the Executive and the Executive’s family, as provided in Section 3(e) below;

 

 

(iii)                               the Executive shall be eligible for a Pro-Rated Bonus payable at the time bonuses would otherwise be paid pursuant to the applicable bonus plan (which shall be within the “short-term deferral” period set forth in Section 409A of the Code); and

 

(iv)                              Liz shall continue to pay to the Executive his or her base salary at the then-current rate for a period of 26 weeks, payable in accordance with Liz’s ordinary payroll practices, following the Performance-Based Termination (“Initial Continuation Period”), less an amount equal to the Executive’s portion of the premiums applicable to the Benefits Continuation for such period.  Following the Initial Continuation Period, the Executive shall receive up to an additional 26 weeks of base salary continuation, payable in accordance with Liz’s ordinary payroll practices, subject to the Executive’s failure to obtain Alternate Employment, provided he or she uses Reasonable Efforts to obtain Alternate Employment. “Alternate Employment” means (x) employment that provides the Executive with base salary at a rate not less than 75% of the Executive’s base salary rate at the time of termination or (y) a consulting arrangement that continues for five (5) consecutive weeks and exceeds 30 hours per week.  “Reasonable Efforts” means, among other things, that the Executive attends all counseling and/or training sessions recommended by the designated outplacement service group, maintains weekly contact with the outplacement service group and maintains discussions with the outplacement service group regarding all offers of alternate employment made to the Executive.

 

The payments and benefits set forth in Section 3(c)(ii) and 3(c)(iv) are contingent on the Executive’s execution, delivery and non-revocation of the Release as provided for in Section 3(g).  Payments pursuant to Section 3(c)(iv) shall commence on the 60th day following the Executive’s date of termination of employment and (B) within 15 business days following this payment commencement date, salary continuation payments relating to the first 60 days shall be paid in a lump sum.  Notwithstanding the foregoing, if, and only to the extent required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, the aggregate payments pursuant to Section 3(c)(iv) shall be reduced to the amount that is one dollar less than the maximum amount payable pursuant to a “separation pay plan” for separation pay due to involuntary separation from service as set forth in Section 409A of the Code and the regulations promulgated thereunder (the “Performance Severance Payment Limit”).  Liz shall, in its sole discretion, determine if the amounts payable pursuant to Section 3(c)(iv) are in excess of the Performance Severance Payment Limit.  In determining the aggregate payments pursuant to Section 3(c)(iv) subject to reduction, such amount shall be determined prior to giving effect to any deductions relating to the Executive’s portion of the premiums applicable to the Benefits Continuation.  The Executive shall have no rights to receive any payments in excess of the Performance Severance Payment Limit.

 

(d)                                 Termination Without Cause; Voluntary Termination for Good Reason; Termination in Connection with a Change in Control.  Subject to Section 3(g), in the event that the Executive’s employment is terminated (1) by Liz other than for Cause and other than upon the Executive’s death or Disability, or a Performance-Based Termination; (2) by the Executive for Good Reason; or (3) by Liz (other than for Cause and other than upon the Executive’s death, Disability or Performance-Based Termination) in connection with a Change in Control or by the Executive for Good Reason in connection with a Change in Control:

 

 

(i)                                     Liz shall pay to the Executive an amount equal to the Executive’s Accrued Salary;

 

(ii)                                  Liz shall provide Benefits Continuation for the Executive and the Executive’s family, as provided in Section 3(e) below;

 

(iii)                               Liz shall pay to the Executive an amount equal to two (2) times the Executive’s then current annual target bonus plus an amount equal to two (2) times the Executive’s then-current annual base salary, less an amount equal to the Executive’s portion of the premiums applicable to the Benefits Continuation for 26 weeks.  For the avoidance of doubt, no amount shall be paid pursuant to Section 3(d) in respect of the annual bonus for the current year.

 

Payments pursuant to Section 3(d)(iii) shall be made in a single lump sum on the 60th day following the Executive’s date of termination of employment, subject to the Executive’s execution, delivery and non-revocation of the Release as provided for in Section 3(g).  For the purposes of this Agreement, “Good Reason” shall mean the occurrence of one or more of the following events:  (1) The Executive experiences a material diminution in duties or responsibilities, without the Executive’s consent (provided that a change in reporting structure shall not be deemed a diminution in duties or responsibilities); (2) Liz moves its principal executive offices by more than 100 miles (provided  that such move increases the Executive’s commuting distance by more than 100 miles); (3) a material reduction in the Executive’s base salary; or (4) a material breach by Liz of any of its material obligations under any employment agreement between the Executive and Liz then in effect; provided,  however, that no event or condition shall constitute Good Reason unless (x) the Executive gives Liz a written notice of termination for Good Reason no fewer than 30 days prior to the date of termination and not more than 90 days after the initial existence of the condition giving rise to Good Reason, and (y) the grounds for termination (if susceptible to correction) are not corrected by Liz within 30 days of its receipt of such notice.

 

(e)                                  Benefits Continuation.  So long as the Executive shall not have breached the Executive’s obligations to Liz under Sections 4 and 5 hereof (and without limiting any other remedy available to Liz), Liz shall provide the Executive and the Executive’s family with coverage substantially identical to that provided to other senior executives of Liz in its medical, dental, vision, and the Executive life insurance programs (subject in the case of life insurance to insurability at standard rates) until the earlier of (i) 26 weeks following the date of the Executive’s termination or (ii) the date on which the Executive (or the Executive’s family in the case of the Executive’s death) becomes eligible to participate in another group welfare plan or program (“Benefits Continuation”).  Notwithstanding the forgoing, nothing in this Section 3(e) shall prohibit Liz from making any modification to its medical, dental, vision and Executive life insurance programs from time to time.  The Executive shall continue to pay the employee portion of the Benefits Continuation as in effect from time to time.  If this agreement to provide Benefits Continuation raises any compliance issues or impositions of penalties under any non-discrimination rules that have been issued or are issued in the future pursuant to the Patient Protection and Affordable Care Act (PPACA), the parties agree to modify this Agreement so that it complies with the terms of those non-discrimination rules without impairing the economic benefit to the Executive.

 

 

(f)                                    General.  In the event that the Executive’s employment with Liz is terminated for any reason, Liz’s payment of the amounts or benefits provided for in this Section 3 (together with reimbursement of the Executive’s reasonable and necessary out-of-pocket business expenses incurred through such date in accordance with Liz’s standard policy in effect at such time) shall constitute complete satisfaction of all obligations of Liz to the Executive pursuant to this Agreement.  Upon any termination of employment, the Executive shall cease to be an employee of Liz for all purposes and except as otherwise expressly set forth in this Section 3 or Section 9 of this Agreement, Liz shall have no obligation under this Agreement to provide the Executive with any employee benefits or perquisites.  In particular, except as set forth in Section 3(b)(ii) and 3(c)(iii), the Executive shall have no right to receive a bonus for the year in which the Executive’s employment is terminated for any reason.

