Document:

exv10w28

 

EXHIBIT 10.28

[LOGO] bank hapaoalim

MULTIPLE-LOAN RIDER TO PROMISSORY NOTE

LOAN(S) DENOMINATED IN U.S. OR OTHER CURRENCY

LIBOR-BASED RATE

This Rider
is referred to in paragraph 3 of and constitutes a part of, a note of
Borrower to the Bank dated

As of March 1, 2006 in the amount of $4,000,000.00

	 	 	 	 	 
	Specific Terms	 	 	 	 
	(a)
	 	Margin:	 	1.75% per year
	(b)
	 	Interest Period:	 	1, 2 or 3 months and as agreed from time m time
	(c)
	 	Minimum Draw Amount:	 	$100,000.00
	(d)
	 	Minimum Multiple Amount:	 	None

Borrower agrees to the above Specific Term and to all of the Terms and Conditions
set forth below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	Print Borrower’s Name:	 	 	 	 	 	VALENTEC SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(Signature) By:	 	/s/ Robert A. Zummo	 	 	 	(Signature) by: 	 	/s/ Zvika Kreisman	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Print Name:	 	Robert A. Zummo	 	 	 	Print Name:	 	     Zvika Kresiman	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Print title:

	 	 	 	President, CEO
	 	 	 	Print Title:
	 	           Director	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

TERMS AND CONDITIONS

Certain capitalized terms are defined in paragraph 4.

1. Advances. Borrower may receive a Loan in any principal amount upon Borrower’s
request to the Bank and the Bank’s agreement thereto, subject to all of the following
conditions:

     Agreement of the Bank and Borrower. Subject to subparagraphs l(b), 1(c) and
2(b), the Bank and Borrower shall have agreed, not later than the Determination Time, with
respect to the Loan’s (i) principal amount, (ii) LIBOR Based Rate and (iii) Interest Period;
provided, however, that if the Bank determines that by such Determination Time,
Borrower has failed or declined to agree on the LIBOR-Based Rate and/or Interest Period with
respect to such Outstanding Principal Amount, then interest on such Outstanding Principal
Amount shall accrue at the LIBOR-Based Rate without the agreement of Borrower, and the
Interest Period shall be of the same duration as the Interest Period just ended with respect
to such Outstanding Principal Amount or, if there was no such prior Interest Period, one
month.

     Applicable limitations. (i) The applicable Payment Date shall not be later
than the Due Date; (H) the total of the Outstanding Principal Amounts of all Loans shall not
exceed the principal amount set forth in the Note; (iii) the principal amount of any single
Loan request shall be not less than any Minimum Draw Amount set. forth under Specific
Terms; and (iv) the principal amount of any single Loan request shall be an integral
multiple of any Minimum Multiple Amount set forth under Specific Terms.

     Borrower’s request and agreement. Borrower’s request for a Loan and Borrower’s
agreement to the terms thereof shall be communicated to the Bank in any form that is
acceptable in each instance to the Bank in its sole discretion, which may include telephone,
telex, fax, email or a writing executed by Borrower. Borrower shall have provided the Bank
with documentation, satisfactory in form and substance

 

 

to the Bank in its sole discretion, confirming the authority of the person(s) agreeing to
such terms on behalf of Borrower.

2. Payment of Principal and Interest. Subject to the other provisions of the Note:

     (a) Obligation; Time and Manner of Payment. Subject to the other provisions
of the Note and this Rider, the Outstanding Principal Amount shall be due and payable at the
applicable Payment Date. Unless specified otherwise in the Note or in a Rider thereto,
every payment to be made by or on behalf of the Borrower under the Note shall be made in
U.S. Dollars, and the designation of U.S. Dollars as the currency of payment is of the,
essence. Every payment or delivery under the Note by or on behalf of Borrower of any money
denominated many Currency shall be made at the Office and/or to such account or accounts as
the Bank may designate from time to time by notice to Borrower, in immediately available and
freely transferable funds in the Currency in which the applicable obligation is denominated
and in Currency that is unrestricted, unblocked and free of exchange controls, without set
off, counterclaim, withholding or deduction of any kind whatsoever. Except as otherwise
provided herein, any payment due under the Note on a day that is not a Business Day shall be
payable on the next succeeding Business Day.

     (b) Loan Rate. Interest on any Outstanding Principal Amount shall accrue at
the LIBOR-Based Rate; provide however, that if the Bank determines (1) that by the
Determination Time (A) lay reason of circumstances affecting the London Interbank Market
generally, adequate and fair means do not exist for ascertaining an applicable LIBOR rate or
it is impractical for the Bank to fund or continue to fund the Outstanding Principal Amount
during the applicable Interest Period, or (B) quotes for funds in the relevant Currency in
sufficient amounts comparable to the relevant Outstanding Principal Amount and for the
duration of the applicable interest Period would not be available to the Bank in the London
Interbank Market, or (C) quotes for funds in the relevant Currency in the London Interbank
Market will not accurately reflect the cost to the Bank of making a Loan or of funding. the
relevant Outstanding Principal Amount during the applicable Interest Period, or (ii) that
at, any time the making or funding of loans, or charging of interest at rates, based on
LIBOR shall be unlawful or unenforceable for any reason, then as long as such
circumstance(s) shall continue, interest on the relevant Outstanding Principal. Amount
shall accrue at the Alternate Rate.

     (c) Payment and Calculation of Interest. Interest shall be payable (i) at
each Payment Date or (whenever the Applicable Rate is a Variable Prime-Based Rate) monthly,
(ii) at the Due Date and (iii) at any time that any Outstanding Principal. Amount or part
thereof is paid. Interest shall be calculated as set forth in the Note.

     (d) Currency of Payment. Upon any failure of Borrower to pay or deliver any
amount of Currency when due, the Bank may, at its option in its sole discretion, require
Borrower to pay the equivalent of such amount in any other Currency, computed at the Bank’s
selling rate for such Currency at the place cohere such amount is due. The receipt by the
Bank of any amount in respect of any obligation under the Note in a Currency other than that
in which such amount was originally due, whether pursuant to a judgment or arbitration award
or pursuant to the provisions of the Note or any agreement or otherwise, shall not discharge
Borrower with respect to any such obligation except to the extent that on the first day on
which the Bank is open for business immediately following such receipt; the Bank shall be
able, in accordance with normal banking practice, to purchase the Currency in which such
amount was due with the Currency received. If the amount so purchasable shall be less than
the original amount of the Currency in which such amount was due, Borrower shall,
notwithstanding any judgment or arbitration award, indemnify and hold the Bank harmless
against any logs sustained by it. Borrower shall in any event indemnify the Bank against
any and all costs incurred by it in making any such purchase of Currency.

3. Bank’s Conclusive Determinations and Schedule. The Bank’s determination with
respect to any matter hereunder shall be conclusive, final and binding on Borrower, absent
manifest error. The Bank shall from time to time record the date and amount of each Loan,
the Applicable Rate, each date on which any part of principal, interest or any other amount
shall be due and payable, and the amount and date of each payment of principal, interest or
any other amount, on a schedule, which in the Bank’s discretion may be computer-generated
and/or may be taken from the Bank’s general books and records, and which schedule is

 

 

incorporated in, and is a part of, the Note and this Rider (the “Schedule”). The Schedule
shall be conclusive, final and binding upon Borrower, absent manifest error, provide however
that the failure of the Bank to record any of the foregoing shall not limit or otherwise
affect the obligation of Borrower to pay all amounts owed to the Bank under the Note.
Without limiting the foregoing, Borrower acknowledges that the Interest Period and the
Applicable Rate with respect to any Outstanding Principal Amount are subject to the Bank’s
consent ordinarily negotiated between Borrower and the Bank by telephone; and Borrower
agrees that in the event of any dispute as to any of the terms of any Loan, the
determination of the Bank and its respective entry with respect thereto on its books and
records and/or on the Schedule shall be conclusive, final and binding an Borrower, absent
manifest error.

