EXHIBIT 10.6.4
For Bank Use Only Reviewed by_____
Due JANUARY 1, 2007
Customer # 1105510939 Loan #
TERM NOTE
(For Term Loan Agreement)
$ 1,400,000.00 DECEMBER 18, 2002
FOR VALUE RECEIVED, the undersigned borrower (the "Borrower"), promises
to pay to the order of U. S . BANK N. A. ____________________________
(the"Bank"), the principal sum of ONE MILLION FOUR HUNDRED THOUSAND AND
NO/100________________________________________________________________
Dollars($ 1,400,000.00).
Interest.
The unpaid principal balance will bear interest at an annual rate equal to
0.500% plus the prime rate announced by the Bank.
The interest rate hereunder will be adjusted each time that the prime rate
changes.
Payment Schedule.
Principal is payable in 47 installments of $29,166.67 each, beginning FEBRUARY
1, 2003, and on the same date of each CONSECUTIVE month thereafter (except that
if a given month does not have such a date, the last day of such month), plus a
final payment equal to all unpaid principal on JANUARY 1, 2007, the maturity
date.
Interest is payable beginning FEBRUARY 1, 2003, and on the same date of each
CONSECUTIVE month thereafter (except that if a given month does not have such a
date, the last day of such month), plus a final interest payment with the final
payment of principal.
Interest will be computed for the actual number of days principal is
unpaid, using a daily factor obtained by dividing the stated interest rate by
360.
Notwithstanding any provision of this Note to the contrary, upon any
default or at any time during the continuation thereof (including failure to pay
upon maturity), the Bank may, at its option and subject to applicable law,
increase the interest rate on this Note to a rate of 5% per annum plus the
interest rate otherwise payable hereunder. Notwithstanding the foregoing and
subject to applicable law, upon the occurrence of a default by the Borrower or
any guarantor involving bankruptcy, insolvency, receivership proceedings or an
assignment for the benefit of creditors, the interest rate on this Note shall
automatically increase to a rate of 5% per annum plus the rate otherwise payable
hereunder.
In no event will the interest rate hereunder exceed that permitted by
applicable law. If any interest or other charge is finally determined by a court
of competent jurisdiction to exceed the maximum amount permitted by law, the
interest or charge shall be reduced to the maximum permitted by law, and the
Bank may credit any excess amount previously collected against the balance due
or refund the amount to the Borrower.
Subject to applicable law, if any payment is not made on or before
its due date, the Bank may collect a delinquency charge of 5% of the
unpaid amount. Collection of the late payment fee shall not be deemed
to be a waiver of the Bank's right to declare a default hereunder.
Without affecting the liability of any Borrower, endorser, surety or
guarantor, the Bank may, without notice, renew or extend the time for
payment, accept partial payments, release or impair any collateral
security for the payment of this Note, or agree not to sue any party
liable on it.
This Term Note constitutes the Note issued under a Term Loan
Agreement dated as of the date hereof between the Borrower and the
Bank, to which Agreement reference is hereby made for a statement of
the terms under which the loan evidenced hereby was made and a
description of the terms and conditions upon which the maturity of
this Note may be accelerated, and for a description of the collateral
securing this Note.
All documents attached hereto, including any appendices, schedules,
riders, and exhibits to this Term Note, are hereby expressly incorporated by
reference.
The Borrower hereby acknowledges the receipt of a copy of this Note.
(individual Borrower) HI-SHEAR TECHNOLOGY, CORP.
Borrower Name (Organization)
a DELAWARE Corporation
Borrower Name N/A By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name and Title ▇▇▇▇▇▇ ▇▇▇▇▇▇,
PRESIDENT/CEO
Borrower Name N/A By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------
Name and Title ▇▇▇▇▇▇▇ ▇▇▇▇▇, VP
FINANCE/CFO
1105510939-
TERM LOAN AGREEMENT
This Term Loan Agreement (the "Agreement") is made and entered into by and
between the undersigned borrower (the "Borrower") and the undersigned bank (the
"Bank") as of the date set forth on the last page of this Agreement.
ARTICLE I. LOANS
1.1 TERMS FOR ADVANCE(S). [CHOOSE ONE:]
X SINGLE ADVANCE TERM LOAN. As of the date hereof, the Borrower
--- has obtained a term loan from the Bank in the amount of $
1,400,000.00 (the "Loan Amount"). The term loan is evidenced by
a single promissory note of the Borrower to the order of the
Bank in the principal amount of the Loan Amount and dated as of
the date hereof (the "Note").
Multiple Advance Term Loan. Prior to n/a or the earlier
termination hereof, the Borrower may obtain advances from the
Bank in an aggregate amount not exceeding $ n/a (the "Loan
Amount'). The term loans will be evidenced by a single
promissory note of the Borrower to the Bank in the principal
amount of the Loan Amount and dated as of the date hereof (the
"Note"). Although the Note will be expressed as payable in the
full Loan Amount, the Borrower will be obligated to pay only the
amounts actually disbursed hereunder, together with accrued
interest on the outstanding balance at the rates and on the
dates specified therein and such other charges provided for
herein.
