1
Exhibit 10.9
LOAN AGREEMENT
May 1, 1996
Implant Sciences Corporation
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Re: Loan Agreement with USTrust
Gentlemen:
USTrust, a Massachusetts trust company with its principal office at 00
Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx (hereinafter, the "Bank") hereby agrees to
establish the following credit facilities (hereinafter, collectively, the
"Loans") as described below in favor of Implant Sciences Corporation (the
"Borrower") subject to the following terms and conditions.
I. REVOLVING CREDIT
1. The Bank shall establish a discretionary line of credit (the "Revolving
Credit") in favor of the Borrower in the amount of the Borrower's
Availability (as defined below) subject to the following terms and
conditions:
a. All loans and advances made by the Bank to the Borrower
pursuant to the Revolving Credit shall be payable upon DEMAND
and shall be evidenced by the Borrower's Commercial Promissory
Note (the "Revolving Credit Note") executed this day and
delivered to the Bank substantially in the form of Exhibit A
annexed hereto. In the event that the Revolving Credit Note is
lost, destroyed or mutilated at any time prior to the
termination of the within Agreement, the Borrower shall
execute and deliver to the Bank a new promissory note
substantially in the form of the Revolving Credit Note,
whereupon the original Revolving Credit Note which was lost,
destroyed or mutilated shall become null and void and of no
further force and effect and the Bank shall indemnify the
Borrower for any damages or claims arising out of such
original lost, destroyed or mutilated Revolving Credit Note.
The original Revolving Credit Note shall not be necessary to
establish the indebtedness of the Borrower to the Bank on
account of such loans, advances and repayments. All payments
made by the Borrower under the Revolving Credit may be
reborrowed from time to time by the Borrower pursuant to the
terms hereof.
b. As used herein, the term "Availability" refers to the lesser
of
1
2
i. Seventy percent (70%) or such revised percentage as
the Bank may set from time to time in the Bank's
discretion of the face amount of the Borrower's
Acceptable Accounts as determined by the Bank. As
used herein, "Acceptable Accounts" shall mean those
domestic accounts of the Borrower as to which (x) the
Bank has a security interest, (y) the Borrower has
furnished to the Bank information as provided in
Section III, paragraph 3(d)(iv), below, and (z) are
less than sixty (60) days old from the invoice date
and otherwise are acceptable to the Bank for lending;
or
ii. One Hundred Thousand Dollars ($100,000.00) or such
other amounts the Bank may set from time to time in
the Bank's discretion.
c. At the time of each loan made to the Borrower pursuant to the
Revolving Credit, the Borrower shall immediately become
indebted to the Bank in the amount of that loan. Each such
loan may be credited by the Bank to any deposit account of the
Borrower with the Bank, or may be paid to the Borrower, or may
be applied to any obligation of the Borrower to the Bank as
the Bank may in each instance elect.
d. During each year in which the Revolving Credit is available to
the Borrower, the Borrower shall repay the full outstanding
balance of the Revolving Credit and remain out of debt under
the Revolving Credit for a minimum of thirty (30) consecutive
days.
e. All loans and advances made to the Borrower under the
Revolving Credit shall bear interest until repaid as provided
in the Revolving Credit Note.
II. EQUIPMENT/TERM LOAN
2. Subject to and in accordance with the terms of the within Agreement,
the Borrower may borrow, for the purposes of (i) the refinance of
existing term debt and (ii) the purchase of equipment deemed acceptable
to the Bank, up to Three Hundred Thousand Dollars ($300,000.00) (the
"Equipment/Term Loan"). So long as no event has occurred which is an
Event of Default (as defined in the Equipment/Term Note (as defined
below)) or would become an Event of Default with the giving of notice
and/or the passage of time and such occurrence were not cured within
any applicable grace period, the Borrower may request advances for
equipment purchases during the period commencing on the date hereof
through October 31, 1996 (the "Equipment Availability Period"). Such
requests shall be accompanied by a copy of the purchase order, quote,
or invoice relating to the subject equipment. The Equipment/Term Loan
shall be repaid as provided in the Borrower's Commercial Promissory
Note (the "Equipment/Term Note") in the form of Exhibit B annexed
hereto. Without limiting the foregoing, the Borrower shall pay interest
only on a monthly basis on the Equipment/Term Loan during the Equipment
Availability Period at the interest rate set forth in the
Equipment/Term Note. The Borrower shall at the end of the Equipment
Availability Period amortize the outstanding balance under the
Equipment/Term Loan as of November 1, 1996 based on a fifty-four (54)
month amortization schedule plus
2
3
interest as provided in the Equipment/Term Note. Amounts repaid under
the Equipment/Term Loan may not be reborrowed. The Bank shall not be
obligated to advance any funds under the Equipment/Term Loan after the
expiration of the Equipment Availability Period.