 

(g)                                 Release Requirement.  Liz expressly conditions its provision of all payments and benefits due to the Executive pursuant to this Section 3 on receipt from the Executive of a full general release of all claims against Liz, its affiliates, and each of their respective officers, directors, insured’s and affiliates, in a form and manner determined by Liz in its sole discretion (“Release”), (which must be signed by the Executive within 21 or 45 days of receipt of the Release, as may be required by law) and such release becoming effective and irrevocable (provided Executive has not revoked the Release pursuant to and within the statutory revocation period, if required) in its entirety.

 

(h)                                 Consideration.  Payments made pursuant to Sections 3(c), 3(d) and 3(e) are made in consideration of the Executive’s signing a release pursuant to Section 3(g) and compliance with the covenants set forth in Sections 4 and 5.

 

(i)                                     Sole Remedy.  The Executive’s rights set out in this Agreement shall constitute the Executive’s sole and exclusive rights and remedies as a result of the Executive’s actual or constructive termination of employment other than rights to vested benefits under Liz’s tax qualified and non-qualified retirement plans or additional vesting of equity awards as provided for under the terms of those equity awards, or as otherwise required by applicable law, and the Executive hereby waives any such other claims against Liz as a result of the Executive’s termination of employment.

 

(j)                                     Compliance with Section 409A.  This Agreement is intended to satisfy the requirements of Section 409A of the Code with respect to amounts subject thereto and shall be interpreted and construed and shall be performed by the parties consistent with such intent, and Liz shall not make or provide any payment or benefits if such payment or provision of such benefits would, as a result, be subject to tax under Section 409A of the Code.  Payments and benefits provided under this Agreement are intended to be exempt from or qualify as an exception to Section 409A of the Code, for example by constituting either a “short-term deferral” or pay pursuant to a “separation pay plan,” in each case, in accordance with Section 409A of the Code and the regulations promulgated thereunder, and all provisions of the Agreement shall be construed and interpreted in a manner consistent with such intention and any ambiguities herein will be interpreted to give effect to such intention.  If, in the good faith judgment of Liz, any provision of this Agreement could cause the Executive to be subject to adverse or unintended tax consequences under Section 409A of the Code, such provision shall be modified by Liz in its sole discretion to maintain, to the maximum extent practicable, the original intent of the applicable provision

 

 

without violating the requirements of Section 409A of the Code.  Each payment made pursuant to this Agreement shall be deemed a separate payment for purposes of Section 409A of the Code.  Except as expressly provided otherwise herein, no reimbursement payable to the Executive pursuant to any provisions of this Agreement or pursuant to any plan or arrangement of Liz covered by this Agreement shall be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred, and no such reimbursement during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A of the Code.

 

(k)                                  Additional Tax Considerations.  In the event that (but for this Section 3(k)) any payment or benefit received or to be received by the Executive pursuant to this Agreement or any other plan or arrangement with Liz (each, a “Payment”) would constitute an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code, or would otherwise be subject to the excise tax imposed under Section 409 of the Code, or any similar federal or state law, Liz shall reduce the aggregate amount of such Payments such that the present value thereof (as determined under the Code and the applicable regulations) is equal to 2.99 times the Executive’s “base amount” as defined in Section 280G(b)(3) of the Code.  The determinations to be made with respect to this Section 3(k) shall be made by a certified public accounting firm designated by Liz.  Unless the Executive shall have given prior written notice to Liz to effectuate any such reduction if a reduction is required, any such notice consistent with the requirements of Section 409A of the Code to avoid the imputation of any tax, penalty or interest thereunder, Liz shall reduce or eliminate Payments by first reducing or eliminating any cash severance benefits (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any other remaining Payments.  The preceding provisions of this Section 3(k) shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive’s rights and entitlements to any benefits or compensation.

 

4.                                      Confidentiality.

 

(a)                                  Liz owns and has developed and compiled, and will own, develop and compile, certain proprietary techniques and confidential information which have great value to its business (referred to in this Agreement, collectively, as “Confidential Information”).  Confidential Information includes not only information disclosed by Liz and its affiliates, but also information developed or learned by the Executive during the course or as a result of employment hereunder, which information the Executive acknowledges is and shall be the sole and exclusive property of Liz.  Confidential Information includes all proprietary information that has or could have commercial value or other utility in the business in which Liz is engaged or contemplates engaging, and all proprietary information of which the unauthorized disclosure could be detrimental to the interests of Liz, whether or not such information is specifically labeled as Confidential Information by Liz.  By way of example and without limitation, Confidential Information includes any and all information developed, obtained or owned by Liz concerning trade secrets, techniques, know-how (including designs, plans, procedures, merchandising know-how, processes and research records), software, computer programs, innovations, discoveries, improvements, research, development, test results, reports, specifications, data, formats, marketing data and plans, business plans, strategies, forecasts, unpublished financial information, orders, agreements and other forms of documents, price and cost information,

 

 

merchandising opportunities, expansion plans, designs, store plans, budgets, projections, customer, supplier and subcontractor identities, characteristics and agreements, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally available to the public prior to its disclosure to the Executive; (ii) becomes generally known or generally available to the public subsequent to disclosure to the Executive through no wrongful act of any person; or (iii) which the Executive is required to disclose by applicable law, regulation, or legal process (provided  that, unless prohibited by law, the Executive provides Liz with prior notice of the contemplated disclosure and reasonably cooperates with Liz, at Liz’s expense in seeking a protective order or other appropriate protection of such information).

 

(b)           The Executive acknowledges and agrees that in the performance of the Executive’s duties hereunder Liz will from time to time disclose to the Executive and entrust the Executive with Confidential Information.  The Executive also acknowledges and agrees that the unauthorized disclosure of Confidential Information, among other things, may be detrimental to Liz’s interests, an invasion of privacy and an improper disclosure of trade secrets.  The Executive agrees that the Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any corporation, partnership, individual or other third party, other than in the course of the Executive’s assigned duties and for the benefit of Liz, any Confidential Information, either during the Employment Period or thereafter.

 

(c)           In the event the Executive’s employment with Liz ceases for any reason, the Executive will not remove from Liz’s ‘s premises without its prior written consent any records, files, drawings, documents, equipment, materials or writings received from, created for or belonging to Liz, including those which relate to or contain Confidential Information, or any copies thereof.  Upon request or when the Executive’s employment with Liz terminates, the Executive will immediately deliver the same to Liz.

 

(d)           During the Employment Period, the Executive will disclose to Liz all designs, inventions and business strategies or plans developed by the Executive during such period which relate directly or indirectly to the business of Liz, including without limitation any process, operation, product or improvement.  The Executive agrees that all of the foregoing are and will be the sole and exclusive property of Liz and that the Executive will at Liz’s request and cost do whatever is necessary to secure the rights thereto, by patent, copyright or otherwise, to Liz.

 

(e)           The Executive and Liz agree that the Executive shall not disclose to Liz, or use for Liz’s benefit, any information which may constitute trade secrets or confidential information of third parties, to the extent the Executive has any such secrets or information.

 

(f)            Executive agrees not to disclose any information regarding the facts leading up to or the existence or substance of this Agreement, except to Executive’s spouse, domestic or civil union partner, tax advisor, and/or an attorney with whom Executive chooses to consult regarding Executive’s consideration of this Agreement, or as otherwise required by law.

 

(g)           The provisions of this Section 4, unless otherwise noted, shall survive the termination of this Agreement and the expiration of the Employment Period.