1.2 ADVANCES AND PAYING PROCEDURE. The Bank is authorized and directed to
credit any of the Borrower's accounts with the Bank (or to the account the
Borrower designates in writing) for all loans made hereunder, and the Bank is
authorized to debit such account or any other account of the Borrower with the
Bank for the amount of any principal or interest due under the Note or other
amount due hereunder on the due date with respect thereto.
1.3 Closing Fee. The Borrower will pay the Bank a one-time closing fee of $
n/a contemporaneously with execution of this Agreement. This fee is in addition
to all other fees, expenses and other amounts due hereunder.
1.4. Compensating Balances. The Borrower will maintain on deposit with the
Bank in non-interest bearing accounts average daily collected balances, in
excess of that required to support account activity and other credit facilities
extended to the Borrower by the Bank, an amount at least equal to the sum of (i)
$ n/a and (ii) n/a % of the Loan Amount as computed on a monthly basis. If the
Borrower fails to keep and maintain such balances, it will pay a deficiency fee,
payable within five days after receipt of a statement therefor calculated on the
amount by which the Borrower's average daily balances are less than the
requirements set forth above, computed at a rate equal to the rate set forth in
the Note.
1.5 Expenses and Attorneys' Fees. The Borrower will reimburse the Bank and
any Participant (defined below) for all attorneys' fees and all other costs,
fees and out-of-pocket disbursements incurred by the Bank or any Participant in
connection with the preparation, execution, delivery, administration, defense
and enforcement of this Agreement or any of the other Loan Documents (defined
below), including attorneys' fees and all other costs and fees (a) incurred
before or after commencement of litigation or at trial, on appeal or in any
other proceeding, (b) incurred in any bankruptcy proceeding and (c) related to
any waivers or amendments with respect thereto (examples of costs and fees
include but are not limited to fees and costs for: filing, perfecting or
confirming the priority of the Bank's lien, title searches or insurance,
appraisals, environmental audits and other reviews related to the Borrower, any
collateral or the loans, if requested by the Bank). The Borrower will also
reimburse the Bank and any Participant for all costs of collection, including
all attorneys' fees, before and after judgment, and the costs of preservation
and/or liquidation of any collateral.
1.6 Conditions to Borrowing. The Bank will not be obligated to make (or
continue to make) advances hereunder unless (i) the Bank has received executed
originals of the Note and all other documents or agreements applicable to the
loans described herein, including but not limited to the documents specified in
Article III (collectively with this Agreement the "Loan Documents"), in form and
content satisfactory to the Bank; (ii) if the loan is secured, the Bank has
received confirmation satisfactory to it that the Bank has a properly perfected
security interest, mortgage or lien, with the proper priority, (iii) the Bank
has received certified copies of the Borrower's governance documents and
certification of entity status satisfactory to the Bank and all other relevant
documents; (iv) the Bank has received a certified copy of a resolution or
authorization in form and content satisfactory to the Bank authorizing the loan
and all acts contemplated by this Agreement and all related documents, and
confirmation of proper authorization of all guaranties and other acts of third
parties contemplated hereunder; (v) if required by the Bank, the Bank has been
provided with Opinion of the Borrower's counsel in form and content satisfactory
to the Bank confirming the matters outlined in Section 2.2 and such other
matters as the Bank requests; (vi) no default exists under this Agreement or
under any other Loan Documents, or under any other agreements by and between the
Borrower and the Bank; and (vii) all proceedings taken in connection with the
transactions contemplated by this Agreement (including any required
environmental assessments), and all instruments, authorizations and other
documents applicable thereto, are satisfactory to the Bank and its counsel.
ARTICLE II. WARRANTIES AND COVENANTS
While any part of the credit granted to the Borrower under this Agreement or
the other Loan Documents is available or any obligations under any of the Loan
Documents are unpaid or outstanding, the Borrower continuously warrants and
agrees as follows:
2.1 ACCURACY OF INFORMATION. All information, certificates or statements given
to the Bank pursuant to this Agreement and the other Loan Documents will be true
and complete when given.
2.2 Organization and Authority; Litigation. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms. The execution,
delivery and performance of this Agreement and all other Loan Documents to which
the Borrower is a party (i) are within the borrower's power; (ii) have been duly
authorized by all appropriate entity action; (iii) do not require the approval
of any governmental agency; and, (iv) will not violate any law, agreement or
restriction by which the Borrower is bound. If the Borrower is not an
individual, the Borrower is validly existing and in good standing under the laws
of its state of organization, has all requisite power and authority and
possesses all licenses necessary to conduct its business and own its properties.
There is no litigation or administrative proceeding threatened or pending
against the Borrower which would, if adversely determined, have a material
adverse effect on the Borrowers financial condition or its property.
2.3 EXISTENCE; BUSINESS ACTIVITIES; ASSETS; CHANGE OF CONTROL. The Borrower will
(i) preserve its existence, rights and franchises; (ii) not make any material
change in the nature or manner of its business activities; (iii) not liquidate,
dissolve, merge or consolidate with or into another entity or change its form of
organization; (iv) not amend its organizational documents in any manner that may
conflict with any term or condition of the Loan Documents; and (v) not sell,
lease, transfer or otherwise dispose of all or substantially all of its assets.
Other than the transfer to a trust beneficially controlled by the transferor, no
event shall occur which causes or results in a transfer of majority ownership of
the Borrower while any Obligations are outstanding or while the Bank has any
obligation to provide funding to the Borrower.
