EXHIBIT 4.2
CONVERTIBLE DEBT TERM SHEET
When signed by all parties, this Term Sheet will memorialize the terms
and conditions of a binding agreement between Xxxxxx X. Xxxxxxx
("Xxxxxxx") and DDL Electronics, Inc. ("DDL") as to all of the terms
herein set forth. This agreement may be supplemented by additional
definitive agreements, instruments and other documents including terms
and conditions customary in transactions of this nature but not
inconsistent herewith. The terms set forth herein shall not be further
modified or negotiated without the consent of both parties and shall be
included in the definitive agreements.
1. Xxxxxxx'x Advance: Not later than June 30, 1997, Xxxxxxx
will advance $2 million to DDL in immediately available funds for the
purpose of prepaying DDL's outstanding senior secured notes on June 30,
1997.
2. Convertible Note: DDL will issue to Xxxxxxx a secured non-
negotiable Convertible Note bearing simple interest, payable quarterly
in arrears, at 8% per annum, maturing at August 31, 1998 unless the
maturity thereof is accelerated pursuant to paragraph 3 below. Subject
to the prepayment option referred to in such paragraph 3, all (but not
less than all) of such Convertible Note may at Xxxxxxx'x option be
convertible at any time into DDL common stock until August 31, 1998 at a
conversion price equal to $0.75 per share of such common stock, subject
to antidilution adjustments.
3. Prepayment Option: Provisions will be included in the
final documents for prepayment of the note any time after sixty days
from closing. Prepayment will require 30 days notice from DDL in which
time Xxxxxxx has first right of refusal to exercise his conversion
rights at $0.75 per share in lieu of prepayment.
4. Security: The note will be secured by a pledge of all of
the outstanding common stock of SMTEK, Inc. as collateral.
5. Registration Requirement: DDL will register the shares
after conversion on the next available registration of stock, but not
later than twelve months from conversion. A lock-up period of three
months from conversion will be established in the final documents.
6. Corporate Governance: Xxxxxxx will be given the right to
select two representatives on DDL's Board of Directors immediately upon
funding. DDL will reconstitute its Board to make two Director positions
available within the seven existing positions. Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxxx will remain on the Board.
Agreed as of June 30, 1997:
DDL ELECTRONICS, INC.
By: /s/Xxxxxxx X. Xxxxxx /s/Xxxxxx X. Xxxxxxx
__________________________________ _____________________
Xxxxxxx X. Xxxxxx, President & CEO Xxxxxx X. Xxxxxxx