 

 

5.             Restrictive Covenants.

 

(a)           The Executive acknowledges and agrees (i) that the services to be rendered by the Executive for Liz are of a special, unique, extraordinary and personal character; (ii) that the Executive has and will continue to develop a personal acquaintance and relationship with one or more of Liz’s customers, employees, suppliers and independent contractors, which may constitute Liz’s primary or only contact with such customers, employees, suppliers and independent contractors, and (iii) that the Executive will be uniquely identified by customers, employees, suppliers, independent contractors and retail consumers with Liz products. Consequently, the Executive agrees that it is fair, reasonable and necessary for the protection of the business, operations, assets and reputation of Liz and that the Executive makes the covenants contained in this Section 5.

 

(b)           The Executive agrees that, during the Employment Period and, for a period of 18 months thereafter (“Restricted Period”), the Executive shall not, directly or indirectly, own, manage, operate, join, control, participate in, invest in or otherwise be connected or associated with, in any manner, including as an officer, director, employee, partner, consultant, advisor, proprietor, trustee or investor, any Competing Business in the United States; provided however that nothing contained in this Section 5(b) shall prevent the Executive from owning less than 2% of the voting stock of a publicly held corporation for investment purposes.  For purposes of this Section 5(b), the term “Competing Business” shall mean any business entity that engages in a competing business with Liz, including, without limitation, any of the entities set forth on Exhibit A.

 

(c)           The Executive agrees that, during the Restricted Period, the Executive shall not, directly or indirectly:

 

(i)            persuade or seek to persuade any customer of Liz to cease to do business or to reduce the amount of business which any customer has customarily done or contemplates doing with Liz, whether or not the relationship between Liz and such customer was originally established in whole or in part through the Executive’s efforts;

 

(ii)           seek to employ or engage, or assist anyone else to seek to employ or engage, any person who at any time during the year preceding the termination of the Executive’s employment hereunder was in the employ of Liz or any of its affiliates, or was an independent contractor providing material manufacturing, marketing, sales, financial or management consulting services in connection with the business of Liz or any of its affiliates and with whom the Executive had regular contact; or

 

(iii)          interfere in any manner in the relationship of Liz or any of its affiliates with any of its suppliers or independent contractors, whether or not the relationship between Liz and the applicable affiliate and such supplier or independent contractor was originally established in whole or in part by the Executive’s efforts.

 

As used in this Section 5, the terms “customer” and “supplier” shall mean and include any individual, proprietorship, partnership, corporation, joint venture, trust or any other form of business entity which is then a customer or supplier, as the case may be, of Liz or which was such

 

 

a customer or supplier at any time during the one-year period immediately preceding the date of termination of employment.

 

(d)           The Executive agrees that, during the Restricted Period, the Executive will take no action which is intended, or would reasonably be expected, to harm Liz or its reputation or which would reasonably be expected to lead to unwanted or unfavorable publicity to Liz.

 

(e)           The Executive agrees not to publicly or privately make or publish any statement (oral or written) that would disparage, criticize or defame Liz or its affiliates or their executives or directors, and the Executive will do his or her best to ensure that the Executive’s family members, agents or representatives also do not publicly or privately make or publish any statement (oral or written) that would disparage, criticize or defame Liz or its affiliates or their executives or directors.

 

(f)            The provisions of this Section 5 shall survive the termination of this Agreement and the expiration of the Employment Period.

 

6.             Remedies

 

(a)           The Executive acknowledges and agrees that the remedy at law available to Liz for breach of any of the Executive’s obligations under this Agreement (including without limitation Sections 4 or 5) may be inadequate and that damages flowing from such breach may not be readily susceptible to measurement in monetary terms.  Accordingly, the Executive acknowledges, consents and agrees that in addition to any other rights or remedies that Liz may have at law or in equity or as may otherwise be set forth in this Agreement, if the Executive violates any of the provisions of this Agreement (including, without limitation Sections 4 or 5), Liz shall be entitled to a decree specifically enforcing such provisions, and shall be entitled to a temporary restraining order or a preliminary or permanent injunction, restraining the Executive from committing or continuing any such violation, without the necessity of proving actual damages, posting any bond or other security. Such injunctive relief in any court shall be available to Liz, in lieu of, or prior to or pending determination in, any arbitration proceeding pursuant to Section 9(d).

 

(b)           It is agreed that in the event of a breach of this Agreement (including, without limitation, Sections 4 or 5), the Executive shall repay to Liz the amount of any payments made pursuant to Section 3 other than the Accrued Salary.  This Section 6(b) is in addition to any damages or remedies to which the Executive is entitled to under law or equity, except that any damages award will be reduced by the amount the Executive repaid pursuant to this Section 6(b).

 

(c)           To the extent required under applicable laws rules and regulations, Liz will be entitled to recoup, and the Executive will be required to repay, any payments or benefits pursuant to this Agreement.

 

7.             Withholding.  The parties understand and agree that all payments to be made by Liz pursuant to this Agreement shall be subject to all applicable tax and other withholding obligations of Liz.

 

 

8.             Notices.  All notices required or permitted hereunder will be given in writing by personal delivery; by confirmed facsimile transmission; by express delivery via any reputable express courier service; or by registered or certified mail, return receipt requested, postage prepaid.  Any notice to Liz shall be addressed to the Chief Executive Officer of Liz Claiborne, Inc., 1441 Broadway, New York, New York with a copy to the Chief Legal Officer, Liz Claiborne, Inc., 5901 West Side Avenue, North Bergen, NJ 07047  or at such other address as Liz may hereafter designate to the Executive by notice as provided in this Section 8.  Any notice to be given to the Executive shall be addressed to the Executive’s home address of record, or at such other address as the Executive may hereafter designate to Liz by notice as provided herein.  Notices which are delivered personally, by confirmed facsimile transmission, or by courier as aforesaid, will be effective on the date of delivery.  Notices delivered by mail will be deemed effectively given upon the fifth calendar day subsequent to the postmark date thereof.

 

9.             Miscellaneous.

 

(a)           The failure of either party at any time to require performance by the other party of any provision hereunder will in no way affect the right of that party thereafter to enforce the same, nor will it affect any other party’s right to enforce the same, or to enforce any of the other provisions in this Agreement; nor will the waiver by either party of the breach of any provision hereof be taken or held to be a waiver of any prior or subsequent breach of such provision or as a waiver of the provision itself.

 

(b)           Each of the covenants and agreements set forth in this Agreement are separate and independent covenants, each of which has been separately bargained for and the parties hereto intend that the provisions of each such covenant shall be enforced to the fullest extent permissible.  Should the whole or any part or provision of any such separate covenant be held or declared invalid, such invalidity shall not in any way affect the validity of any other such covenant or of any part or provision of the same covenant not also held or declared invalid.  If any covenant shall be found to be invalid but would be valid if some part thereof were deleted or the period or area of application reduced, then such covenant shall apply with such minimum modification as may be necessary to make it valid and effective.

 

(c)           The Executive acknowledges and agrees that his or her work with Liz directly affects Liz’s operations in the State of New York and, therefore, the parties agree that all provisions in this Agreement will be governed, construed and enforced in accordance with the laws of the State of New York and without regard to conflict of law provisions.