2.4 USE OF PROCEEDS; MARGIN STOCK; SPECULATION. Advances by the Bank hereunder
will be used exclusively by the Borrower for the purposes represented to the
Bank. The Borrower will not, without the prior written consent of the Bank,
redeem, purchase, or retire any of the capital stock or declare or pay any
dividends, or make any other payments or distributions of a similar type or
nature including withdrawal distributions. The Borrower will not use any of the
loan proceeds to purchase or carry "margin" stock (as defined in Regulation U of
the Board of Governors of the Federal Reserve System). No part of any of the
proceeds will be used for speculative investment purposes, including, without
limitation, speculating or hedging in the commodities and/or futures market.
2.5 Environmental Matters. Except as disclosed in a written schedule attached to
this Agreement (if no schedule is attached, there are no exceptions), there
exists no uncorrected violation by the Borrower of any federal, state or local
laws (including statutes, regulations, ordinances or other governmental
restrictions and requirements) relating to the discharge of air pollutants,
water pollutants or process waste water or otherwise relating to the environment
or Hazardous Substances as hereinafter defined, whether such laws currently
exist or are enacted in the future (collectively "ENVIRONMENTAL LAWS"). The term
"HAZARDOUS SUBSTANCES" will mean any hazardous or toxic wastes, chemicals or
other substances, the generation, possession or existence of which is prohibited
or governed by any Environmental Laws. The Borrower is not subject to any
judgment, decree, order or citation, or a party to (or threatened with) any
litigation or administrative proceeding, which asserts that the Borrower (i) has
violated any Environmental Laws; (ii) is required to clean up, remove or take
remedial or other action with respect to any Hazardous Substances (collectively
"Remedial Action"); or (iii) is required to pay all or a portion of the cost of
any Remedial Action, as a potentially responsible party. Except as disclosed on
the Borrower's environmental questionnaire provided to the Bank, there are not
now, nor to the Borrower's knowledge after reasonable investigation have there
ever been, any Hazardous Substances (or tanks or other facilities for the
storage of Hazardous Substances) stored, deposited, recycled or disposed of on,
under or at any real estate owned or occupied by the Borrower during the periods
that the Borrower owned or occupied such real estate, which if present on the
real estate or in soils or ground water, could require Remedial Action. To the
Borrowers knowledge, there are no proposed or pending changes in Environmental
Laws which would adversely affect the Borrower or its business, and there are no
conditions existing currently or likely to exist while the Loan Documents are in
effect which would subject the Borrower to Remedial Action or other liability.
The Borrower currently complies with and will continue to timely comply with all
applicable Environmental Laws; and will provide the Bank, immediately upon
receipt, copies of any correspondence, notice, complaint, order or other
document from any source asserting or alleging any circumstance or condition
which requires or may require a financial contribution by the Borrower or
Remedial Action or other response by or on the part of the Borrower under
Environmental Laws, or which seeks damages or civil, criminal or punitive
penalties from the Borrower for an alleged violation of Environmental Laws.
2.6 Compliance with Laws. The Borrower has complied with all laws applicable to
its business and its properties, and has all permits, licenses and approvals
required by such laws, copies of which have been provided to the Bank.
2.7 Restriction on Indebtedness. The Borrower will not create, incur, assume or
have outstanding any indebtedness for borrowed money (including capitalized
leases) except (i) any indebtedness owing to the Bank and its affiliates, and
(ii) any other indebtedness outstanding on the date hereof, and shown on the
Borrower's financial statements delivered to the Bank prior to the date hereof,
provided that such other indebtedness will not be increased.
2.8 Restriction on Liens. The Borrower will not create, incur, assume or permit
to exist any mortgage, pledge, encumbrance or other lien or levy upon or
security interest in any of the Borrower's property now owned or hereafter
acquired, except (i) taxes and assessments which are either not delinquent or
which are being contested in good faith with adequate reserves provided; (ii)
easements, restrictions and minor title irregularities which do not, as a
practical matter, have an adverse effect upon the ownership and use of the
affected property; (iii) liens in favor of the Bank and its affiliates; and (iv)
other liens disclosed in writing to the Bank prior to the date hereof.
2.9 Restriction on Contingent Liabilities. The Borrower will not guarantee or
become a surety or, otherwise contingently liable for any obligations of others,
except pursuant to the deposit and collection of checks and similar matters in
the ordinary course of business.
2.10 INSURANCE. The Borrower will maintain insurance to such extent, covering
such risks and with such insurers as is usual and customary for businesses
operating similar properties, and as is satisfactory to the Bank, including
insurance for fire and other risks insured against by extended coverage, public
liability insurance and workers' compensation insurance; and will designate the
Bank as loss payee with a "Lender's Loss Payable" endorsement on any casualty
policies and take such other action as the Bank may reasonably request to ensure
that the Bank will receive (subject to no other interests) the insurance
proceeds on the Bank's collateral.
2.11 TAXES AND OTHER LIABILITIES. The Borrower will pay and discharge, when due,
all of its taxes, assessments and other liabilities, except when the payment
thereof is being contested in good faith by appropriate procedures which will
avoid foreclosure of liens securing such items, and with adequate reserves
provided therefor.
