EXHIBIT 10.1
REVOLVING LOAN AND SECURITY
AGREEMENT
This Agreement is made as of this
10 TH day of May, 2005, by and between
Micronetics, Inc. , a Delaware corporation with an address
of 26 Hampshire Drive, Hudson, New Hampshire 03051 (the
“Debtor”), and Banknorth, N.A. , a national
banking association, with its principal New Hampshire office at 300
Franklin Street, Manchester, New Hampshire and a mailing address of
P.O. Box 600, Manchester, New Hampshire 03105-0600 (the
“Secured Party”).
WITNESSETH:
WHEREAS, the Debtor desires to
borrow from the Secured Party up to Five Million and No/100ths
Dollars ($5,000,000.00) for working capital needs and, subject to
the prior written approval of the Secured Party, to assist in the
financing of the acquisition of other companies; and
WHEREAS, the Secured Party is
willing to lend to the Debtor up to Five Million and No/100ths
Dollars ($5,000,000.00) subject to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of
the covenants set forth herein, the loan made hereunder, and other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
I. LOANS : The Secured Party
agrees that it will establish an account on its books to be
referred to herein as “Debtor’s Loan Account”,
and it will lend to the Debtor, (upon the written or oral
instructions of the Chief Executive Officer or the Principal
Financial Officer of the Debtor, or such other person or persons
designated by either of them, in writing, provided however that in
the event the request for an advance is made orally, the Debtor
shall confirm such request in writing within two (2) business days
of said oral request), from time to time, sums not to exceed a
total of Five Million and No/100ths Dollars ($5,000,000.00)
(hereinafter referred to as the “Borrowing Base”) in
the aggregate outstanding at any one time, said sums outstanding
from time to time defined as “Debit Balance in Debtor’s
Loan Account” and repayable with interest as set forth in the
Promissory Note (as hereinafter defined) and being otherwise
subject to the terms and conditions set forth in Article II.A,
below, and otherwise in this Agreement. Debtor’s obligations
under Debtor’s Loan Account shall be evidenced by a
promissory note in the form satisfactory to Secured Party (the
“Promissory Note”).
II. AFFIRMATIVE COVENANTS :
The Debtor agrees that:
A. Commencing one month from the
date hereof, it will pay to the Secured Party interest monthly on
the daily Debit Balances in Debtor’s Loan Account at the rate
per annum as set forth in the Promissory Note, which it has
delivered to the Secured Party herewith, and it will pay to Secured
Party the principal amounts and interest as provided in the
Promissory Note according to its tenor.
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In the event of default as defined
in Article X of this Agreement, the entire Debit Balance in
Debtor’s Loan Account and all interest thereon shall be
immediately due and payable without demand at the option of the
Secured Party.
The Secured Party may enter loans
made pursuant to Article I, above as debits in Debtor’s Loan
Account. The Secured Party shall also record in Debtor’s Loan
Account in accordance with customary accounting practice: all other
charges, expenses, and other items properly chargeable to the
Debtor; all payments made by or on behalf of the Debtor on account
of indebtedness evidenced by Debtor’s Loan Account; and other
appropriate debits and credits. The Debit Balance in Debtor’s
Loan Account shall reflect the amount of the Debtor’s
indebtedness to the Secured Party from time to time by reason of
loans under Article I, above, and other appropriate charges
hereunder. At least once each month the Secured Party shall render
a billing statement for the Debtor’s Loan Account, which
billing statement shall be considered correct and accepted by the
Debtor and presumptively correct upon the Debtor unless it notifies
the Secured Party to the contrary within thirty (30) days of the
sending of said statement by the Secured Party to the
Debtor.
The Debtor understands that the
Secured Party will use the Borrowing Base as a maximum ceiling
under a revolving line of credit pursuant to which the Debtor may
borrow, repay and reborrow up to the amount of the Borrowing Base.
The Debtor agrees that the Debit Balance in Debtor’s Loan
Account shall at no time exceed the Borrowing Base. The Debtor
further agrees that in the event it is requesting an advance for
purposes other than working capital, it will first obtain the prior
written consent of the Secured Party.
B. It will promptly reimburse the
Secured Party for all reasonable charges and expenses incurred by
the Secured Party in connection with the making of this Agreement
and all reasonable legal fees incurred by the Secured Party in
connection with the making of this Agreement.
C. It will promptly reimburse the
Secured Party for (i) all damages sustained by any breach of
warranty or covenant of the Debtor herein; and (ii) all fees, court
costs, collection charges, reasonable attorneys’ fees,
reasonable accountants’ fees, and all other costs and
expenses which may be incurred by the Secured Party to enforce any
provisions of this Agreement, as against the Debtor, or in the
prosecution of any proceeding arising from the efforts of the
Secured Party to recover money or other things of value, or the
enforcement of rights or remedies under this Agreement, as the same
may from time to time be amended, unless the enforcement of such
provision is held unlawful by a Court of competent
jurisdiction.
D. It will deliver, at its expense,
(i) annually, within one hundred twenty (120) days after its fiscal
year end the audited financial statements of the Debtor and all of
the Debtor’s subsidiaries, prepared by a certified public
accountant satisfactory to the Lender, and (ii) quarterly, within
forty-five (45) days after the end of each fiscal quarter, (a)
company prepared financial statements of the Debtor, (b) copy of
10Q report, and (c) accounts receivable aging, all in form
satisfactory to Lender. All of the foregoing financial statements
and reports shall be signed by a duly authorized representative of
the Debtor.
E. It will, at all reasonable times,
and upon reasonable notice, allow Secured Party, by or through any
of its officers, agents, attorneys or accountants, or such other
persons, associations or corporations that Secured Party in its
sole discretion should deem
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acceptable, to inspect the Collateral (as
hereinafter defined), to examine or make extracts from the books
and records of the Debtor, and to arrange for the verification of
accounts receivable under reasonable procedures directly with
account debtors or by other methods, provided, however, that the
Secured Party shall give reasonable notification to the Debtor
prior to contacting account debtors for such verification. It will
furnish to the Secured Party upon request additional statements of
any accounts receivable, together with all notes or other papers
evidencing the same, and any guaranties, securities or other
documents or information relating thereto. Secured Party will
protect the confidentiality of accounts receivable customer lists
and other books and records of the Debtor in connection with the
verification of same. The Secured Party acknowledges that portions
of the Collateral and Debtor’s facilities are classified and
may be subject to certain confidentiality and security requirements
as imposed by the federal government of the United States of
America, and the enforcement of this Revolving Loan and Security
Agreement may be subject to the terms of such confidentiality and
security requirements.
F. It will promptly and from time to
time pay and discharge all taxes, charges and assessments which may
be or shall be levied, charged or assessed on or against it or any
of its property, or any part thereof, or on or against the income
and profits therefrom, before they become delinquent. Debtor shall
have the right, however, to contest by legal proceeding the
validity or amount of any tax, charge or assessment, and Debtor
need not pay any amount of such tax, charge or assessment under
dispute if the proceedings shall operate to prevent or stay the
collection of such tax, charge or assessment.
G. It will provide and maintain
hazard insurance, fire and extended coverage, on all of its
property including the Collateral, in such amounts and for such
other coverages as shall be satisfactory in all respects to the
Secured Party, naming the Secured Party as loss payee, as its
interests may appear. It will provide the Secured Party with a
schedule of all insurance policies annually, at the time it submits
its annual financial statements as herein required.
III. SECURITY INTEREST : The
Debtor, to secure the payment of the Promissory Note, and all sums
required by, and the performance of all covenants contained in this
Agreement hereby gran