 

(d)           Any controversy arising out of or relating to this Agreement or the breach hereof shall be settled by JAMS arbitration in the City of New York in accordance with the rules then governing.  Judgment upon the arbitration award rendered may be entered in any court having jurisdiction thereof, except that in the event of any controversy relating to any violation or alleged violation of any provision of Sections 4 or 5 hereof, Liz in its sole discretion shall be entitled to seek injunctive relief from a court of competent jurisdiction without any requirement to first seek arbitration.  The parties hereto agree that any arbitral award may be enforced against the parties to an arbitration proceeding or their assets wherever they may be found.  In the event that (i) the Executive makes a claim against Liz under this Agreement; (ii) Liz disputes such claim, and (iii) the Executive prevails with respect to such disputed claim, then Liz shall reimburse the Executive

 

 

for the Executive’s reasonable costs and expenses (including reasonable attorney fees) incurred by the Executive in pursuing such disputed claim.

 

(e)           The parties agree (subject to Sections 9(c) and 9(d)) to the exclusive jurisdiction of the federal and state courts in the County of New York, State of New York for any disputes arising out of this Agreement or the Executive’s employment, and agree to dismiss any claim brought in any other forum, with the party who filed a claim in such other forum to be responsible for all costs associated with such dismissal.

 

(f)            This Agreement sets forth the entire agreement by and between Liz, Liz and the Executive with respect to the subject matter hereof.  For purposes of clarity, any Executive Severance Agreement previously entered into between the Executive and Liz is superseded in its entirety and is of no further force or effect after the Effective Date.

 

(g)           Notwithstanding anything to the contrary herein, in the event that the Executive’s employment is terminated as a result of a sale pursuant to which the assets of Liz or any of its affiliates is sold (which sale may or may not constitute a Change in Control as such term is defined herein) and the Executive receives a Comparable Job Offer (as defined below) with or by the purchaser of such assets, or an affiliate of such purchaser, such termination shall not be considered a termination under this Agreement and the Executive shall not be entitled to any benefits pursuant to Section 3 of this Agreement as a result thereof.  For purposes of this Agreement, a “Comparable Job Offer” shall mean an offer of employment (that need not be in writing) with the purchaser of such assets (or an affiliate thereof) that sets forth the following terms of employment:  (i) a position that is the same or substantially similar to the Executive’s position immediately prior to the consummation of such sale (the “Closing Date”) (it being understood that whether a position is with an entity whose stock is not publicly traded, shall not in and of itself preclude an offer from being a Comparable Job Offer); (ii) an annual base salary, that is not materially less favorable than the Executive’s base salary as in effect immediately prior to the Closing Date; and (iii) is at the same work location as, or a work location not more than one hundred (100) miles from, the Executive’s work location immediately prior to the Closing Date (provided  that such move increases the Executive’s commuting distance by more than 100 miles). The determination of whether the Executive has received a Comparable Job Offer shall be reasonably determined in good faith by Liz and any determination so made shall be final and binding upon the Executive.

 

(h)           The Section headings contained herein are for purposes of convenience only and are not intended to define or list the contents of the Sections.

 

(i)            The provisions of this Agreement which by their terms call for performance subsequent to termination of the Executive’s employment, or termination of this Agreement, shall so survive such termination.

 

(j)            Except as set forth in Section 3, the Executive shall not be required to mitigate, by seeking employment or otherwise, the amount of any payment or benefit provided for in this Agreement, including without limitation any payment or benefit made or vested upon or as a result of the termination of the Executive’s employment, nor will any compensation, income, or other benefit from any source whatsoever create any mitigation, offset or reduction against any

 

 

such payment or benefit.

 

(k)           The Executive and Liz each hereby acknowledges and agrees that the provisions of this Agreement are not intended to create any contractual obligations with respect to the Executive’s employment by Liz.  The Executive and Liz each acknowledges and agrees the Executive’s employment by Liz continues to be “at-will” and either Executive or Liz may terminate the employment relationship at any time for any reason with or without Cause or notice.

 

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

 

 

	
 
    	
 
    	
LIZ CLAIBORNE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
By:Exhibit 10.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of March 28, 2012, by and between MOCON, INC., a Minnesota corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Bank”).

 

RECITALS

 

Borrower has requested that Bank extend credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and subject to the conditions contained herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I
 CREDIT TERMS

 

Section 1.1  Line of Credit.

 

(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 March 28, 2016 (the “Maturity Date”), not to exceed at any time the aggregate principal amount of Five Million Dollars ($5,000,000) (“Line of Credit”), the proceeds of which shall be used by Borrower to:  (i) purchase the capital stock of PBI-Dansensor A/S, a company organized under the laws of Denmark (the “Acquisition Target”), which purchase will be effected through MOCON Denmark Holding ApS, a Danish private limited liability company and a wholly owned subsidiary of Borrower, and related costs; (ii) provide for the working capital and general corporate purpose needs of Borrower (including the issuance of Letters of Credit, as defined below), Microanalytics Instrumentation Corp., a Texas corporation and a wholly owned subsidiary of Borrower (“Microanalytics”), and Baseline-MOCON, Inc., a Colorado corporation and a wholly owned subsidiary of Borrower (“Baseline”, and together with Borrower and Microanalytics, collectively, “Obligors”), and (iii) provide for Permitted Acquisitions (as defined below).  Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note of even date herewith (as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof, the “Revolving Line of Credit Note”), all terms of which are incorporated herein by this reference.

 

(b)           Letter of Credit Subfeature.  As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to issue or cause an affiliate to issue standby or commercial letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”); provided, however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed One Million Dollars ($1,000,000); and provided further, that no Letter of Credit shall be issued hereunder if, after giving effect to the issuance of such Letter of Credit, the Aggregate Outstanding Amount (as defined below) would exceed the amount of the

 

 

 

Line of Credit.  The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion.  Each Letter of Credit shall be  issued for a term not to exceed one (1) year, as designated by Borrower; provided however, that no Letter of Credit shall have an expiration date more than sixty days beyond  the Maturity Date.  The undrawn amount of all issued and outstanding Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder.  Each Letter of Credit shall be subject to the additional terms and conditions of such letter of credit agreements, applications and any related documents required by Bank in connection with the issuance thereof.  Each drawing paid under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the time any drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together with interest thereon from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit.  In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such drawing.  As used herein, “Aggregate Outstanding Amount” means the sum of (i) the aggregate principal amount of all outstanding advances made by Bank under Section 1.1(a) and (ii) the aggregate remaining available amount of all issued and outstanding Letters of Credit and Borrower’s obligation to pay amounts drawn under Letters of Credit that have not yet been reimbursed with proceeds of an advance or otherwise.

 

(c)           Borrowing and Repayment.  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Revolving Line of Credit Note; provided, however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.

 

(d)           Optional Line of Credit Reduction.  At any time subsequent to the Closing Date (as defined below), and prior to the Maturity Date, Borrower shall have the right to decrease the maximum Line of Credit available hereunder.  Any such reduction shall be in a minimum amount of $500,000 and shall become effective after the receipt by Bank of Borrower’s written request therefor.

 

Section 1.2  Term Loan.