2.12 FINANCIAL STATEMENTS AND REPORTING. The financial statements and other
information previously provided to the Bank or provided to the Bank in the
future are or will be complete and accurate and prepared in accordance with
generally accepted accounting principles. There has been no material adverse
change in the Borrower's financial condition since such information was provided
to the Bank. The Borrower will (i) maintain accounting records in accordance
with generally recognized and accepted principles of accounting consistently
applied throughout the accounting periods involved; (ii) provide the Bank with
such information concerning its business affairs and financial condition
(including insurance coverage) as the Bank may request; and (iii) without
request, provide the Bank with management-prepared financial statements:
X quarterly within 45 days of the end of each quarter;
-----
monthly within n/a days of the end of each month;
----
and annual audited financial statements prepared by an accounting firm
acceptable to the Bank within 90 days of the end of each fiscal year,
2.13 Inspection of Properties and Records; Fiscal Year. The Borrower will permit
representatives of the Bank to visit and inspect any of the properties and
examine any of the books and records of the Borrower at any reasonable time and
as often as the Bank may reasonably desire. The Borrower will not change its
fiscal year.
2.14 Financial Status. The Borrower will maintain at all times:
(i) Net Working Capital in the amount of at least (v) Capital Expenditures not to exceed $ n/a per
$ 4600000.00. fiscal year.
(ii) Tangible Net Worth in the amount of at least (vi) Cash Flow Coverage Ratio of at least n/a
$ n/a
(iii) Debt to Worth Ratio of not more than (vii) Officers, Directors, Partners, Members, and Management Salaries and
1.50 TO 1.00 Other Compensation not to exceed $ n/a per fiscal year.
(iv) Current Ratio of at least n/a
The terms used in this Section 2.14 will have the meanings set forth in a
supplement entitled "Financial Definitions," a copy of which the Borrower hereby
acknowledges having received with this Agreement and which is incorporated
herein by reference.
ARTICLE III. COLLATERAL AND GUARANTIES
3.1 COLLATERAL. This Agreement and the Note are secured by any and all security
interests, pledges, mortgages/deeds of trust or liens now or hereafter in
existence granted to the Bank to secure indebtedness of the Borrower to the
Bank, including without limitation as described in the following documents:
___ Real Estate Mortgage(s)/Deed(s) of Trust dated covering real estate located
at
[X] Security Agreement(s) dated 12/31/01
___ Collateral Pledge Agreement(s) dated
___ Other
3.2 Guaranties. This Agreement and the Note are guarantied by each and every
guaranty now or hereafter inexistence guarantying the indebtedness of the
Borrower to the Bank (except for any guaranty expressly limited by its terms to
a specific separate obligation of Borrower to the Bank) including, without
limitation, the following: N/A
3.3 Credit Balances; Setoff. As additional security for the payment of the
obligations described in the Loan Documents and any other obligations of the
Borrower to the Bank of any nature whatsoever (collectively the "Obligations"),
the Borrower hereby grants to the Bank a security interest in, a lien on and an
express contractual right to set off against all depository account balances,
cash and any other property of the Borrower now or hereafter in the possession
of the Bank and the right to refuse to allow withdrawals from any account
(collectively "Setoff"). The Bank may, at any time upon the occurrence of a
default hereunder (notwithstanding any notice requirements or grace/cure periods
under this or other agreements between the Borrower, rower and the Bank) Setoff
against the Obligations whether or not the Obligations (including FUTURE
INSTALLMENTS) ARE THEN DUE OR HAVE BEEN ACCELERATED, ALL WITHOUT ANY ADVANCE OR
CONTEMPORANEOUS NOTICE OR demand OF ANY KIND TO THE BORROWER, SUCH NOTICE AND
DEMAND BEING EXPRESSLY WAIVED.
The information in this Article III is for information only and the omission of
any reference to an agreement will not affect the validity or enforceability
thereof. The rights and remedies of the Bank outlined in this Agreement and the
documents identified above are intended to be cumulative.
ARTICLE IV. DEFAULTS
4.1 Defaults. Notwithstanding any cure periods described below, the Borrower
will immediately notify the Bank in writing when the Borrower obtains knowledge
of the occurrence of any default specified below. Regardless of whether the
Borrower has given the required notice, the occurrence of one or more of the
following will constitute a default:
(a) Nonpayment. The Borrower shall fail to pay (i) any interest due on the
Note or any fees, charges, costs or expenses under the Loan Documents
by 5 days after the same becomes due; or (ii) any principal amount of
the Note when due.
(b) Nonperformance. The Borrower or any guarantor of Borrowers Obligations
to the Bank ("GUARANTOR") shall fail to perform or observe any
agreement, term, provision, condition, or covenant (other than a
default occurring under (a), (c), (d), (e), (f) or (g) of this Section
4.1) required to be performed or observed by the Borrower or any
Guarantor hereunder or under any other Loan Document or other agreement
with or in favor of the Bank.
(c) Misrepresentation. Any financial information, statement, certificate,
representation or warranty given to the Bank by the Borrower or any
Guarantor (or any of their representatives) in connection with entering
into this Agreement or the other Loan Documents and/or any borrowing
thereunder, or required to be furnished under the terms thereof, shall
prove untrue or misleading in any material respect (as determined by
the Bank in the exercise of its judgment) as of the time when given.