4. Definitions. Each capitalized term not defined herein shall have the meaning
ascribed thereto in the Note. The following definitions apply in this Rider and in the
Note, and shall prevail over any different definitions in the Note.

     (a) Alternate Rate: an annual Variable Prime-Based Rate equal to the Prime
Rate plus the Margin.

     (b) Applicable Rate: whichever of the Loan Rate or Increased Rate is the
applicable interest rate at anytime with respect to any Outstanding Principal Amount.

     (c) Currency: money denominated in the lawful currency of any country (including but not limited to the lawful currency of the United
States) or any unit of account or single or unified currency of the European Community.

     (d) Determination Time: 12:00 noon (or any later time determined by the Bank
in its sole discretion), New York City time, of a Working Day that is three Working Days
prior to the date of the Loan.

     (e) Due Date: the date set forth in paragraph 1 of the Note, or, if the Bank
has extended such date pursuant to paragraph G(5) of the Note or by an agreement with
Borrower, such extended date.

     (f) Interest Period: any term of 1 day, 1 week, 1 to 6, 9 or 12 months, or
such other term as maybe acceptable to the Bank in its discretion, as set forth above under
Specific Terns or if not so set forth, as selected or agreed to by the Bank in its
discretion. A term shall not be considered an “Interest Period” during any period that the
Applicable Rate is a Variable Prime-Based Rate. Each Interest Period shall commence
immediately at the end of the preceding Interest Period, if any. If there had been no
immediately preceding Interest Period with respect to any Outstanding Principal Amount, the
Interest Period shall commence on the fast Business Day on which (i) such amount shall be
outstanding and (ii) the Applicable Rate is not a Variable Prime-Based Rate. If any
Interest Period would otherwise come to an end on a day that is not a Working Day, its
termination shall be postponed to the next day that is a Working Day unless it would thereby
terminate in the next calendar month. In such case, such Interest Period shall terminate on
the immediately preceding Working Day.

     (g) LIBOR for each Interest Period: the rate per annum (carried out to the
fifth decimal) equal to the rate determined by the Bank to be the offered rate on a page or
service (whether provided by Bridge Telerate, Reuters, Bloomberg or any other service) that
displays an average British Bankers Association Interest Settlement Rate for deposits in the
applicable Currency (for delivery on the first Working Day of such interest Period) with a
term equivalent to such interest Period, determined as of approximately 11:00 a.m. (London
time) two (2) Working Days prior to the Bust Working Day of such Interest Period. At the
Borrower’s request, the Bank will provide the Borrower with identifying information with
respect to the page or service so used by the Bank. If the Bank determines that the rate
referenced in the first sentence of this paragraph is not available, then “LIBOR” will mean;
as applicable to any Interest Period, the rate determined () on the basis of the offered
rates for deposits in the applicable Currency with a term equivalent to such Interest
Period, which are offered by four major banks selected by the Bank in the London interbank
market at approximately 11:00 am. London time, on the Working Day that. is two (2) Working
Days prior to the first Working Day of such Interest Period; or (it) by applying such other

 

 

recognized source of London Eurocurrency deposit rates as the Bank may determine from time
to time. If the Bank determines in its sole discretion that LIBOR cannot be determined or
does not represent its effective cost of maintaining a Loan, then interest shall accrue at
the effective cost to the Bank to maintain the Loan (as determined by the Bank in its sole
discretion).

     (h) LIBOR—Based Rate: an annual rate equal to LIBOR plus the Margin, as
determined by the Bank.

     (i) Loan: (i) any loan advanced by the Bank, to Borrower under the Note, (ii)
any rollover by the Bank of any such loan that is otherwise due and payable, or (iii) any
conversion of the Applicable Rate for any Outstanding Principal Amount from a rate that is a
Variable Prime-Based Rate to one that is not, or vice versa.

     (j) Loan Rate: the, interest rate determined under subparagraph 1(a) and/or
2(b).

     (k) Margin: as set forth under Specific Terms or, if not so set forth, 2% per
year.

     (1) Note: the note of which this Rider is a part (including any and all riders
and amendments to the Note),

     (m) Outstanding Principal Amount: the outstanding principal amount of each
Loan.

     (n) Payment Date: the last Business Day of the applicable Interest Period or,
if the applicable Loan Rate is a Variable Prime-Based Rate, the Due Date,

     (o) Working Day: a Business Day on which banks are regularly open for
business in London.

 

 

PROMISSORY NOTE

U.S. $4,000,000.00

Dated: As of March 1, 2006, New York, New York

	1.	 	Obligation and Repayment: For value received, Borrower absolutely and unconditionally
promises to pay to the order of the Bank, at the Office, without defense, setoff or
counterclaim, the principal amount of Four Million and 00/100
United States Dollars, together
with interest and any other sum(s) due and payable as specified below. The principal amount of
this Note shall be due and payable on June 13, 2006 unless due and payable sooner in
accordance with the terms of this Note and Rider.
	 
	2.	 	Interest: Subject to paragraph A(2) of the Terms and Conditions, interest shall accrue
on the principal amount of this Note outstanding from time to time at the following rate
described in the Rider referred to in Paragraph 3 below (the “Loan Rate”). Interest shall be
payable in accordance with the attached Rider and at any Payment Date and at any time that any
part of the principal or any installment of this Note is paid.
	 
	3.	 	Riders: In the event of any inconsistency between this Note and any Rider(s) to which this
Note is subject, the provisions of such Rider(s) shall prevail. This Note is subject to the
following Rider, which is part of this Note:
	 
	 	 	Multiple-Loan Rider to Promissory Note, Loan(s) Denominated in U.S. or Other Currency
(Libor-Based Rate).
	 
	4.	 	Address and Identification of Borrower:

	 	 	 	 	 
	 	 	Address: 2618 York Avenue
	 

	 	 	 	   Minden, LA
	 	 	Telephone:
(318) 282-4586
	 	 	Fax: (318) 382-4583
	 	 	Social Security or
Taxpayer ID number: 33-0618610

	5.	 	Agreement to All Terms and Conditions; Authorization to Complete Blanks: This Note
is subject to all of the Terms and Conditions set forth below. Each of the undersigned agrees
to all of the provisions of this Note, Including the Terms and Conditions and any Rider(s).
The Bank is authorized to complete any blank space in this Note. Such completion shall be
conclusive, final and binding on Borrower in the absence of manifest error.
	 
	6.	 	No Representations or Agreements by the Bank: Each of the undersigned acknowledges that
the Bank has made no representation, covenant, commitment or agreement to Borrower
except pursuant to any written document executed by the Bank.
	 
	7.	 	No Representation of Nonenforcement: Each of the undersigned acknowledges that no
representative or agent of the Bank has represented or indicated that the Bank will not
enforce any provision of this Note, Including the Terms and Conditions and any Rider(s), in
the event of litigation or otherwise.
	 
	8.	 	Waiver of Jury Trail: Borrower waives, and understands that the Bank waives, the right to
a jury trial with respect to any dispute arising hereunder or relating to any of the
Liabilities; any judicial proceeding with respect to any such dispute shall take place
without a jury.
	 
	9.	 	This Note supersedes and replaces that certain Note dated September 6, 2005 in the amount
of $3,000,000.00 executed by the Borrower in favor of the Bank but does not extinguish
the Indebtedness evidenced thereby.
	 