 

(a)           Term Loan.  Subject to the terms and conditions of this Agreement, Bank hereby agrees to make a loan to Borrower on the date of the initial extension of credit hereunder (the “Closing Date”) in the principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000) (“Term Loan”), the proceeds of which shall be used to:  (i) purchase, directly or indirectly in the manner contemplated in Section 1.1(a), the capital stock of the Acquisition Target and related costs; (ii) provide for the working capital and general corporate purpose needs of the Obligors; and (iii) provide for Permitted Acquisitions.  Borrower’s obligation to repay the Term Loan shall be evidenced by a promissory note of even date herewith (as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof, the “Term Note”), all terms of which are incorporated herein by this reference.  Bank’s

 

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commitment to grant the Term Loan shall terminate no later than one month after the Closing Date.

 

(b)           Repayment.  Principal and interest on the Term Loan shall be repaid in accordance with the provisions of the Term Note.

 

(c)           Prepayment.  Borrower may prepay principal on the Term Loan solely in accordance with the provisions of the Term Note.

 

Section 1.3  Interest/Fees.

 

(a)           Interest.  The outstanding principal balance of advances under the Line of Credit, and the amount of each drawing paid under any Letter of Credit, shall bear interest from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest set forth in the Revolving Line of Credit Note.  The outstanding principal balance of the Term Loan shall bear interest at the rate of interest set forth in the Term Note.

 

(b)           Computation and Payment.  Interest shall be computed on the basis of a 360-day year, actual days elapsed.  Interest shall be payable at the times and place set forth in the Revolving Line of Credit Note, the Term Note or other instrument or document required hereby.

 

(c)           Unused Commitment Fee.  Borrower shall pay to Bank a fee equal to one-fifth of one percent (0.20%) (computed on the basis of a 360-day year, actual days elapsed) on the average daily unused amount of the Line of Credit (as such Line of Credit may be reduced at Borrower’s option pursuant to Section 1.1(d) above), which fee shall be calculated on a quarterly basis by Bank and shall be due and payable by Borrower in arrears on the first day of the month following each such quarter.  Any portion of the unused commitment fee under this clause (c) remaining unpaid on the Maturity Date shall be due and payable on such date.

 

(d)           Letter of Credit Fees.  Borrower shall pay to Bank (i) fees upon the issuance and renewal  of each Letter of Credit equal to two and one-quarter of one percent (2.25%) per annum (computed on the basis of a 360-day year, actual days elapsed) of the face amount of such Letter of Credit, and (ii) fees upon the payment or negotiation of each drawing under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including, without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank’s standard fees and charges then in effect for such activity.

 

Section 1.4  Collection of Payments.  Borrower authorizes Bank to collect all principal, interest, fees and other amounts due under or in connection with this Agreement, the Revolving Line of Credit Note, the Term Note and the other Loan Documents (as defined below) by charging Borrower’s deposit account number 000-1062094 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof.  Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

 

Section 1.5  Collateral.  As security for all indebtedness and other debts, liabilities and obligations of Borrower to Bank, Borrower hereby grants to Bank security interests

 

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of first priority in all of Borrower’s property; provided that in no event shall Borrower’s interest in the capital stock of the Acquisition Target or its parent, MOCON Denmark Holding ApS, a Danish private limited liability company, be subject, whether directly or indirectly, to such security interests.  All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank.  Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security interests, agreements and documents, including, without limitation, filing and recording fees and costs of appraisals, audits and title insurance.

 

Section 1.6  Guaranties.  The payment and performance of all indebtedness and other debts, liabilities and obligations of Borrower to Bank  shall be guaranteed jointly and severally by Baseline and Microanalytics, as evidenced by and subject to the terms of guaranties in form and substance satisfactory to Bank.

 

Section 1.7  Additional Definition.  As used herein, “Subsidiary” means any corporation, partnership, limited liability company or other entity of which more than 50% of the outstanding capital stock having general voting power under ordinary circumstances to elect a majority of the governing board of such entity (irrespective of whether or not at the time stock or membership interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by Borrower.  Unless otherwise specified, “Subsidiary” means a Subsidiary of Borrower.

 

ARTICLE II
 REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.

 

Section 2.1  Legal Status.  Borrower is a corporation, duly incorporated and existing and in good standing under the laws of Minnesota, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower.

 

Section 2.2  Authorization and Validity.  This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.

 

Section 2.3  No Violation.  The execution, delivery and performance by Borrower of each of the Loan Documents do not and will not violate any provision of any law or regulation, or contravene any provision of the articles of incorporation or bylaws of Borrower or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound or require any authorization,

 

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consent or approval that has not been obtained prior to Closing Date, or require any authorization, consent or approval by, or registration, declaration or filing (other than filing of financing statements and recording of mortgages as contemplated hereunder) with, or notice to, any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any third party, except such authorization, consent, approval, registration, declaration, filing or notice as has been obtained, accomplished or given prior to the Closing Date, or violate any provision of any law, rule or regulation (including but not limited to Regulations T, U or X of the Board of Governors of the Federal Reserve System) or of any order, writ, injunction or decree presently in effect having applicability to Borrower or of the articles of incorporation or bylaws of Borrower.

 

Section 2.4  Litigation.  There are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the Closing Date.

 

Section 2.5  Correctness of Financial Statements.  The annual financial statement of Borrower and its Subsidiaries dated December 31, 2011, and all interim financial statements delivered to Bank since said date, including, without limitation all financial statements of the Acquisition Target, are true and correct copies which have been delivered by Borrower to Bank prior to the date hereof, (a) are complete and correct and present fairly the financial condition of Borrower, (b) disclose all liabilities of Borrower, its Subsidiaries and the Acquisition Target that are required to be reflected or reserved against under generally accepted accounting principles consistently applied (“GAAP”), whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with GAAP.  Since the dates of such financial statements there has been no material adverse change in the financial condition of, as applicable, Borrower, any of its Subsidiaries or the Acquisition Target, nor has Borrower, any of its Subsidiaries or the Acquisition Target mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except (x) in favor of Bank, (y) to secure approximately $6,600,000 of indebtedness of Borrower to PBI Holding A/S, the seller of the Acquisition Target (“Seller”) pursuant to that certain Vendor Loan Agreement dated of even date herewith (the “Seller Indebtedness”) or (z) as otherwise permitted by Bank in writing. The representations and warranties made in this Section 2.5 with respect to the financial statements of the Acquisition Target shall refer only to those financial statements prepared by or on behalf of Borrower after the date hereof and specifically exclude any financial statements of the Acquisition Target delivered to Bank prior to the Closing Date.

 

Section 2.6  Income Tax Returns.  Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year and Borrower has paid or caused to be paid to the proper authorities when due all federal, state, foreign and local taxes required to be withheld by it.  Borrower has filed all federal, state and local tax returns which are required to be filed, and Borrower has paid or caused to be paid to the respective taxing authorities all taxes as shown on said returns or on any assessment received by it to the extent such taxes have become due, except for any such tax, assessment, charge or claim whose amount, applicability or validity is being contested by Borrower in good faith and by proper proceedings and for which Borrower shall have set aside adequate reserves in accordance with GAAP.

 

Section 2.7  No Subordination.  There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the

 

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subordination in right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.

 

Section 2.8  Permits, Franchises.  Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.