(d) Default on Other Obligations. The Borrower or any Guarantor shall be in
default under the terms of any loan agreement, promissory note, lease,
conditional sale contract or other agreement, document or instrument
evidencing, governing or securing any indebtedness owing by the
Borrower or any Guarantor to the Bank or any indebtedness in excess of
$10,000 owing by the Borrower to any third party, and the period of
grace, if any, to cure said default shall have passed.
(e) Judgments. Any judgment shall be obtained against the Borrower or any
Guarantor which, together with all other outstanding unsatisfied
judgments against the Borrower (or such Guarantor), shall exceed the
sum of $10,000 and shall remain unvacated, unbonded or unstayed for a
period of 30 days following the date of entry thereof.
(f) Inability to Perform; Bankruptcy/insolvency. (i) The Borrower or any
Guarantor shall die or cease to exist; or (ii) any Guarantor shall
attempt to revoke any guaranty of the Obligations described herein, or
any guaranty becomes unenforceable in whole or in part for any reason;
or (iii) any bankruptcy, insolvency or receivership proceedings, or an
assignment for the benefit of creditors, shall be commenced under any
Federal or state law by or against the Borrower or any Guarantor; or
(iv) the Borrower or any Guarantor shall become the subject of any
out-of-court settlement with its creditors; or (v) the Borrower or any
Guarantor is unable or admits in writing its inability to pay its debts
as they mature; or (vi) if the Borrower is a limited liability company,
any member thereof shall withdraw or otherwise become disassociated
from the Borrower.
(g) Adverse Change; Insecurity. (i) There is a material adverse change in
the business, properties, financial condition or affairs of the
Borrower or any Guarantor, or in any collateral securing the
Obligations; or (ii) the Bank in good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure.
4.2 Termination of Loans; Additional Bank Rights. Upon the occurrence of any of
the events identified in Section 4.1, the Bank may at any time (notwithstanding
any notice requirements or grace/cure periods under this or other agreements
between the Borrower and the Bank) (i) immediately terminate its obligation, if
any, to make additional loans to the Borrower; (ii) Setoff; and/or (iii) take
such other steps to protect or preserve the Bank's interest in any collateral,
including without limitation, notifying account debtors to make payments
directly to the Bank, advancing funds to protect any collateral and insuring
collateral at the Borrower's expense; all without demand or notice of any kind,
all of which are hereby waived.
4.3 Acceleration of Obligations. Upon the occurrence of any of the events
identified in Sections 4.1 (a) through 4.1 (e) and 4.1 (g), and the passage of
any applicable cure periods, the Bank may at any time thereafter, by written
notice to the Borrower, declare the unpaid principal balance of any Obligations,
together with the interest accrued thereon and other amounts accrued hereunder
and under the other Loan Documents, to be immediately due and payable; and the
unpaid balance will thereupon be due and payable, all without presentation,
demand, protest or further notice of any kind, all of which are hereby waived,
and notwithstanding anything to the contrary contained herein or in any of the
other Loan Documents. Upon the occurrence of any event under Section 4.1(f), the
unpaid principal balance of any Obligations, together with all interest accrued
thereon and other amounts accrued hereunder and under the other Loan Documents,
will thereupon be immediately due and payable, all without presentation, demand,
protest or notice of any kind, all of which are hereby waived, and
notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents. Nothing contained in Section 4.1, Section 4.2 or this section
will limit the Bank's right to Setoff as provided in Section 3.3 or otherwise in
this Agreement.
4.4 Other Remedies. Nothing in this Article IV is intended to restrict the
Bank's rights under any of the Loan Documents or at law, and the Bank may
exercise all such rights and remedies as and when they are available.
ARTICLE V. OTHER TERMS
5.1 Financial Definitions Supplement. If covenants regarding financial status
apply to this loan, the "Financial Definitions" Supplement identified in Section
2.14 of this Agreement is hereby incorporated into this Agreement. The Borrower
acknowledges receiving a copy of such Supplement.
5.2 ADDITIONAL TERMS; ADDENDUM/SUPPLEMENTS. The warranties, covenants,
conditions and other terms described in this Section and/or in the Addendum
and/or other attached document(s) referenced in this Section are incorporated
into this Agreement:
SEE ATTACHED ADDENDUM
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ARTICLE VI. MISCELLANEOUS
6.1 Delay; Cumulative Remedies. No delay on the part of the Bank in exercising
any right, power or privilege hereunder or under any of the other Loan Documents
will operate as a waiver thereof, nor will any single or partial exercise of any
right, power or privilege hereunder preclude other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and remedies
herein specified are cumulative and are not exclusive of any rights or remedies
which the Bank would otherwise have.
6.2 RELATIONSHIP TO OTHER DOCUMENTS. The warranties, covenants and other
obligations of the Borrower (and the rights and remedies of the Bank) that are
outlined in this Agreement and the other Loan Documents are intended to
supplement each other. In the event of any inconsistencies in any of the terms
in the Loan Documents, all terms will be cumulative so as to give the Bank the
most favorable rights set forth in the conflicting documents, except that if
there is a direct conflict between any preprinted terms and specifically
negotiated terms (whether included in an addendum or otherwise), the
specifically negotiated terms will control.