	10.	 	Execution of Promissory Note:

	 	 	 	 	 	 	 	 	 
	 	 	Print name of Borrower: VALENTEC SYSTEMS, INC.	 	 
	 	 	(Signature) By:	 	/s/ Robert A. Zummo	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	Print name:	 	Robert A. Zummo	 	 
	 	 	Title or capacity (if signing on behalf of Borrower):	 	 
	 	 	President, CEO	 	 
	 
	 	 	(Signature) By:	 	/s/ Zvika Kriezman	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	Print name:	 	Zvika Kreisman	 	 
	 	 	Title or capacity (if signing on behalf of Borrower):	 	 
	 	 	Director	 	 	 	 

TERMS AND CONDITIONS

Definitions are set forth in paragraph M.

	A.	 	Calculation and Accrual of Interest: (1) Generally. Interest shall be calculated on a dally
basis on outstanding
balances at the Applicable Rate, divided by 360, on the actual days elapsed. During any time
that the Applicable Rate would exceed the applicable maximum lawful rate of interest, the
Applicable Rate shall automatically be reduced to such maximum rate, Any interest payment made in
excess of such maximum rate shall be applied as, and deemed to be, in the Bank’s sole discretion,
(a) a payment of any of the Liabilities, in such manner as
determined by the Bank, or (b) cash
collateral to be retained by the Bank to secure repayment of this Note. (2) Increased Rate.
Interest shall accrue at the Increased Rate upon and after (a) the occurrence of any Debtor
Relief Action, (b) any demand of payment of this Note (If payable on demand) or (c) the
occurrence of any Event of Default (if this Note is payable other than on demand) (3)
Accrual. To the extent permitted by Law, interest shall accrue at the Applicable Rate on all
unpaid Liabilities under this Note, including but not limited to any unpaid Interest and any
unpaid obligation owed pursuant to paragraph B (Indemnification).
	 
	B.	 	Indemnification: To the extent permitted by Law: (1) Taxes. All payments under this Note
shall be made free and clear of, and without deduction for, any Taxes. If Borrower shall be
required to deduct any Taxes in respect of any sum payable under this Note, then (a) the sum
payable shall be Increased so that the Bank shall receive an amount equal to the sum the Bank
would have received had no deductions been made, and (b) Borrower shall make such deductions
and shall pay the amount deducted to the relevant Governmental Authority. Borrower shall pay
to the Bank on demand, and shall Indemnify and hold the Bank harmless from, any and all Taxes
paid by the Bank and any and all

 

 

	 	 	liability (Including penalties, Interest and expenses) with respect thereto, whether or not such
Taxes were correctly or legally asserted. Within 30 days after any Taxes are paid, Borrower
shall furnish evidence thereof to the Bank. (2) Regulatory Costs. In the event that in
connection with the transaction(s) contemplated by this Note and/or the Bank’s funding of such
transaction(s), the Bank is required to incur any Regulatory Costs in order to comply with any
Law issued after the date of this Note, then Borrower shall pay to the Bank on demand, and
shall indemnify and hold the Bank harmless from, any and all such Regulatory Costs. (3) Costs
and Expenses. Borrower shall pay the Bank on demand, and shall indemnify and hold the Bank
harmless from, any and all Costs and Expenses. (4) Prepayment
Costs. If Borrower makes any
payment of Prepaid Principal (voluntarily or not), and if the Applicable Rate with respect to
such Prepaid Principal is not a Variable Prime-Based Rate, then Borrower shall pay to the Bank
an amount sufficient to compensate the Bank for its Prepayment Costs. Borrower acknowledges
that determining the actual amount of Prepayment Costs may be difficult or impossible in any
specific instance. Accordingly, Borrower agrees that Prepayment Costs shall be deemed to be
the excess, if any, of (i) the product of (A) the Prepaid Principal, times (B)
the Applicable Rate divided by 360, times (C) the remaining number of days from the date of
the payment to the applicable Payment Date, over (ii) that amount of interest which the Bank
determines that the holder of a Treasury Obligation selected by the
Bank in the amount (or as
close to such amount as feasible) of the Prepaid Principal and having a maturity date on (or
as soon after as feasible) the applicable Payment Date would earn if that Treasury Obligation
were purchased in the secondary market on the date the Prepaid Principal is paid to the Bank
and were held to maturity. Borrower agrees that the determination of Prepayment Costs shall be
based on amounts which a holder of a Treasury Obligation could receive under these
circumstances, whether or not the Bank actually invests the Prepaid Principal in any Treasury
Obligation. (6) Bank Certificate. The Bank’s certificate as to any amounts owing under this
paragraph shall be prima facie evidence of Borrower’s obligation.
	 
	C.	 	Set Off: Every Account of Borrower with the Bank shall be subject to a lien and to being set
off against the Liabilities. The Bank may at any time at its option
and without notice, except
as may be required by law, charge and/or appropriate and apply all or any part of any
such Account forward the payment of any of the Liabilities.
	 
	D.	 	Events of Default: The remainder of this paragraph D
shall not apply if this Note is payable
on demand, Each of the following shall be an Event of Default
hereunder. (1) Nonpayment. (a)
The nonpayment when due of any part of the Liabilities; (b) the prohibition by any Law of
payment of any part of any of the Liabilities. (2) Bankruptcy; Adverse Proceedings. (a) The
occurrence of any Debtor Relief Action; (b) the appointment of a receiver, trustee, committee,
custodian, personal representative or similar official far any Party or for any Material part
of any Party’s property; (c) any action taken by any Party to authorize or consent to any
action set forth in subparagraph D(2)(a) or (b): (d) the rendering against any Party of one
or more judgments, orders, decrees and/or arbitration awards (whether for the payment of
money or injunctive or other relief) which in the aggregate are Material to such Party, if
they continue in effect for 30 days without being vacated, discharged, stayed, satisfied or
performed; (e) the issuance or filing of any warrant, process, order of attachment,
garnishment or other lien or levy against any Material part of any Party’s property; (f) the
commencement of any proceeding under, or the use of any of the provisions of, any Law against
any Material part of any Party’s property, including but not limited to any Law (i) relating
to the enforcement of judgments or (ii) providing for forfeiture to, or condemnation,
appropriation, seizure or taking possession by, or on order of, any Governmental Authority;
(g) the forfeiture to, or the condemnation, appropriation, seizure, or taking possession by, or on order of, any Governmental Authority, of any Material part of any
Party’s property; (h) any Party being charged with a crime by indictment, information or the
like. (3) Noncompliance. (a) Any Default with respect to any Agreement with or to the Bank; (b)
the giving to the Bank by or on behalf of any Party at any time of any materially incorrect or
incomplete representation, warranty, statement or information; (c) the failure of any Party to
furnish to the Bank, copies of its financial statements and such other information respecting
its business, properties, condition or operations, financial or otherwise, promptly when, and in
such form as, reasonably required or requested by the Bank; (d) any Party’s failure or refusal,
upon reasonable notice from the Bank, to permit the Bank’s representative(s) to visit such
Party’s premises during normal business hours and to examine and make photographs, copies and
extracts of such Party’s property and of its books and records; (e) any Party’s concealing,
removing or permitting to be concealed or removed, any part of its property with the intent to
hinder or defraud any of its creditors; (f) any Party’s making or suffering any Transfer of arty
of its property, which Transfer is deemed fraudulent under the law of any applicable
jurisdiction; (g) the revocation or early termination of any Party’s obligations under any
Agreement with or to the Bank (including but not limited to any of the Liabilities), or the
validity, binding effect or enforceability of any of such obligations being challenged or
questioned, whether or not by the institution of proceedings, (h) the revocation, withdrawal,
expiration, reduction or default of or under any related Letter of Undertaking or guarantee, or
any agreement to which a Letter of Undertaking or guarantee was issued. (4) Adverse Changes. (a)
The occurrence of a Material adverse change in any Party’s financial condition; (b) the death or
incompetence (if a person) or the dissolution or liquidation (if a corporation, partnership or
other entity) of any Party or such Party’s failure to be and remain in good standing and
qualified to do business in each jurisdiction Material to such Party; (c) any Material Default
with respect to any Material Agreement other than with or to the Bank; (d) any Default pursuant
to which any Person shall have the power to effect an Acceleration of any Material Debt; (e) any
Acceleration or demand of payment with respect to any Material Debt; (f) any Party’s becoming
insolvent, as defined in the Uniform Commercial Code; (g) the Bank’s believing in good faith that
the prospect of payment of any of the Liabilities or of performance of any other obligation of
any Party to the Bank is impaired; (h) the Material suspension of any Party’s business; (i) any
Party’s Material failure to pay any tax when due; (j) the expulsion of any Party from any
exchange or self-regulatory organization or any loss, suspension, nonrenewal or invalidity of any
Party’s Material license, permit, franchise, patent, copyright, trademark or the like; (k) the
occurrence of any event which gives any Person the right to assert a lien, levy or right of
forfeiture against any Material part of any Party’s property; (l) Borrower’s failure to give the
Bank notice, within 10 Business Days after Borrower had notice or knowledge, of the occurrence of
any event which, with the giving of notice and/or lapse of time, would constitute an Event of
Default. (5) Business changes. (a) any change in Control of any Party; (b) any merger or
consolidation involving any Party; (c) any Party’s sale or other Transfer of substantially all of
its property; (d) any bulk sals by any Party; (e) any Material change in the nature or structure
of any Party’s business. (6) Exchange Controls. (a) Any Party’s failure to obtain any Exchange
Control Permit deemed by the Bank to be necessary or appropriate; (b) the failure to obtain the
renewal of any such Exchange Control Permit at least 30 days prior to its expiration.
	 