 

Section 2.9  ERISA.  Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under GAAP.

 

Section 2.10  Other Obligations.  Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

 

Section 2.11  Environmental Matters.  Except as disclosed by Borrower to Bank in writing prior to the Closing Date, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time.  None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment.  Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

 

Section 2.12  Real Property.  Set forth and described in the Perfection Certificate (as defined below) is a correct and complete list of all interests (including, but not limited to, all fee simple and leasehold interests) of each Obligor in any real property or fixtures, wherever located.

 

Section 2.13  Adverse Change.  There has been no material adverse change in the business, properties or condition (financial or otherwise) of Obligors since the date of the last financial statement referred to in Section 2.5.

 

Section 2.14  Intellectual Property Rights.  Set forth and described in the Perfection Certificate is a complete list of all registered intellectual property or other proprietary rights, including all rights arising in connection with copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade names or mask works, applications, and material unregistered copyrights and service marks (collectively, the “Intellectual Property”) owned by Obligors, including the application, registration or patent number of each item.  Obligors own the Intellectual Property free and clear of all restrictions (including covenants not to sue a third

 

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person and entity), court orders, injunctions, decrees, writs or security interests, liens, charges or other encumbrances (other than those specifically permitted by this Agreement), whether by written agreement or otherwise, (i) no person or entity other than Obligors owns or has been granted any right in the Intellectual Property, (ii) all Intellectual Property is valid, subsisting and enforceable, and (iii) each Obligor has taken all commercially reasonable action necessary to maintain, protect and enforce the Intellectual Property owned by it.

 

ARTICLE III
 CONDITIONS

 

Section 3.1  Conditions of Initial Extension of Credit.  The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all of the following conditions:

 

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

 

(b)           Documentation.  Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed by the parties thereto (where applicable):

 

(i)            this Agreement;

 

(ii)           the Revolving Line of Credit Note;

 

(iii)          the Term Note;

 

(iv)          the respective security agreements of Borrower and each other Obligor in favor of Bank;

 

(v)           the standby letter of credit agreement of Borrower in favor of Bank;

 

(vi)          the commercial letter of credit agreement of Borrower in favor of Bank;

 

(vii)         the continuing guaranty of Baseline in favor of Bank;

 

(viii)        the continuing guaranty of Microanalytics in favor of Bank;

 

(ix)          the perfection certificate of the Obligors in favor of Bank (the “Perfection Certificate”);

 

(x)           the share purchase agreement with respect to the Acquisition Target and all material documentation related thereto;

 

(xi)          financing statements with respect to each Obligor to be filed in each jurisdiction which, in the opinion of Bank, is reasonably necessary to perfect the security interests and liens created by a security agreement of such Obligor in favor of Bank, to the extent such security interests and liens can be perfected by filing;

 

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(xii)         current searches of appropriate filing offices in the jurisdiction in which each Obligor is organized, has an office or otherwise conducts business (including, but not limited to, secretaries of state and county recorders) showing that no state or federal tax liens have been filed and remain in effect against such Obligor, and that no financing statements or other notifications or filings have been filed and remain in effect against such Obligor, other than those for which Bank has received an appropriate release, termination or satisfaction or those permitted in accordance with this Agreement;

 

(xiii)        certificate of the secretary or other appropriate officer of each Obligor (A) certifying that the execution, delivery and performance of this Agreement, the Revolving Line of Credit Note, the Term Note and other documents contemplated hereunder to which such Obligor is a party have been duly approved by all necessary action of the board of directors of such Obligor, and attaching true and correct copies of the applicable resolutions granting such approval, and (B) certifying that attached to such certificate are true and correct copies of such Obligor’s articles of incorporation and bylaws, together with such copies, together with a certification of the names of the officers of such Borrower that are authorized to sign this Agreement, the Revolving Line of Credit Note, the Term Note and other documents contemplated hereunder, together with the true signatures of such officers.  Bank may conclusively rely on such certificate until Bank receives a further certificate of the secretary or assistant secretary of such Borrower canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate;

 

(xiv)        a certificate of good standing for each Obligor from the Secretary of State (or the appropriate official) of the state of formation of each Obligor, dated not more than 30 days prior to the Closing Date; and

 

(xv)         such other documents as Bank may require under any other Section of this Agreement.

 

(c)           Financial Condition.  There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower or any other Obligor, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower or any other Obligor.

 

(d)           Insurance.  Borrower shall have delivered to Bank evidence of insurance coverage on all Obligor’s property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank.

 

(e)           Costs and Expenses.  Payment of all fees and expenses then due and payable pursuant to this Agreement.

 

Section 3.2  Conditions of Each Extension of Credit.  The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of the following conditions:

 

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(a)           Compliance.  The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.

 

(b)           Documentation.  Bank shall have received all additional documents which may be required in connection with such extension of credit.

 

ARTICLE IV
 AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Obligors to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, and shall cause each Obligor to, unless Bank otherwise consents in writing:

 

Section 4.1  Punctual Payments.  Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.

 

Section 4.2  Accounting Records.  Maintain adequate books and records in accordance with GAAP consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Obligors.

 

Section 4.3  Financial Statements.  Provide to Bank all of the following, in form and detail satisfactory to Bank:

 

(a)           not later than 90 days after and as of the end of each calendar year, audited, consolidated financial statements of Borrower and its Subsidiaries, prepared by KPMG LLP or other certified public accountants of nationally recognized standing;

 

(b)           not later than 45 days after and as of the end of each fiscal quarter, financial statements of Borrower and its Subsidiaries, prepared by Borrower, including an unaudited internal balance sheets and statements of income, cash flow and retained earnings of Borrower and its Subsidiaries as at the end of such quarter and for the year-to-date period then ended, prepared on a consolidating and consolidated basis, in reasonable detail, all prepared in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes;

 

(c)           contemporaneously with each annual and quarterly financial statement of Borrower and its Subsidiaries required hereby, a certificate of the president or chief financial officer of Borrower that said financial statements are accurate and that there

 

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exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default;

 

(d)           not later than 90 days after the commencement of each fiscal year, the projected balance sheets, income statements, capital expenditures budget, and cash flow statements of Borrower and its Subsidiaries (presented on a consolidated basis) for each quarter of such year, each in reasonable detail, representing the good faith projections of Borrower and its Subsidiaries for each such quarter, and certified by Borrower’s president or chief financial officer as being the most accurate projections available, together with such supporting schedules and information as Bank from time to time may reasonably request; and

 

(e)           from time to time such other information as Bank may reasonably request.

 

Section 4.4  Compliance.  Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which each Obligor is organized and/or which govern Obligor’s continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to each Obligor and/or its business.

 

Section 4.5  Insurance.  Maintain and keep in force, for each business in which any Obligor is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, with all such insurance carried with companies and in amounts satisfactory to Bank and including such lender’s loss payable and additional insured endorsements as Bank may request, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance then in effect.

 

Section 4.6  Facilities.  Keep all of Obligors’ properties in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.  At any time upon Bank’s request, obtain a consent and waiver agreement, in form and substance acceptable to Bank, signed by each landlord with respect to Obligor’s leased locations as shown on the Perfection Certificate, acknowledging Bank’s prior security interest in all personal property located on such leased site and allowing Bank to enter upon such leased site to remove such personal property at any time.