6.3 Participations; Guarantors. The Bank may, at its option, sell all or any
interests in the Note and other Loan Documents to other financial institutions
(the "Participant"), and in connection with such sales (and thereafter) disclose
any financial information the Bank may have concerning the Borrower to any such
Participant or potential Participant. From time to time, the Bank may, in its
discretion and without obligation to the Borrower, any Guarantor or any other
third party, disclose information about the Borrower and this loan to any
Guarantor, surety or other accommodation party. This provision does not obligate
the Bank to supply any information or release the Borrower from its obligation
to provide such information, and the Borrower agrees to keep all Guarantors
advised of its financial condition and other matters which may be relevant to
the Guarantors' obligations to the Bank.
6.4 Successors. The rights, options, powers and remedies granted in this
Agreement and the other Loan Documents will extend to the Bank and to its
successors and assigns, will be binding upon the Borrower and its successors and
assigns and will be applicable hereto and to all renewals and/or extensions
hereof.
6.5 Indemnification. Except for harm arising from the Bank's willful misconduct,
the Borrower hereby indemnifies and agrees to defend and hold the Bank harmless
from any and all losses, costs, damages, claims and expenses of any kind
suffered by or asserted against the Bank relating to claims by third parties
arising out of the financing provided under the Loan Documents or related to any
collateral (including, without limitation, the Borrower's failure to perform its
obligations relating to Environmental Matters described in Section 2.5 above).
This indemnification and hold harmless provision will survive the termination of
the Loan Documents and the satisfaction of the Obligations due the Bank.
6.6 Notice of Claims Against Bank; Limitation of Certain Damages. In order to
allow the Bank to mitigate any damages to the Borrower from the Bank's alleged
breach of its duties under the Loan Documents or any other duty, if any, to the
Borrower, the Borrower agrees to give the Bank immediate written notice of any
claim or defense it has against the Bank, whether in tort or contract, relating
to any action or inaction by the Bank under the Loan Documents, or the
transactions related thereto, or of any defense to payment of the Obligations
for any reason. The requirement of providing timely notice to the Bank
represents the parties' agreed-to standard of performance regarding claims
against the Bank. Notwithstanding any claim that the Borrower may have against
the Bank, and regardless of any notice the Borrower may have given the Bank, the
Bank will not be liable to the Borrower for consequential and/or special damages
arising therefrom, except those damages arising from the Bank's willful
misconduct.
6.7 Notices. Notice of any record shall be deemed delivered when the record has
been (a) deposited in the United States Mail, postage pre-paid, (b) received by
overnight delivery service, (c) received by telex, (d) received by telecopy, (e)
received through the internet, or (f) when personally delivered.
6.8 Payments. Payments due under the Note and other Loan Documents will be made
in lawful money of the United States. All payments may be applied by the Bank to
principal, interest and other amounts due under the Loan Documents in any order
which the Bank elects.
6.9 Applicable Law and Jurisdiction; Interpretation; Joint Liability;
Severability. This Agreement and all other Loan Documents will be governed by
and interpreted in accordance with the internal laws of the State of CALIFORNIA
except to the extent superseded by Federal law. Invalidity of any provisions of
this Agreement will not affect any other provision. THE BORROWER HEREBY CONSENTS
TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN THE
COUNTY OR FEDERAL JURISDICTION OF THE BANK'S BRANCH WHERE THE LOAN WAS
ORIGINATED, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS , WITH REGARD
TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS AGREEMENT. THE
NOTE, THE COLLATERAL, ANY OTHER LOAN DOCUMENT, OR ANY TRANSACTIONS ARISING
THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING. Nothing
herein will affect the Bank's rights to serve process in any manner permitted by
law, or limit the Bank's right to bring proceedings against the Borrower in the
competent courts of any other jurisdiction or jurisdictions. This Agreement, the
other Loan Documents and any amendments hereto (regardless of when executed)
will be deemed effective and accepted only at the Bank's offices, and only upon
the Bank's receipt of the executed originals thereof. If there is more than one
Borrower, the liability of the Borrowers will be joint and several, and the
reference to "Borrower" will be deemed to refer to all Borrowers. Invalidity of
any provision of this Agreement shall not affect the validity of any other
provision.
6.10 Copies; Entire Agreement; Modification. The Borrower hereby acknowledges
the receipt of a copy of this Agreement and all other Loan Documents.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING, EXPRESSING CONSIDERATION AND
SIGNED BY THE PARTIES ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT
CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. THE TERMS OF THIS
AGREEMENT MAY ONLY BE CHANGED BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE SHALL
ALSO BE EFFECTIVE WITH RESPECT TO ALL OTHER CREDIT AGREEMENTS NOW IN EFFECT
BETWEEN BORROWER AND THE BANK. A MODIFICATION OF ANY OTHER CREDIT AGREEMENTS NOW
IN EFFECT BETWEEN BORROWER AND THE BANK, WHICH OCCURS AFTER RECEIPT BY BORROWER
OF THIS NOTICE, MAY BE MADE ONLY BY ANOTHER WRITTEN INSTRUMENT. ORAL OR IMPLIED
MODIFICATIONS TO SUCH CREDIT AGREEMENTS ARE NOT ENFORCEABLE AND SHOULD NOT BE
RELIED UPON.
