Exhibit 10.18
FIFTH LOAN MODIFICATION AGREEMENT
This Fifth Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of June 25, 2004, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of
business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a
loan production office located at One Xxxxxx Executive Park, Suite 200,
0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and PARLEX CORPORATION, a
Massachusetts corporation, with offices at Xxx Xxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxxxx, 00000, PARLEX DYNAFLEX CORPORATION, a California
corporation, with offices at Xxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000, and POLY-FLEX CIRCUITS, INC., a Rhode Island corporation, with
offices at 00 Xxxxxx Xxxxx, Xxxxxxxx, Xxxxx Xxxxxx 00000 (jointly and
severally, individually and collectively, "Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among
other indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of
June 11, 2003, evidenced by, among other documents, a certain Loan and
Security Agreement dated as of June 11, 2003 between Borrower and Bank, as
amended from time to time (as amended, the "Loan Agreement"). Capitalized
terms used but not otherwise defined herein shall have the same meaning as
in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement and certain
Intellectual Property Security Agreements each dated June 11, 2003 (the "IP
Agreements") (together with any other collateral security granted to Bank,
the "Security Documents").
Hereinafter, the Security Documents, together with all other
documents evidencing or securing the Obligations shall be referred to as
the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
Modification to Loan Agreement.
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A. Section 3.12 of the Loan Agreement is hereby amended by
deleting the following text in its entirety:
"3.12 Indebtedness. Except as shown on the Schedule
hereto, Borrower shall not create, incur, assume, or be
liable for any indebtedness for money borrowed, or permit
any of Borrower's subsidiaries to do so. Notwithstanding
the foregoing, Borrower's subsidiaries, Parlex (Shanghai)
Circuit Co., Ltd. and Parlex (Shanghai) Interconnect
Products Co., Ltd., may incur indebtedness (provided such
indebtedness is not guaranteed by any Borrower and
Borrower furnishes Silicon with evidence satisfactory to
Silicon that there shall be no recourse against any
Borrower in connection with any such indebtedness) of not
more than US$13,000,000 in the aggregate."
and substituting the following Section 3.12 therefor:
"3.12 Indebtedness. Except as shown on the Schedule
hereto, Borrower shall not create, incur, assume, or be
liable for any indebtedness for money borrowed, or permit
any of Borrower's subsidiaries to do so. Notwithstanding
the foregoing, Borrower's subsidiaries, Parlex Asia
Pacific Limited, Parlex (Shanghai) Circuit Co., Ltd. and
Parlex (Shanghai) Interconnect Products Co., Ltd., may
incur indebtedness (provided such indebtedness is not
guaranteed by any Borrower except as set forth in Section
5.5(ix)) of not more than US$13,000,000 in the
aggregate."
B. Section 5.5(ix) of the Loan Agreement is hereby amended
by adding the following text at the end of the Section:
"(other than with respect to an unsecured guarantee by
one or more of the Borrowers of indebtedness of Parlex
Asia Pacific Limited, Parlex (Shanghai) Circuit Co., Ltd.
and Parlex (Shanghai) Interconnect Products, Co., Inc. to
Bank of China provided the amount guaranteed by the
Borrower or Borrowers, as the case may be, may not exceed
$5,000,000 in the aggregate for all Borrowers)"
C. Section 2 of the Schedule to the Loan Agreement is hereby
amended by deleting same in its entirety and substituting
the following therefor:
" Interest Rate (Section 1.2):
A rate equal to the Prime Rate (as defined below) plus
2.25% per annum (which applicable interest rate shall be
reduced to a rate equal to the Prime Rate plus 2.00% per
annum in the event Borrowers furnish Silicon with
evidence satisfactory to Silicon that no Borrower is a
guarantor or otherwise liable for any indebtedness of any
of Borrower's subsidiaries and that there shall be no
recourse against any Borrower in connection with any such
indebtedness at any time). Interest shall be calculated
on the basis of a 360-day year for the actual number of
days elapsed. "Prime Rate" is the greater of (i) 4.0% or
(ii) the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
Notwithstanding the foregoing, (i) upon Borrower's
achievement of two (2) consecutive quarters of positive
operating income, the interest rate hereunder shall be
reduced to the Prime Rate (as defined above) plus 1.25%
per annum, and (ii) upon Borrower's achievement of two
(2) consecutive quarters of positive net income, the
interest rate hereunder shall be further reduced to the
Prime Rate (as defined above) plus 0.75% per annum.
Such reduction in the interest rate shall be effective
immediately upon receipt by Silicon of sufficient
evidence of such achievement of positive operating income
and/or positive net income, as applicable.
Notwithstanding the foregoing, such reduction in the
interest rate shall be effective no later than the day
upon which Borrower files a second consecutive quarterly
statement on Form 10-Q indicating positive operating
income or a second consecutive quarterly statement on
Form 10-Q indicating positive net income, as applicable."
4. FEES. Borrower shall pay to Bank a modification fee equal to
Twenty Thousand Dollars ($20,000.00), which fee shall be due on the date
hereof and shall be deemed fully earned as of the date hereof. Borrower
shall also reimburse Bank for all reasonable legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.
5. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENTS.
Borrower hereby ratifies, confirms, and reaffirms, all and singular, the
terms and conditions of the IP Agreements and acknowledges, confirms and
agrees that the IP Agreements contain an accurate and complete listing of
all Intellectual Property.
6. RATIFICATION OF PERFECTION CERTIFICATES. Borrower hereby
ratifies, confirms, and reaffirms, all and singular, the terms and
disclosures contained in certain Perfection Certificates delivered to the
Bank on or about June 11, 2003, and acknowledges, confirms and agrees the
disclosures and information provided therein has not changed, as of the
date hereof.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby
amended wherever necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies,
confirms, and reaffirms all terms and conditions of all security or other
collateral granted to the Bank, and confirms that the indebtedness secured
thereby includes, without limitation, the Obligations.
9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and
agrees that Borrower has no offsets, defenses, claims, or counterclaims
against the Bank with respect to the Obligations, or otherwise, and that if
Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against the Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly
WAIVED and Borrower hereby RELEASES the Bank from any liability thereunder.
10. CONTINUING VALIDITY. Borrower understands and agrees that in
modifying the existing Obligations, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the Existing
Loan Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to modifications
to the existing Obligations pursuant to this Loan Modification Agreement
in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute
a satisfaction of the Obligations. It is the intention of Bank and
Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will
be released by virtue of this Loan Modification Agreement.
11. COUNTERSIGNATURE. This Loan Modification Agreement shall
become effective only when it shall have been executed by Borrower and
Bank.
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This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first
written above.
BORROWER:
PARLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
PARLEX DYNAFLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
POLY-FLEX CIRCUITS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Treasurer
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