III. GENERAL TERMS AS TO THE LOANS
3. As a partial inducement to the Bank to make the Loans, the Borrower
shall execute, seal and deliver to the Bank the following documents:
a. A Security Agreement (hereinafter, the "Security Agreement")
granting to the Bank a security interest in and to all assets
of the Borrower, all as more fully set forth in said Security
Agreement, substantially in the form and substance of Exhibit
C annexed hereto, pursuant to which security interest the Bank
shall have a first lien in and to all assets of the Borrower;
b. A Guaranty in form and substance satisfactory to the Bank
executed by Xxxxxxx X. Xxxxxx (the "Guarantor") of the
Liabilities (as defined in said Guaranty) of the Borrower.
c. A Subordination Agreement in form and substance satisfactory
to the Bank executed by the Guarantor and Xxxxxxx X. Xxxxxx as
creditors of the Borrower providing that all Junior Debt is
subordinate to the Liabilities (each as defined in said
Subordination Agreement).
d. The Borrower shall provide the Bank with or cause the Bank to
be provided with such financial information requested by the
Bank from time to time, including, without limitation, the
following:
i. Annually, within 120 days from the end of each fiscal
year end of the Borrower, audited annual financial
statements of the Borrower in form and substance
satisfactory to the Bank by the Borrower's certified
public accountants (which accountants shall be
acceptable to the Bank);
ii. Annually, within 30 days from the end of each
calendar year, signed and sworn to personal financial
statements of the Guarantor in form and substance
satisfactory to the Bank;
iii. Quarterly, within 30 days from the end of each fiscal
quarter of the Borrower, management internally
prepared financial statements of the Borrower which
shall include at a minimum a balance sheet and profit
and loss statement for the subject quarter; and
3
4
iv. monthly, within 15 days from the end of each calendar
month, an accounts receivable aging and borrowing
base certificate in form and substance satisfactory
to the Bank.
4. The Borrower shall also comply with the following affirmative
covenants:
a. The ratio of EBIT to Debt Service shall not at any time be
less than 1.5 to 1.0. EBIT shall mean the Borrower's earnings
before interest and taxes plus depreciation as determined in
accordance with generally accepted accounting principles; and
Debt Service shall mean all principal and interest payments on
account of all outstanding and anticipated indebtedness owed
or to be owed by the Borrower to the Bank or to other third
parties.
b. The Borrower shall maintain a minimum Tangible Capital Base of
not less than $600,000.00 as of June 30, 1996, which minimum
Tangible Capital Base shall increase by $50,00.00 at each
fiscal year and thereafter. As used herein, Tangible Capital
Base shall mean the Borrower's net worth less intangible
assets plus subordinated debt.
c. The ratio of Senior Liabilities to Tangible Capital Base shall
not at any time be more than 1.25 to 1.0. As used herein,
Senior Liabilities shall mean the Borrower's (i) total
liabilities less (ii) subordinated debt.
d. In order to enable the Bank to monitor the financial condition
of the Borrower, the Borrower shall maintain all of the
Borrower's operating accounts with the Bank.
5. The Borrower shall also comply with the following negative covenants:
a. Borrower shall not convey, sell, assign, mortgage, pledge or
transfer in any manner whatsoever the Borrower's legal or
beneficial interest in any of the Borrower's assets, other
than in the ordinary course of the Borrower's business.
b. There shall be no material adverse change in (i) the financial
condition of the Borrower or the Guarantor or (ii) the
representations made by the Borrower or the Guarantor to the
Bank.
c. There shall be no material change in (i) the business of the
Borrower or (ii) the identity and authority of any person
having management authority with respect to the Borrower.
d. The Borrower does not and shall not hereafter have any
indebtedness for borrowed money with the exception of the
Loans and the Junior Debt (as defined in the Subordination
Agreement).
6. All notices, demand and other communications made in respect to this
Agreement shall be deemed made when given to the following addresses,
each of which may be changed upon
4
5
seven (7) days written notice to the others given by certified mail,
return receipt requested as follows:
If to Bank: USTrust
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxx III
Vice President
with a copy
to: Xxxxxx & Xxxxxxxxxx
0 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx Xxxxxxxx, Esq.
If to the
Borrower: Implant Sciences Corporation
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx
President
7. The Borrower shall pay all expenses of the Bank in connection with the
preparation, execution and delivery of this Agreement and of the other
documents and agreements between the Borrower and the Bank, including,
without limitation, reasonable attorneys' fees and disbursements of
counsel and all fees and expenses of counsel which the Bank may
hereafter incur in revising, protecting or enforcing any of its rights
against the Borrower, any security held by the Ban or against any
guarantor, and all costs of collection. The borrower specifically
authorizes the Bank to charge any account which the Borrower maintains
with the Bank to cover the foregoing.
5
6
Please indicate your agreement with the terms and conditions contained
in this letter by signing in the space provided below whereupon this letter
agreement shall take effect as a sealed instrument.
Very truly yours,
USTRUST
By: /s/ Xxxxx X. Xxxxx, III Vice President
--------------------------------------
Xxxxx X. Xxxxx, III
Vice President
Agreed and assented to under seal this 1st day of May, 1996.
IMPLANT SCIENCES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------
Xxxxxxx X. Xxxxxx
President
6