	E.	 	Remedies: (1) Acceleration at Bank’s Option. Upon any failure to pay this Note in full on
demand (if payable on demand) or (if this Note is payable other than on demand) upon the
occurrence of any Event of Default other than any Debtor Relief Action, then any and all
Liabilities, not then due, shall, at the Bank’s option.

2

 

	 	 	become immediately due and payable without notice, which Borrower waives. (2) Automatic
Acceleration. The occurrence of any Debtor Relief Action, then, whether or not any of the
Liabilities are payable upon demand and notwithstanding paragraph F, any and all Liabilities
not then due, shall automatically become immediately due and payable without notice or demand,
which Borrower waives. (3) Additional Remedies. Bank shall have all rights and remedies
available to it under any applicable Agreement or Law.
	 
	F.	 	Waiver of Protest, etc.: Notice, presentment, protest, notice of dishonor and (except for
such of the Liabilities as are payable on demand, but subject to subparagraph E(2)) demand for payment are hereby waived as to all of the Liabilities.
	 
	G.	 	Payment: (1) Manner. Any payment by other than immediately available funds shall be
subject to collection. Interest shall continue to accrue until the funds by which payment is
made are available to the Bank. If and to the extent any payment of any of the Liabilities
is not made when due, the Bank is authorized In its discretion to effect payment by charging
any amount so due against any Account of Borrower with the Bank without notice, except as may
be required by law, whether or not such charge creates an overdraft. (2) Application.
Any payment received by the Bank (including a deemed payment under paragraph A, a set-off
under paragraph C or a charge against an Account under this paragraph G) shall be applied to
pay any obligation of indemnification (including but not limited to under paragraph B) and
to pay any other Liabilities (including Interest thereon and the principal thereof) In
such order as the Bank shall elect in its discretion. Borrower will continue to be liable for
any deficiency. (3) Prepayment. Borrower shall be entitled to pay any outstanding principal
amount or installment under this Note on any Business Day prior to
the applicable Payment Date
without the prior consent of the Bank, provided that (a) any such payment shall be together
with payment of all Liabilities then due and all interest accrued on the Prepaid Principal to
the date of such payment, and (b) if the Applicable Rate with respect to such Prepaid
Principal is not a Variable Prime-Based Rate, any such payment shall be on not less than 5
Business Days’ notice to the Bank and shall be accompanied by any amount required pursuant to
subparagraph B(4). Any such payment shall, unless otherwise consented to by the Bank, be
applied pro rata to the last outstanding principal amount(s) to
become due under this Note in
inverse order of maturity. (4) Non-Business Days. If any
payment of any of the Liabilities is
due on any day that is not a Business Day, It shall be payable on the next Business Day. The
additional day(s) shall be included in the computation of interest. (5) Extension at Bank’s
Option. The Bank shall have the option, which may be exercised
one or more times by notice(s)
to Borrower, to extend the date on which any amount is payable hereunder to one or more
subsequent date(s) set forth in such notice(s).
	 
	H.	 	Parties; Counterparts; No Transfer by Borrower: If Borrower is more than one Person, all of
them shall be jointly and severally liable under this Note. This Note and any Rider hereto may
be executed in counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single instrument. The obligations under this Note shall
continue In force and shall apply notwithstanding any change in the membership of any
partnership executing this Note, whether arising from the death or retirement of one or more
partners or the accession of one or more new partners. Without the
Bank’s written consent,
Borrower shall have no right to make any Transfer of any of the Liabilities; any such
purported Transfer shall be vold. Subject to the foregoing, the provisions of this Note shall
be binding on Borrower’s executors, administrators, successors
and assigns.
	 
	I.	 	Bank Transfers: (1) Transferability. Without
limiting the Bank’s rights hereunder, the Bank
may make a Transfer of all or any part of (a) any obligation of Borrower to the Bank
(including but not limited to any of the Liabilities), (b) any obligation of any other Party in connection with any of the Liabilities, (c) any Agreement of any
Party in connection with any of the Liabilities, (d) any collateral, mortgage, lien or security
interest, however denominated, securing any of the Liabilities, and/or (e) the Bank’s rights and,
if any, obligations with respect to any of the foregoing. (2) Extent of Transfer. In the event
the Bank shall make any Transfer of any of the foregoing items (“Transferred Items”), then — to
the extent provided by the Bank with respect to such Transfer— the Transferee shall have the
rights, powers, privileges and remedies of the Bank. The Bank shall thereafter, to the extent of
such Transfer, be forever relieved and fully discharged from all liability or responsibility, if
any, that it may have to any Person with respect thereto, except for claims, if any, arising
prior to or upon such Transfer. The Bank shall retain all its rights and powers with respect to
any Transferred items to the extent that it has not made a Transfer thereof. Without limiting the
foregoing, to the extent of any such Transfer, paragraph B (Indemnification) shall apply to any
Taxes, Regulatory Costs, Costs and Expenses, and Prepayment Costs of, or Incurred by, any
Transferee, and paragraphs C (Set-Off) and G(1) (Payment-Manner) shall apply to any Account of
Borrower with any Transferee. (3) Disclosures. The Bank is authorized to disclose to any
prospective or actual Transferee any information that the Bank may have or acquire about Borrower
and any information about any other Person submitted to the Bank by or on behalf of Borrower. (4)
Negotiability Defenses Waived. If this Note is not a negotiable instrument, Borrower waives all
defenses (except such defenses as may be asserted against a holder in due course of a negotiable
Instrument) which Borrower may have or acquire against any Transferee who takes this Note, or any
complete or partial Interest in it, for value, in good faith and without notice that it is
overdue or has been dishonored or of any defense against or claim to it on the part of any
Person.
	 