6.11 Waiver of Jury Trial. THE BORROWER AND THE BANK HEREBY JOINTLY AND
SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS THEREUNDER, ANY
COLLATERAL SECURING THE OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR
CONNECTED THERETO. THE BORROWER AND THE BANK EACH REPRESENTS TO THE OTHER THAT
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
6.12 Attachments. All documents attached hereto, including any appendices,
schedules, riders, and exhibits to this Agreement, are hereby expressly
incorporated by reference.
IN WITNESS WHEREOF, the undersigned have executed this TERM LOAN AGREEMENT as of
DECEMBER 18, 2002
(Individual Borrower) HI-SHEAR TECHNOLOGY, CORP.
Borrower Name (Organization)
a DELAWARE Corporation
Borrower Name N/A By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name and Title ▇▇▇▇▇▇ ▇▇▇▇▇▇, PRESIDENT/CEO
----------------------------------------
Borrower Name N/A By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name and Title ▇▇▇▇▇▇▇ ▇▇▇▇▇, VP FINANCE/CFO
----------------------------------------
U.S. BANK N.A.
(Bank)
By
Name and Title ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. SENIOR VICE PRESIDENT
----------------------------------------
Borrower Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇. TORRANCE, CA 90505
Borrower Telephone No.:
1105510939-
FINANCIAL DEF ITIONS SUPPLEMENT
TO
Revolving Credit Agreement
and
Term Loan Agreement
1. The term "CAPITAL EXPENDITURES" shall mean the aggregate amount of all
purchases or acquisition of fixed assets, including real estate, motor
vehicles, equipment, fixtures, leases and any other items that would be
capitalized on Debtor's books under generally accepted accounting
principles. The term "Capital Expenditures" will not include
expenditures or charges for the usual and customary maintenance, repair
and retooling of any fixed asset, the acquisition of new tooling in the
ordinary course of business or fixed asset acquisitions evidenced by a
binding purchase order or agreement made prior to the date of this
Agreement.
2. The term "Cash Flow Coverage Ratio" shall mean the relationship,
expressed as a numerical ratio, between:
(i) The total of ▇▇▇▇▇▇▇▇'s after-tax income (less dividends) plus
depreciation and amortization; and
(ii) Current maturities of long-term debt.
3. THE TERM "CURRENT RATIO" shall mean the relationship, expressed as a
numerical ratio, between the amount described below in 7(i) and the
amount described in 7(ii).
4. The term "DEBT TO WORTH RATIO" shall mean the relationship, expressed as a
numerical ratio, between:
(i) the total of all liabilities of the Borrower which would
appear on a balance sheet of the Borrower in accordance with
generally accepted accounting principles; and
(ii) Tangible Net Worth.
5. The term "ELIGIBLE ACCOUNT" shall mean an account owing to the Borrower
which meets all of the following requirements at the time it comes into
existence and continues to meet the same until it is collected in full:
(i) SALE OF GOODS OR SERVICES RENDERED. It arose from the
performance of services by the Borrower, or from a bona fide
sale or lease of goods on terms in effect as of the date of
this Agreement as disclosed by the Borrower to the Bank; which
services have been fully performed for an account debtor or
which goods have been delivered or shipped to an account
debtor residing in the United States or to a foreign account
debtor acceptable to the Bank and supported by a letter of
credit acceptable to the Bank or to the United States or any
agency or department thereof whose accounts are assigned to
the Bank under the Federal Assignment of Claims Act; and for
which the Borrower has genuine and complete invoices, shipping
documents or receipts;
(ii) Age and Due Date. It is payable within 30 days of the date of
invoice, and in each instance is not more than 60 days past
due;
(iii) OWNERSHIP. It is owned and assignable by the Borrower free of
all claims, encumbrances and security interests (except the
Bank's paramount security interest);
(iv) No Defenses. It is enforceable by the Borrower and the Bank
against the account debtor for the amount shown as owing in
the statements furnished by the Borrower to the Bank; it and
the transaction out of which it arose comply with all
applicable laws and regulations; it is not subject to any
setoff, credit allowance or adjustment except discount, for
prompt payment, nor has the account debtor returned the goods
or disputed liability; and it did not arise from conditional
sale, guaranteed sale, sale on approval, sale or return or
sale on consignment;
(v) Financial Condition of Account Debtor. Neither the Borrower
nor the Bank has any notice or knowledge of anything which
might impair the credit standing of the account debtor or the
prospect of payment of the account, nor does the dollar amount
of past-due invoices as a portion of the total dollar amount
due from an account debtor exceed 10 %, which limitation may
change from time to time;
(vi) Affiliates. It is not due from an Affiliate of the Borrower,
including, without limitation, (a) a parent corporation; (b)
subsidiary corporation; (c) an entity controlled by any
controlling shareholder(s) of the Borrower; or (d) any
officer, director, shareholder or owner of the Borrower or of
any Affiliate. (collectively "Affiliate");
(vii) OTHER PROVISIONS.
6. The term "Eligible Inventory" shall mean inventory (as defined under
the Uniform Commercial Code in the state where the Bank's main office
is located) of the Borrower which meets all of the following
requirements and continues to meet the same until it is sold or
otherwise disposed of:
(i) OWNERSHIP. It is owned and assignable by the Borrower free of
all claims, encumbrances and security interests (except the
Bank's paramount security interest); it is located in the
United States; it is not stored with any bailee,
warehouseman, Affiliate or other party without a written
agreement in favor of the Bank; and it is not held by the
Borrower nor put in the field by the Borrower as a
conditional sale, guaranteed sale, sale on approval, sale or
return or sale on consignment.
