EXHIBIT 99.6
TERM NOTE
$12,500,000 West Covina, California
January 27, 2004
FOR VALUE RECEIVED, the undersigned VIRCO MFG. CORPORATION ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at San Gabriel Valley Regional Commercial Banking Office, 1000
Lakes Drive, Suite 250, West Covina, California, or at such other place as the
holder hereof may designate, in lawful money of the United States of America and
in immediately available funds, the principal sum of $12,500,000, with interest
thereon as set forth herein.
This Term Note (this "Note") is the Term Note issued pursuant to the
Credit Agreement dated as of January 27, 2004 (as amended, restated,
supplemented or otherwise modified, the "Credit Agreement") between Borrower and
Bank. Terms defined in the Credit Agreement and not otherwise defined herein are
used herein as therein defined. Reference hereby is made to the Loan Documents
for a description of the assets in which a Lien has been granted, the nature and
extent of the security and the guaranties, the terms and conditions upon which
the Liens and each guaranty were granted and the rights of the holder of this
Note in respect thereof.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Fixed Rate Term" means a period commencing on a Business Day
and continuing for one (1), two (2), three (3), six (6), nine (9) or twelve (12)
months, as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in relation
to LIBOR; provided however, that no Fixed Rate Term may be selected for a
principal amount less than $1,000,000; and provided further, that no Fixed Rate
Term shall extend beyond the Term Loan Termination Date. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(b) "LIBOR" means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the
following formula:
Base LIBOR
LIBOR = --------------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United
States dollar deposits quoted by Bank as the Inter-Bank Market Offered
Rate, with the understanding that such rate is quoted by Bank for the
purpose of calculating effective rates of interest for loans making
reference thereto, on the first day of a Fixed Rate Term for delivery
of funds on
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said date for a period of time approximately equal to the number of
days in such Fixed Rate Term and in an amount approximately equal to
the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S.
dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for "Eurocurrency Liabilities" (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by
Bank for expected changes in such reserve percentage during the
applicable Fixed Rate Term.
(c) "Prime Rate" means at any time the rate of interest most
recently announced within Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Bank's base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed)
either at a (i) fluctuating rate per annum equal to the Prime Rate in effect
from time to time plus 0.75%, or (ii) at a fixed rate per annum determined by
Bank equal to LIBOR in effect on the first day of the applicable Fixed Rate Term
plus 3.25%. When interest is determined in relation to the Prime Rate, each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within Bank. With respect to each LIBOR selection
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term;
provided, however, that if an Event of Default has occurred and is continuing,
Borrower may not elect to continue or convert any portion of the Term Loan
outstanding hereunder into a LIBOR rate loan. Any such notice
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may be given by telephone (or such other electronic method as Bank may permit)
so long as, with respect to each LIBOR selection, (A) if requested by Bank,
Borrower provides to Bank written confirmation thereof not later than three (3)
Business Days after such notice is given, and (B) such notice is given to Bank
prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time
during any Business Day if Bank, at it's sole option but without obligation to
do so, accepts Borrower's notice and quotes a fixed rate to Borrower. If
Borrower does not immediately accept a fixed rate when quoted by Bank, the
quoted rate shall expire and any subsequent LIBOR request from Borrower shall be
subject to a redetermination by Bank of the applicable fixed rate. If no
specific designation of interest is made at the time this Note is disbursed or
at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime
Rate interest selection for this Note or the principal amount to which such
Fixed Rate Term applied.
(c) Taxes and Regulatory Costs. Borrower shall pay to Bank
immediately upon demand, in addition to any other amounts due or to become due
hereunder, any and all (i) withholdings, interest equalization taxes, stamp
taxes or other taxes (except income and franchise taxes) imposed by any
Governmental Authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any Governmental Authority or resulting
from compliance by Bank with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority and related
in any manner to LIBOR to the extent they are not included in the calculation of
LIBOR. In determining which of the foregoing are attributable to any LIBOR
option available to Borrower hereunder, any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be
payable on the first day of each month, commencing February 1, 2004.
(e) Default Interest. From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder becomes due and
payable by acceleration or otherwise, the outstanding principal balance of this
Note shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360 day year, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note.
REPAYMENT AND PREPAYMENT:
(a) Repayment. The Term Loan evidenced hereby shall be payable as
follows and without set off, counterclaim or reduction of any kind:
(i) an installment of principal equal to $520,833.34
shall be due and payable on each January 31, April 30, July 31 and
October 31 of each year, commencing on April 30, 2004;
(ii) on the date of the consummation of any disposition of
any assets of Borrower or any of its Subsidiaries (other than a
disposition permitted by Section 5.6 of the Credit Agreement), an
amount of the cash proceeds received in connection such
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disposition equal to the excess, if any, of the aggregate cash proceeds
received in connection with all dispositions of assets (other than
those permitted by Section 5.6 of the Credit Agreement) less (A) any
fees, costs, commissions and expenses reasonably incurred in connection
with such dispositions and (B) the taxes actually paid or to be payable
by Borrower (as estimated by the chief financial officer of Borrower,
giving effect to the overall tax position of Borrower), over $500,000,
shall be payable in respect of the Indebtedness evidenced hereby; such
payment shall be applied in the inverse order of the maturities due
hereunder (and, Borrower acknowledges that nothing contained in this
subclause (ii) shall permit Borrower or any of its Subsidiaries to sell
or otherwise dispose of any assets other than in accordance with
Section 5.6 of the Credit Agreement); and
(iii) the principal Indebtedness evidenced hereby shall be
payable on the Term Loan Termination Date.
(b) Application of Payments. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
(c) Prepayment.
Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty. Any such prepayment shall be applied in the
inverse order of the maturities due hereunder.
LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of $1,000,000; provided however, that if the outstanding principal
balance of such portion of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrower, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) Determine the amount of interest which would have
accrued each month on the amount prepaid at the interest rate
applicable to such amount had it remained outstanding until the last
day of the Fixed Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the
amount of interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term at LIBOR
in effect on the date of prepayment for new loans made for such term
and in a principal amount equal to the amount prepaid.
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(iii) If the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii)
above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2%) above the Prime
Rate in effect from time to time (computed on the basis of a 360 day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
All prepayments of principal shall be applied on the most remote
principal installment or installments then unpaid.
EVENTS OF DEFAULT:
Any default in the payment or performance of any obligation under this
Note, or any defined Event of Default under the Credit Agreement, shall
constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
VIRCO MFG. CORPORATION
By: /s/ Robert E. Dose
----------------------------------
Robert E. Dose
Vice President - Finance, Secretary and
Treasurer
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