	J.	 	No Oral Changes; No Waiver by the Bank; Partial
Unenforceability: This Note may not be
changed orally. Neither a waiver by the Bank of any of its options, powers or rights in one or
more instances, nor any delay on the part of the Bank in exercising any of them, nor any
partial or single exercise thereof, shall constitute a waiver thereof In any other instance.
Any provision of this Note which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent, of such
prohibition, unenforceability or nonauthorization, without Invalidating the remaining
provisions of this Note in that or any other jurisdiction and without affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
	 
	K.	 	Disputes and Litigation; (1) Governing Law. This Note and the rights and obligations of the
Bank and Borrower hereunder shall be governed by the Internal laws of the State of New York
without giving effect to conflict of laws principles. (2) Jurisdiction, Venue, and Service of
Process. Borrower submits to the nonexclusive jurisdiction of the federal and state courts In
the State of New York In New York County with respect to any dispute arising hereunder or
relating to any of the Liabilities. Service of process may be made on Borrower by personal
delivery at, or by mail addressed to, any address to which the Bank is authorized to address
notices to Borrower. (3) Waiver of Defenses, Setoffs, Counterclaims and Certain Damages.
Borrower waives the right to assert any defense, setoff or
counterclaim in any proceeding
relating in any way to this Note or any transaction contemplated hereby. The Bank shall not
have any liability for negligence, except solely to the extent required by law and not
disclaimable, and except for its own gross negligence or willful
misconduct. In any event, the Bank shall not have
any liability for any special, consequential or punitive damages. (4) Sovereign Immunity.
Borrower Irrevocably waives, with respect to itself and its property, any sovereign

3

 

	 	 	immunity that it may have or hereafter acquire, including but not limited to Immunity from
the jurisdiction of any court, from any legal process, from
attachment prior to judgment, from
attachment in aid of execution, from execution or otherwise.
	 
	L.	 	Notice: Any notice in connection with any of the Liabilities shall be in writing and may be
delivered personally or by cable, telex, telecopy or other electronic means of communication,
or by certified mail, return receipt requested, addressed (a) to Borrower as set forth herein
or to any other address that the Bank believes to be Borrower’s address, and (b) to the Bank
at Bank Hapoalim B.M., 1177 Avenue of the Americas, New York, New York 10035, Attention: Legal
Department. Any such notice shall be addressed to such other address (es) as may be designated
in writing hereafter. All such notices shall be deemed given when delivered personally or
electronically or when mailed, except notice of change of address, which shall be deemed to
have been given when received.
	 
	M.	 	Definitions: The following definitions apply in this Note: (1) Acceleration: any acceleration
of payment or requirement of prepayment of any Debt, or any Debts becoming due and payable
prior to stated maturity. (2) Account (a) the balance of any account of Borrower with any
Person, (b) any claim of Borrower against any Person, and/or (c) any property in the
possession or custody of, or in transit to, any Person, whether for safekeeping, collection,
pledge or otherwise, as to which Borrower has any right, power or interest — in each
case whether existing now or hereafter, in any jurisdiction worldwide, and whether or not
denominated in the same currency as any of the Liabilities. (3) Agreement: any agreement or
instrument (including but not limited to this Note), no matter when made, under which any
Party is obligated to any Person. (4) Applicable Rate: whichever of the Loan Rate or Increased
Rate is the applicable interest rate at any time.
(5) Bank: Bank Hapoalim B.M. (6) Borrower: the Person(s) executing this Note at paragraph 9 or any one or more of them. “Borrower” may
refer to one or more Persons. (7) Business Day: any day on which both (a) banks are regularly
open for business in New York City and (b) the Office is open for ordinary business, in the
Bank’s discretion, the Office may be closed on any Saturday, Sunday, legal holiday or other day
an which it is lawfully permitted to close. (8) Control: the power, alone or in conjunction
with others, directly or indirectly, through voting securities, by contract or otherwise, to
direct or cause the direction of a Person’s management and
policies. (9) Costs and Expenses:
any and all reasonable costs and expenses (including but not limited to attorneys’ fees and
disbursements) Incurred in connection with the Borrower and/or the Liabilities, including but
not limited to those for (a) any action taken, whether or not by
litigation, to collect, or to
protect rights or interests with respect to, or to preserve any
collateral securing, any of
the Liabilities, (b) compliance with any legal process or any order or directive of any
Governmental Authority with respect to any Party, (c) any litigation or administrative
proceeding relating to any Party, and/or (d) any amendment, modification, extension or waiver
with respect to any of the Liabilities. (10) Debt: any Party’s obligation of any sort (in whole
or in part) for the payment of money to any Person, whether (a) absolute or contingent, (b)
secured or unsecured, (c) joint, several or independent, (d) now or hereafter existing, or (e)
due or to become due. (11) Debtor Relief Action: the commencement by any Party or (unless
dismissed or terminated within 30 days) against any Party of any proceeding under any law of
any jurisdiction (domestic or foreign) relating to bankruptcy,
reorganization, insolvency,
arrangement, composition, receivership, liquidation, dissolution, moratorium or other relief
of financially distressed debtors, or the making by any Party of an assignment for the
benefit of creditors. (12) Default: any breach, default or event of default under, or any
failure to comply with, any provision of any Agreement.
(13) Event of Default: any event set
forth in paragraph D. (14) Exchange Control Permit: any permit or license issued by a Governmental Authority outside the United States under which any Party is permitted (a) to Incur
and pay any of the Liabilities in the United States in any currency(ies) in which denominated or
(b) to enter into, incur and/or perform any other obligation or Agreement. (15) Governmental
Authority: any domestic or foreign, national or local, (a) government, (b) governmental,
quasi-governmental or regulatory agency or authority, (c) court or (d) central bank or other
monetary authority, (16) Increased Rate: (a) If the Loan Rate is a Variable Prime-Based Rate, the
increased Rate with respect to the entire outstanding principal balance shall be the Loan Rate plus
2% per year. (b) If the Loan Rate is not a Variable Prime-Based
Rate, the increased Rate with
respect to any amount of principal or installment shall be (i) the Loan Rate plus 2% per year prior
to the applicable Payment Date and (ii) the Prime Rate plus 4% per year on or subsequent to the
applicable Payment Date. (17) Law: any treaty, law, regulation, rule, judgment, order, decree,
guideline, interpretation or request (whether or not having the force of law) issued by any
Governmental Authority, (18) Liabilities: (a) any and all of the Debt evidenced by this Note, and
any and all other Debt of Borrower to, or held or to be held by, the Bank in any jurisdiction
worldwide for its own account or as agent for another or others, whether created directly or
acquired by Transfer or otherwise, and (b) any and all obligations of any other Party with respect
to any of such Debt. (19) Loan Rate: the interest rate
determined under paragraph 2. (20) Material: material to the business or financial condition of any Party on a consolidated or consolidating
basis. (21) Office: the Bank’s office at 1177 Avenue of the Americas, New York, New York 10036, or
such other place as the Bank may specify by notice. (22) Party: (a) borrower; (b) any maker,
co-maker or endorser of any Agreement evidencing-, or any guarantor, surety, accommodation party or
indemnitor with respect to-, or any Person that provides any collateral as security for-, or any
Person that issues a subordination, comfort letter, standby letter of credit, repurchase agreement,
put agreement, option, other Agreement or other credit support with respect to-, any of the
Liabilities: (c) If any Party is a partnership or joint venture, any general partner or joint
venturer in such Party: and (d) any Person (i) that is under the Control of any Party and (ii)
whose business or financial condition is Material to such Party. (23) Payment Date: any Business
Day on which any part of the principal or any installment of this Note becomes due and payable
under paragraph 1 (and not on account of an Acceleration). (24) Person: any person, partnership,
joint venture, company, corporation, unincorporated organization or association, trust, estate,
Governmental Authority, or any other entity. (25) Prepaid Principal: any amount of principal or any
installment of this Note which Borrower pays prior on the applicable Payment
Date for such amount. (26) Prepayment Costs: all losses,
costs and expenses incurred as a result of
receiving Prepaid Principal and of reinvesting if at rate(s) which may be less than the Applicable
Rate for such Prepaid Principal. (27) Prime Rate: the Bank’s New York Branches’ stated Prime Rate
as reflected in its books and records as such Prime Rate may change from time to time. The Bank’s
determination of its Prime Rate shall be conclusive and final. The Prime Rate is a reference rate
and not necessarily the lowest interest rate charged by the Bank.
(28) Regulatory Costs: any and
all costs and expenses of complying with any Law, including but not limited to with respect to (a)
any reserves or special deposits maintained for or with, or pledges
to, or assessments, insurance
premiums or special charges paid to, any Governmental Authority, or (b) any capital, capital
equivalency ledger account, ratio of assets to liabilities, risk-based capital assessment or any
other capital substitute, risk-based or otherwise. (29) Taxes: any and all present and future
taxes, levles, Imposts, deductions, charges and withholdings in any jurisdiction worldwide, and all
liabilities with respect thereto, which are imposed with respect to this Note or to any amount
payable under this Note, excluding taxes determined on the basis of the net