(ii) Condition. It is in good condition; it has not materially
declined in value; it is not work-in-process; it is of an
age, type and quantity acceptable to the Bank; and, in the
case of goods held for sale, it is new and unused (except as
the Bank may otherwise consent in writing);
(iii) Other Provisions.
7. The term "NET WORKING CAPITAL" shall mean:
(i) the amount of all assets which under generally accepted
accounting principles would appear as current assets on the
balance sheet of the Borrower,
Less
(ii) the amount of all liabilities which under generally accepted
accounting principles would appear as current liabilities on
such balance sheet, including all indebtedness payable on
demand or maturing (whether by reason of specified maturity,
fixed prepayments, sinking funds or accruals of any kind, or
otherwise) within 12 months or less from the date of the
relevant statement, including all lease and rental
obligations due in 12 months or less under capitalized
leases, and including customers' advances and progress
▇▇▇▇▇▇▇▇ on contracts.
8. The term "OFFICER, DIRECTORS, PARTNERS, AND MANAGEMENT SALARIES AND
OTHER COMPENSATION" shall mean the aggregate amount of all salaries,
bonuses, dividends (except for satisfaction of the income tax liability
for Subchapter S corporations), partnership distributions, draws,
profit-sharing payments or other compensation of any kind to officers,
directors, partners, and other employees having management or executive
responsibilities (and all amounts to family members of any such
persons).
9. The term "TANGIBLE NET WORTH" shall mean the total of all assets
properly appearing on the balance sheet of the Borrower in accordance
with generally accepted accounting principles, less the sum of the
following:
(i) the book amount of all such assets which would be treated as
intangibles under generally accepted accounting principles,
including, without limitation, all such items as goodwill,
trademarks, trademark rights, trade names, trade name rights,
brands, copyrights, patents, patent rights, licenses, deferred
charges and unamortized debt discount and expense;
(ii) any write-up in the book value of any such assets resulting
from a revaluation thereof subsequent to the date of the
Revolving Credit Agreement, or the Term Loan Agreement, as the
case may be;
(iii) all reserves, including reserves for depreciation,
obsolescence, depletion. insurance, and inventory valuation,
but excluding contingency reserves not allocated for any
particular purpose and not deducted from assets;
(iv) the amount, if any, at which any shares of stock of the
Borrower appear on the asset side of such balance sheet;
(v) all liabilities of the Borrower shown on such balance sheet;
(vi) all investments in foreign affiliates and nonconsolidated
domestic affiliates; and
(vii) all accounts or notes due to the Borrower from any
shareholder, director, officer, employee or affiliate of the
Borrower or from any relative of such party.
ADDENDUM TO TERM LOAN AGREEMENT
This Addendum is made part of the Term Loan Agreement (the "Agreement") made and
entered into by and between the undersigned borrower (the "Borrower") and the
undersigned bank (the "Bank") as of the date identified below. The warranties,
covenants and other terms described below are hereby added to the Agreement.
FIXED CHARGE COVERAGE: Borrower to maintain a minimum Fixed Charge Coverage
Ratio of 1.50 to 1.00.
"Fixed Charge Coverage" means (a) EBITDAR (EBITDAR for a given period means net
income, plus interest expense, plus income tax expense, plus depreciation
expense plus amortization expense plus rent or lease expense) minus cash taxes,
cash dividends and Unfunded Capital Expenditures for the previous four (4)
rolling quarters and/or fiscal period divided by (b) the sum of all required
principal payments (on short and long term debt and capital leases), interest
and rental or lease expense over the last four rolling quarters and/or fiscal
period.
"Unfunded (a/k/a Unfinanced) Capital Expenditures" means the sum of all
purchases of capital assets or acquisitions of other companies less the sum of
all new financing amounts received or assumed to acquire such capital assets or
acquisitions of other companies for the period specified.
MINIMUM TANGIBLE NET WORTH: Borrower shall maintain a minimum tangible net worth
equal to the sum of the immediately preceding quarter's tangible net worth plus
80% of the current quarter's pre-tax income less tax expense and exclusive of
extraordinary gains or income, but inclusive of extraordinary losses. There WILL
be no adjustments for the cumulative tangible net worth covenant for quarterly
deficits. Tangible Net Worth is defined as: Total Assets minus Intangibles minus
Deferred Tax Asset minus Total Liabilities.
CASH FLOW FROM OPERATIONS: Borrower shall maintain a positive cash flow from
operations as presented in the Sources and Uses Statement of the CPA prepared
financial statements, to be measured on a year to date basis.
PROFITABILITY: Borrower shall report minimum Earning Before Taxes of $1.00 in
any fiscal year, with no two consecutive quarterly losses.
▇▇▇▇▇▇▇▇ agrees with Bank that any settlement or other proceeds received from
United Space Alliance shall be applied to the principal balance of this Note.
Dated as of: December 18, 2002
Borrower: Hi-Shear Technology, Corp.
A Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------- ------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President/CEO ▇▇▇▇▇▇▇ ▇▇▇▇▇,VP
Finance/CFO
Bank: U.S. Bank N.A.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President