 

Section 4.7  Taxes and Other Liabilities.  Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as any Obligor may in good faith contest or as to which a bona fide dispute may arise, and (b) for which any Obligor has made provision, to Bank’s satisfaction, for eventual payment thereof in the event such Obligor is obligated to make such payment.

 

Section 4.8  Litigation.  Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower or any of its Subsidiaries with a claim in excess of $100,000.

 

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Section 4.9  Financial Condition.  Maintain financial condition of Borrower and its Subsidiaries as follows using GAAP consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein):

 

(a)                                 Total Net Funded Debt (as defined below) to EBITDA (as defined below) not greater than 1.00 to 1.00 as of each quarter-end, determined on a rolling four-quarter basis;

 

(b)                                 Fixed Charge Coverage Ratio (as defined below) not less than 1.25 to 1.00 as of each quarter-end, determined on a rolling four-quarter basis.

 

As used herein:

 

“EBITDA” means, with reference to any period, (a) the consolidated net income for such period determined on a consolidated basis in accordance with GAAP consistently applied for such period, plus (b) to the extent deducted in determining such consolidated net income for such period, the sum of the following for such period: (i) consolidated interest expense for such period, (ii) income tax expense for such period, (iii) depreciation and amortization for such period, (iv) the aggregate amount of extraordinary, non-operating or non-cash charges for such period, and (v) non-recurring costs and expenses incurred in connection with a merger or permitted acquisition to the extent acceptable to Bank for such period, and minus, without duplication, (c) the aggregate amount of extraordinary income during such period.  Pro forma credit shall be given for the EBITDA of any person (or identifiable business units or divisions of such person) acquired by the Borrower in accordance with the terms of the credit agreement as if owned on the first day of the applicable period, and subject to adjustments calculated in a manner reasonably satisfactory to Bank.

 

“Fixed Charge Coverage Ratio” means, with reference to any period,  defined as the aggregate of net profit after taxes plus depreciation expense, amortization expense, cash capital contributions and increases in subordinated debt minus dividends, distributions and decreases in subordinated debt, divided by the aggregate of the current maturity of long-term debt and capitalized lease payments.

 

“Total Net Funded Debt” means, with reference to any period,  at any time the sum of all of the following for Borrower and its Subsidiaries on a consolidated basis (without duplication): (i) obligations for borrowed money (including but not limited to senior bank debt, senior notes and subordinated notes), (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of business that are payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations with respect to letters of credit, whether drawn or undrawn, contingent or otherwise (other than reimbursement obligations, which are not due and payable on such date, in respect of documentary letters of credit issued to provide for the payment of goods and services in the ordinary course of business), (vi) net mark-to-market exposure under swaps and other financial contracts, (vii) off-balance sheet liabilities,

 

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including synthetic leases, (viii) capitalized lease obligations, (ix) indebtedness attributable to permitted securitization transactions, (x) any other obligation for borrowed money or other financial accommodation which in accordance with GAAP would be shown as a liability on a consolidated balance sheet, and (xi) all guarantees or other contingent obligations with respect to any indebtedness of others of the kind referred to above of Borrower; less cash (denominated in U.S. dollars) and Cash Equivalents (as defined below).

 

For purposes of the foregoing, “Cash Equivalents” means:  (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (but only so long as the full faith and credit of the United States is pledged in support thereof) having maturities of not more than 24 months from the date of acquisition; (b) securities issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof having maturities of not more than 24 months from the date of acquisition and having one of the two highest ratings from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc.; (c) domestic and Eurodollar certificates of deposit or time deposits or bankers’ acceptances maturing within 24 months after the date of acquisition issued or guaranteed by or placed with, and money market and demand deposit accounts issued or offered by, (i) Bank; (ii) any commercial bank organized under the laws of the United States or any state thereof or the District of Columbia having combined capital and surplus of not less than $250,000,000; (d) repurchase obligations with a term of not more than thirty days for underlying securities of the types described in clause (a) and (b) of this definition entered into with any bank meeting the qualifications specified in clause (c) of this definition; (e) commercial paper issued by the parent corporation of Bank or any commercial bank (provided that the parent corporation and the bank are both incorporated in the United States) having capital and surplus in excess of $250,000,000 and commercial paper issued by any entity incorporated in the United States, which commercial paper has one of the two highest ratings from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., and in each case maturing not more than ninety days after the date of acquisition by such entity; and (f) investments in money market funds substantially all the assets of which are comprised of cash or securities of the types described in clauses (a) through (e) of this definition and other marketable securities owned by the Borrower in compliance with the investment policies of the Borrower delivered to Bank prior to the Closing Date and any modifications to such investment policies after the Closing Date approved by Bank.

 

Section 4.10  Notice to Bank.  Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable detail of:  (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of any Obligor; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Obligors are required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Obligor’s property in excess of an aggregate of $100,000.

 

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ARTICLE V
 NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Obligors to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not and will not permit any Obligor to, without Bank’s prior written consent:

 

Section 5.1  Use of Funds.  Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

 

Section 5.2  Capital Expenditures.  Make any additional investment in fixed assets in any fiscal year of Borrower year in excess of an aggregate of $1,000,000.

 

Section 5.3  Lease Expenditures.  Incur operating lease expense in any fiscal year of Borrower in excess of an aggregate of $250,000.

 

Section 5.4  Creation of Subsidiaries.  Create a Subsidiary or acquire any business which would constitute a Subsidiary other than in connection with a Permitted Acquisition (as defined below).

 

Section 5.5  Other Indebtedness.  Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except:  (a) the liabilities of Borrower to Bank; (b) any other liabilities of any Obligor existing as of, and disclosed in writing to Bank prior to, the Closing Date; (c) indebtedness or liabilities incurred in connection with a Permitted Acquisition; and (d) the Seller Indebtedness.

 

Section 5.6  Merger, Consolidation, Transfer of Assets.  Merge into or consolidate with any other entity; make any substantial change in the nature of any Obligor’s business as conducted as of the Closing Date; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of any Obligor’s assets except in the ordinary course of its business; provided, however, that Borrower and its Subsidiaries may make one or more acquisitions in similar or related businesses provided that (a) Borrower demonstrates pro forma compliance with all terms and conditions of the Line of Credit after giving effect to any acquisition; (b) total aggregate consideration paid or to be paid in connection with such acquisition, inclusive of all unsecured indebtedness incurred or assumed, together with the aggregate consideration paid in connection with all Permitted Acquisitions occurring during the trailing twelve months from such acquisition consummation for which consent was not required (excluding the acquisition of the Acquisition Target), is equal to or less than $5,000,000; (c) the acquired entity or the assets acquired shall be acquired on a non-hostile basis; (d) the acquired entity or assets acquired shall be owned directly by Borrower or by a wholly-owned Subsidiary of Borrower after giving effect to any acquisition; (e) the acquired entity, if it shall become a Subsidiary of Borrower, shall become a guarantor hereunder (if deemed material); (f) there shall exist no potential default, or Event of Default before or after giving effect to any acquisition; and (g) Borrower shall provide historical financial statements on the acquired entity and additional information as requested by Bank regarding any acquisitions (each such acquisition, a “Permitted Acquisition”).