4

 

	 	 	Income of a Person or of any of its offices.
(30) Transfer: any negotiation, assignment,
participation, conveyance, grant of a security interest, lease, delegation, or any other direct or
indirect transfer of a complete or partial, legal, beneficial, economic or other interest or
obligation. (31) Transferee: any Person to whom a
Transfer is made. (32) Transferred Items: items
defined in paragraph 1. (33) Treasury Obligation: a note,
bill or bond issued by the United States
Treasury Department as a full faith and credit general obligation of
the United States. (34)
Variable Prime-Based Rate: any Applicable Rate which is determined based on the Prime Rate. Any
such rate shall change automatically when and as the Prime Rate
changes.

5

 

	 	 	 
	 

	 	As of March 1, 2006

Valentec
Systems, Inc.

 2618 York Avenue

Minden, LA

Gentlemen:

We are pleased to advise that Bank Hapoalim B.M. (the “Bank”) has agreed, subject to the conditions
set forth below, to amend and increase the existing line for advances (the “Line”) to Valentec
Systems, Inc. (the “Borrower”) from the amount of $3,000,000.00 to the maximum aggregate amount of
$4,000,000.00. The Line shall be available as of the date hereof and
shall expire on June 13, 2006.
Any utilization of the Line is subject to the Bank’s receipt of such documentation as it may
request, including without limitation, the following each in form and substance satisfactory to the
Bank: (1) this Letter Agreement, (2) a Promissory Note in the amount of $4,000,000.00 executed by
the Borrower in favor of the Bank in substitution and replacement of the Note dated September 6,
2005, (3) Letters of Undertaking from the Bank’s Hagalim Branch in the aggregate amount of
$4,000,000.00, (4) an Opinion of Borrower’s Counsel and (5) any other documents as the Bank may
require. The Borrower shall also pay the Bank a documentation fee in the amount of $350.00.

Please indicate your acknowledgment of and agreement to the foregoing by signing and returning the
enclosed copy of this letter to the attention of Ofer Vadel,
Assistant Vice President.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Acknowledged and Agreed to:	 	 	 	BANK HAPOALIM B.M.	 	 
	
	 	 	 	 	 	 	 	 
	VALENTEC SYSTEMS, INC.	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Title:
	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Title:
	 	 
	By:

	 	/s/ KREIZMAN ZVI
 

Title: Director
	 	 	 	 	 	 	 	 

New York Branches

1177 Avenue of the Americas New York NY 10036-
2790
 T. 212 782 2000 F. 212 782 2222 www.hapoalimusa.com

 

 

	 	 	 
	 

	 	

MULTIPLE-LOAN RIDER TO PROMISSORY NOTE

LOAN(S) DENOMINATED IN U.S. OR OTHER CURRENCY

LIBOR-BASED RATE

This Rider is referred to in paragraph 3 of, and constitutes a part of, a note of
Borrower to the Bank dated

 As of March 1, 2006 in the amount of $4,000,000,00.

Specific Terms

	(a)	 	Margin: 1.75% per year
	 
	(b)	 	Interest Period: 1, 2 or 3 months and as agreed from time
to time
	 
	(c)	 	Minimum Draw Amount: $100,000.00
	 
	(d)	 	Minimum Multiple Amount: None

Borrower agrees to the above Specific Terms and to all of the Terms and Conditions
set forth below.

Print
Borrower’s Name: VALENTEC SYSTEMS, INC.

	 	 	 	 	 
	(Signature) By: ZVI KREIZMAN               

	 	 	 	(Signature) By:                                  
	Print
Name: ZVI KREIZMAN                    

	 	 	 	Print Name:
                                      
	Print
Title: CFO SOLTAM

	 	 	 	Print Title:                                            

Terms and Conditions

Certain capitalized terms are defined in paragraph 4.

	1.	 	Advances. Borrower may receive a Loan in any principal amount upon Borrower’s
request to the Bank and the Bank’s agreement thereto, subject to all of the following
conditions:

	(a)	 	Agreement of the Bank and Borrower.A Subject to subparagraphs l(b), l(c) and
2(b), the Bank and Borrower shall have agreed, not later than the Determination Time, with
respect to the Loan’s (i) principal amount,
(ii) LIBOR-Based Rate and (iii) Interest
Period; provided, however, that if the Bank determines that by such
Determination Time, Borrower has failed or declined to agree on the LIBOR-Based Rate
and/or Interest Period with respect to such Outstanding Principal Amount, then interest on
such Outstanding Principal Amount shall accrue at the LIBOR-Based Rate without the
agreement of Borrower, and the Interest Period shall be of the same duration as the
Interest Period just ended with respect to such Outstanding
Principal Amount or, if there was no such prior Interest Period, one month.
	 
	(b)	 	Applicable limitations. (i) The applicable Payment Date shall not be later
than the Due Date; (ii) the total of the Outstanding Principal Amounts of all Loans shall
not exceed the principal amount set forth in the Note; (iii) the principal amount of any
single Loan request shall be not less than any Minimum Draw Amount set forth under
Specific Terms; and (iv) the principal amount of any single Loan request shall be
an integral multiple of any Minimum Multiple Amount set forth under Specific
Terms.
	 
	(c)	 	Borrower’s request and agreement. Borrower’s request for a Loan and
Borrower’s agreement to the terms thereof shall be communicated to the Bank in any form
that is acceptable in each instance to the Bank in its sole discretion, which may include
telephone, telex, fax, email or a writing executed by Borrower. Borrower shall have
provided the Bank with documentation, satisfactory in form and substance to the Bank

Page 1 of 4

 

	 	 	liability (including penalties, interest and expenses) with respect thereto, whether or not such
Taxes were correctly or legally asserted, Within 30 days after any Taxes are paid, Borrower
shall furnish evidence thereof to the Bank. (2) Regulatory
Costs. In the event that in
connection with the transaction(s) contemplated by this Note and/or the Bank’s funding of such
transaction(s), the Bank is required to incur any Regulatory Costs in order to comply with any
Law issued after the date of this Note, then Borrower shall pay to the Bank on demand, and shall
indemnify and hold the Bank harmless from, any and all such
Regulatory Costs. (3) Costs and
Expanses. Borrower shall pay the Bank on demand, and shall indemnify and hold the BanK harmless
from, any and all Costs and Expenses. (4) Prepayment
Costs. If Borrower makes any payment of
Prepaid Principal (voluntarily or not), and if the Applicable Rate with respect to such Prepaid
Principal is not a Variable Prime-Based Rate, then Borrower shall pay to the BanK an amount
sufficient to compensate the Bank for its Prepayment Costs. Borrower acknowledges that
determining the actual amount of Prepayment Costs may be difficult or impossible in any specific
instance. Accordingly, Borrower agrees that Prepayment Costs shall be deemed to be the
excess, if any, of (i) the product of (A) the Prepaid Principal, times (B) the
Applicable Rate divided by 360, times (C) the remaining number of days from the date of
the payment to the applicable Payment Date, over (ii) that amount of interest which the
Bank determines that the holder of a Treasury Obligation selected by the Bank in the amount (or
as close to such amount as feasible) of the Prepaid Principal and having a maturity data on (or
as soon after as feasible) the applicable Payment Date would earn if that Treasury Obligation
ware purchased in the secondary market on the date the Prepaid Principal is paid to the Bank and
were held to maturity. Borrower agrees that the determination of Prepayment Costs shall be based
on amounts which a holder of a Treasury Obligation could receive under these circumstances,
whether or not the Bank actually invests the Prepaid Principal in any
Treasury Obligation. (5)
Bank Certificate. The Bank’s certificate as to any amounts owing under this paragraph shall be
prima facie avidence of Borrower’s obligation.
	 
	C.	 	Set Off: Every Account of Borrower with the Bank shall be subject to a lien and to being set
off against the Liabilities. The Bank may at any time at its option and without notice, except
as may be required by law, charge and/or appropriate and apply all or any part of any such
Account toward the payment of any of the Liabilities.
	 
	D.	 	Events of Default: The remainder of this paragraph D shall not apply if this Note is payable
on demand. Each of the following shall be an Event of Default
hereunder. (1) Nonpayment. (a)
The nonpayment when due of any part of the Liabilities; (b) the prohibition by any Law of
payment of any part of any of the Liabilities. (2) Bankruptcy;
Adverse Proceedings. (a) The
occurrence of any Debtor Relief Action; (b) the appointment of a receiver, trustee, committee,
custodian, personal representative or similar official for any Party or for any Material part
of any Party’s property; (c) any action taken by any Party to authorize or consent to any
action set forth in subparagraph D(z)(a) or (b); (d) the rendering against any Party of one or
more Judgments, orders, decrees and/or arbitration awards (whether for the payment of money
or injunctive or other relief) which in the aggregate are Material to
such Party. If they
continue in effect for 30 days without being vacated, discharged, stayed, satisfied or
performed; (e) the issuance or filing of any warrant, process, order of attachment,
garnishment or other lien or levy against any Material part of any Party’s property; (f) the
commencement of any proceeding under, or the use of any of the provisions of, any Law against
any Material part of any Party’s property, including but not limited to any Law (i) relating
to the enforcement of judgments of (ii) providing for forfeiture to, or condemnation,
appropriation, seizure or taking possession by, or on order of, any Governmental Authority;
(g) the forfeiture to, or the condemnation, appropriation, seizure, or
taking possession by, or on order of, any Governmental Authority, of any Material part of any
Party’s property; (h) any Party being charged with a crime by indictment, information or the
like. (3) Noncompliance. (a) Any Default with respect to any Agreement with or to the Bank; (b)
the giving to the Bank by or on behalf of any Party at any time of
any materially incorrect or
incomplete representation, warranty, statement or information; (c) the failure of any Party to
furnish to the Bank, copies of its financial statements and such other information respecting
its business, properties, condition or operations, financial or otherwise, promptly when, and
in such form as, reasonably required or requested by the Bank; (d) any Party’s failure or
refusal, upon reasonable notice from the Bank, to permit the
Bank’s representative(s) to visit
such Party’s premises during normal business hours and to examine and make photographs, copies
and extracts of such Party’s property and of its books and records; (e) any Party’s concealing,
removing or permitting to be concealed or removed, any part of its property with the intent to
hinder or defraud any of its creditors; (f) any Party’s makng or suffering any Transfer of any
of its property, which Transfer is deemed fraudulent under the law of any applicable
jurisdiction; (g) the revocation or early termination of any Party’s obligations under any
Agreement with or to the Bank (including but not limited to any of
the Liabilities), or the
validity, binding effect or enforceability of any of such obligations being challenged or
questioned, whether or not by the institution of proceedings; (h) the revocation, withdrawal,
expiration, reduction or default of or under any related Letter of Undertaking or guarantee, or
any agreement to which a Letter of Undertaking or guarantee was
issued. (4) Adverse Changes. (a)
The occurrence of a Material adverse change in any Party’s financial condition; (b) the death or
incompetence (if a person) or the dissolution or liquidation (if a corporation, partnership or
other entity) of any Party or such Party’s failure to be and remain in good standing and
qualified to do business in each Jurisdiction Material to such Party; (c) any Material Default
with respect to any Material Agreement other than with or to the Bank; (d) any Default pursuant
to which any Person shall have the power to effect an Acceleration of any Material Debt; (e) any
Acceleration or demand of payment with respect to any Material Debt; (f) any Party’s becoming
insolvent, as defined in the Uniform Commercial Code; (g) the
Bank’s believing in good faith
that the prospect of payment of any of the Liabilities or of performance of any other obligation
of any Party to the Bank is impaired; (h) the Material
suspension of any Party’s business; (i)
any Party’s Material failure to pay any tax when due; (j) the expulsion of any Party from any
exchange or self-regulatory organization or any loss, suspension,
nonrenewal or invalidity of
any Party’s Material license, permit, franchise, patent,
copyright trademarks or the like; (k)
the occurrence of any event which gives any Person the right to
assert a lien, levy or right of
forfeiture against any Material part of any Party’s property; (l) Borrower’s failure to give the
Bank notice, within 10 Business Days after Borrower had notice or knowledge, of the occurrence
of any event which, with the giving of notice and/or lapse of time,
would constitute an Event
of Default. (5) Business changes: (a) any change in Control of any Party; (b) any merger or
consolidation involving any Party; (c) any Party’s sale or other Transfer of substantially all
of its property, (d) any bulk sale by any Party; (e) any Material change in the nature or
structure of any Party’s business. (6) Exchange
Controls. (a) Any Party’s failure to obtain any
Exchange Control Permit deemed by the Bank to be necessary or
appropriate; (b) the failure to
obtain the renewal of any such Exchange Control Permit at least 30 days prior to its expiration.
	 
	E.	 	Remedies: (1) Acceleration at Bank’s
Option. Upon any failure to pay this Note in full on
demand (if payable on demand) or (if this Note is payable other than on demand) upon the
occurrence of any Event of Default other than any Debtor Relief Action, then any and all
Liabilities, not then due, shall, at the Bank’s option,

2

 

	 	 	become Immediately due and payable without notice, which
Borrower waives. (2) Automatic
Acceleration. The occurrence of any Debtor Relief Action, then, whether or not any of the
Liabilities are payable upon demand and notwithstanding paragraph F,
any and all Liabilities not
then due, shall automatically become immediately due and payable without notice or demand,
which Borrower waives, (3) Additional Remedies. Bank shall have all
rights and remedies
available to it under any applicable Agreement or Law.

	F.	 	Waiver of Protest, etc.: Notice, presentment, protest, notice of dishonor
and (except for such of the Liabilities as are payable on demand,
but subject to subparagraph E(zj) demand for payment are hereby waived as to
all of the Liabilities.
	 