 

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Section 5.7  Guaranties.  Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of:  (a) Bank; (b) Seller with respect to the Seller Indebtedness; (c) a third party in connection with a Permitted Acquisition.

 

Section 5.8  Loans, Advances, Investments.  Make any loans or advances to or investments in any person or entity, except (a) any of the foregoing existing as of, and disclosed in writing to Bank prior to, the date hereof, including but not limited to the intercompany loans made in connection with the acquisition of the Acquisition Target as set forth on Schedule 5.8, (b) a Permitted Acquisition and (c) additional loans or advances to, or investments in, any foreign Subsidiary in amounts not to exceed an aggregate of $1,000,000 outstanding at any one time.

 

Section 5.9  Redemptions.  Redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now or hereafter outstanding

 

Section 5.10  Pledge of Assets.  Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Obligor’s assets now owned or hereafter acquired, except (a) any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date hereof, (b) liens on the capital stock of the Acquisition Target in favor of Seller and (c) purchase money liens securing obligations less than or equal to $250,000 outstanding in any fiscal year of the Borrower.

 

ARTICLE VI
 EVENTS OF DEFAULT

 

Section 6.1  Event of Default.  The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:

 

(a)                                 Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents and such failure shall continue for a period of five (5) Business Days after such amounts are due; provided that such five-Business-Day grace period shall be available no more than twice in any twelve-month period.

 

(b)                                 Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

 

(c)                                  Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an “Event of Default” in this Section 6.1), and with respect to any such default that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

 

(d)                                 Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower or any Obligor has

 

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incurred any debt or other liability to any person or entity, including Bank, which results in the acceleration of indebtedness or liability of at least $100,000 and is not cured within five (5) Business Days of Borrower first learning of such default.

 

(e)                                  Borrower or any other Obligor shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any other Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time (“Bankruptcy Code”), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower or any other Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any other Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any other Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

 

(f)                                   The filing of a notice of judgment lien against Borrower or any other Obligor; or the recording of any abstract of judgment against Borrower or any other Obligor in any county in which Borrower or such other Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any other Obligor; or the entry of a judgment against Borrower or any other Obligor, in each case in an amount greater than $50,000, which is not vacated within twenty (20) days; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any other Obligor.

 

(g)                                  There shall exist or occur any event of condition that causes a material adverse change in the ability of Borrower or any other Obligor to perform its obligations under any of the Loan Documents.

 

(h)                                 The dissolution or liquidation of Borrower or any other Obligor; or any of the directors or stockholders of Borrower or any other Obligor, shall take action seeking to effect the dissolution or liquidation of Borrower or such Obligor.

 

(i)                                     Any change in control of Borrower or any entity or combination of entities that directly or indirectly control Borrower, with “control” defined as ownership of an aggregate of twenty-five percent (25%) or more of the common stock, members’ equity or other ownership interest (other than a limited partnership interest).

 

(j)                                    The sale, transfer, hypothecation, assignment or encumbrance, whether voluntary, involuntary or by operation of law, without Bank’s prior written consent, of all or any part of or interest in any real property collateral required hereby.

 

Section 6.2  Remedies.  Upon the occurrence of any Event of Default, Bank may exercise any or all of the following rights and remedies:  (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank’s option and without notice become immediately due and payable without presentment, demand,

 

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protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including, without limitation, the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law; and (d) Bank may apply for the appointment of, or taking possession by, a trustee, receiver, liquidator or other similar official of Borrower to hold or liquidate all or any substantial part of the properties or assets of Borrower.  Borrower hereby consents to such appointment and agrees to execute and deliver any and all documents requested by Bank relating to the appointment of such trustee, receiver, liquidator or other similar official (whether by joining in a petition for the appointment of such an official, by entering no contest to a petition for the appointment of such an official, or otherwise, as appropriate under applicable law).  All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

 

Section 6.3  Right of Setoff.  If an Event of Default shall have occurred, Bank and each of its affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Bank or any such affiliate to or for the credit or the account of Borrower against any and all of the obligations of Borrower now or hereafter existing under this Agreement or any other Loan Document to Bank or any such affiliate, irrespective of whether or not Bank shall have made any demand under this Agreement or any other Loan Document and although such obligations of Borrower may be contingent or unmatured or are owed to a branch or office of Bank different from the branch or office holding such deposit or obligated on such indebtedness. The rights of Bank and its affiliates under this Section 6.3 are in addition to other rights and remedies (including other rights of setoff) that Bank or its affiliates may have. Bank will notify Borrowers promptly after any such setoff and application; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application.

 

ARTICLE VII
 MISCELLANEOUS

 

Section 7.1  No Waiver.  No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy.  Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

 

Section 7.2  Notices.  All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

 

Borrower:

 

MOCON, Inc.

 

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7500 Mendelssohn Avenue North

Minneapolis, Minnesota

Attention:  Darrell B. Lee, Chief Financial Officer

Telecopier: 763-493-6358

 

Bank:

 

Wells Fargo Bank, National Association

MAC N9305-187

90 South Seventh Street

Minneapolis, Minnesota 55479

Attention:  R. James Hancock

Telecopier: 612-667-4144

 

or to such other address as any party may designate by written notice to all other parties.  Each such notice, request and demand shall be deemed given or made as follows:  (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

 

Section 7.3  Costs, Expenses and Attorneys’ Fees.  Borrower shall pay to Bank 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 Bank’s in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Bank’s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, up to a maximum of $35,000 in the aggregate; (b) the enforcement and protection of Bank’s rights and remedies and/or the collection of any amounts which become due to Bank under any of the Loan Documents, by law or otherwise, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, 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.

 

Section 7.4  Successors, Assignment.  This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank’s prior written consent.  Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents.  In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.

 

Section 7.5  Entire Agreement; Amendment.  This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof.  This Agreement may be amended or modified only in writing signed by each party hereto.

 

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Section 7.6  No Third Party Beneficiaries.  This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

 

Section 7.7  Time.  Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

 

Section 7.8  Severability of Provisions.  If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

 

Section 7.9  Counterparts.  This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

 

Section 7.10  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

 

Section 7.11  Arbitration.

 

(a)                                 Arbitration.  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) 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)                                 Governing Rules.  Any arbitration proceeding will (i) proceed in a location in Minnesota 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 $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.

 

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(c)                                  No Waiver of Provisional Remedies, Self-Help and Foreclosure.  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)                                 Arbitrator Qualifications and Powers.  Any arbitration proceeding in which the amount in controversy is $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 $5,000,000.00.  Any dispute in which the amount in controversy exceeds $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 Minnesota or a neutral retired judge of the state or federal judiciary of Minnesota, 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 Minnesota 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 Minnesota 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)                                  Discovery.  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 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)                                   Class Proceedings and Consolidations.  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.

 

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

 

(h)                                 Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 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.

 

Signature page follows

 

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

 

 

	
 
    	
MOCON, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Darrell B. Lee
    
	
 
    	
 
    	
Name:
    	
Darrell   B. Lee
    
	
 
    	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL
    
	
 
    	
ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   R. James Hancock
    
	
 
    	
 
    	
Name:
    	
R.   James Hancock
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

Signature Page to Credit Agreement

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