	G.	 	Payment: (1)  Manner. Any payment by other than
immediately available funds shall be subject to
collection. interest shall continue to accrue until
the funds by which payment is made are available to
the Bank. If and to the extent any payment of any of
the Liabilities is not made when due, the Bank is
authorized in its discretion to effect payment by
charging any amount so due against any Account of
Borrower with the Bank without notice, except as may
be required by law, whether or not such charge
creates an overdraft. (2) Application. Any payment
received by the Bank (including a deemed payment
under paragraph A, a set-off under paragraph C or a
charge against an Account under this paragraph G)
shall be applied to pay any obligation of
indemnification (including but not limited to under
paragraph B) and to pay any other Liabilities
(including interest thereon and the principal
thereof) in such order as the Bank shall elect in its
discretion. Borrower will continue to be liable for
any deficiency. (3) Prepayment. Borrower shall be
entitled to pay any outstanding principal amount or
installment under this Note on any Business Day prior
to the applicable Payment Date without the prior
consent of the Bank, provided that (a) any such
payment shall be together with payment of all
Liabilities then due and all interest accrued on the
Prepaid Principal to the date of such payment, and
(b) if the Applicable Rate with respect to such
Prepaid Principal is not a Variable Prime-Based Rate,
any such payment shall be on not less than 5 Business
Days’ notice to the Bank and shall be accompanied by
any amount required pursuant to subparagraph
B(4). Any such payment shall, unless otherwise
consented to by the Bank, be applied pro rata to the
last outstanding principal amount(s) to become due
under this Note in inverse order of maturity. (4)
Non-Business Days. If any payment of any of the
Liabilities is due on any day that is not a Business
Day, it shall be payable on the next Business Day.
The additional day(s) shall be included in the
computation of interest. (5) Extension at Bank’s
Option. The Bank shall have the option, which may be
exercised one or more times by notice(s) to Borrower,
to extend the date on which any amount is payable
hereunder to one or more subsequent date(s) set forth
in such notice(s).
	 
	H.	 	Parties; Counterparts; No Transfer by Borrower: If Borrower is more than one Person, all of
them shall be jointly and severally liable under this Note. This Note and any Rider hereto
may be executed in counterparts, each of which shall constitute an
original, but all of which
when taken together shall constitute a single instrument. The obligations under this Note
shall continue in force and shall apply notwithstanding any change in the membership of any
partnership executing this Note, whether arising from the death or retirement of one or more
partners or the accession of one or more new partners. Without the Bank’s written consent,
Borrower shall have no right to make any Transfer of any of the Liabilities; any such
purported Transfer shall be void. Subject to the foregoing, the provisions of this Note shall
be binding on Borrower’s executors, administrators, successors and assigns.
	 
	I.	 	Bank Transfers: (1) Transferability. Without limiting the Bank’s rights hereunder, the Bank
may make a Transfer of all or any part of (a) any obligation of Borrower to the Bank
(including but not limited to any of the Liabilities), (b) any
obligation of any other Party in connection with any of the Liabilities, (c) any Agreement of
any Party in connection with any of the Liabilities, (d) any collateral, mortgage, lien or
security interest, however denominated, securing any of the Liabilities, and/or (e) the Bank’s
rights and, if any, obligations with respect to any of the foregoing.
(2) Extent of Transfer. In
the event the Bank shall make any Transfer of any of the foregoing
items (“Transferred items”),
then — to the extent provided by the Bank with respect to such Transfer — the Transferee shall
have the rights, powers, privileges and remedies of the Bank. The
Bank shall thereafter, to the
extent of such Transfer, be forever relieved and fully discharged from all liability or
responsibility, if any, that it may have to any Person with respect thereto, except for claims,
if any, arising prior to or upon such Transfer. The Bank shall retain all its rights and powers
with respect to any Transferred items to the extent that it has not made a Transfer thereof.
Without limiting the foregoing, to the extent of any such Transfer, paragraph B
(Indemnification) shall apply to any Taxes, Regulatory Costs, Costs
and Expanses, and Prepayment
Costs of, or incurred by, any Transferee, and paragraphs C (Set-Off) and G(1) (Payment-Manner)
shall apply to any Account of Borrower with any Transferee.
(3) Disclosures. The Bank is
authorized to disclose to any prospective or actual Transferee any information that the Bank may
have or acquire about Borrower and any information about any other Person submitted to the Bank
by or on behalf of Borrower. (4) Negotiability Defenses Waived. If this Note is not a negotiable
instrument, Borrower waives all defenses (except such defenses as may be asserted against a
holder in due course of a negotiable instrument which Borrower may have or acquire against any
Transferee who takes this Note, or any complete or partial interest in it, for value, in good
faith and without notice that it is overdue or has been dishonored or of any defense against or
claim to it on the part of any Person.
	 
	J.	 	No Oral Changes; No Waiver by the Bank; Partial
Unenforceability: This Note may not be
changed orally. Neither a waiver by the Bank of any of its options, powers or rights in one or
more instances, nor any delay on the part of the Bank in exercising any of them, nor any
partial or single exercise thereof, shall constitute a waiver thereof in any other instance.
Any provision of this Note which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or nonauthorization, without invalidating the remaining
provisions of this Note in that or any other jurisdiction and without affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
	 
	K.	 	Disputes and Litigation: (1) Governing Law. This Note and the rights and obligations of the
Bank and Borrower hereunder shall be governed by the internal laws of the State of New York
without giving effect to conflict of laws principles, (2) Jurisdiction, Venue, and Service of
Process. Borrower submits to the nonexclusive jurisdiction of the federal and state courts in
the State of New York in New York County with respect to any dispute arising hereunder or
relating to any of the Liabilities. Service of process may be made on Borrower by personal
delivery at, or by mail addressed to, any address to which the Bank is authorized to address
notices to Borrower. (3) Waiver of Defenses, Setoffs,
Counterclaims and Certain Damages.
Borrower waives the right to assert any defense, setoff or counterclaim in any proceeding
relating in any way to this Note or any transaction contemplated hereby. The Bank shall not
have any liability for negligence, except solely to the extent required by law and not
disclaimable, and except for its own gross negligence or willful
misconduct. In any event, the
Bank shall not have any liability for any special, consequential or punitive damages. (4)
Sovereign immunity. Borrower irrevocably waives, with respect to itself and its property, any
sovereign

3

 

	 	 	immunity that it may have or hereafter acquire, including but not limited to immunity from the
jurisdiction of any court, from any legal process, from attachment
prior to judgment, from
attachment in aid of execution, from execution or otherwise.
	 
	L.	 	Notice: Any notice in connection with any of the Liabilities shall be in writing and may be
delivered personally or by cable, telex, telecopy or other electronic means of communication,
or by certified mail, return receipt requested, addressed (a) to Borrower as set forth herein
or to any other address that the Bank believes to be Borrower’s
address, and (b) to the Bank
at Bank Hapoalim B.M., 1177 Avenue of the Americas, New York, New York 10036,
Attention: Legal Department. Any such notice shall be addressed to such other address (es) as
may be designated in writing hereafter. All such notices shall be deemed given when delivered
personally or electronically or when mailed, except notice of change of address, which shall
be deemed to have been given when received.
	 
	M.	 	Definitions: The following definitions apply in this
Note: (1) Acceleration: any acceleration
of payment or requirement of prepayment of any Debt, or any Debts becoming due and payable
prior to stated maturity. (2) Account: (a) the balance of any account of Borrower with any
Person, (b) any claim of Borrower against any Person, and/or (c) any property in the
possession or custody of, or in transit to, any Person, whether for safekeeping, collection,
pledge or otherwise, as to which Borrower has any right, power or interest — in each case
whether existing now or hereafter, in any jurisdiction worldwide, and whether or not
denominated in the same currency as any of the Liabilities.
(3) Agreement: any agreement or
instrument (including but not limited to this Note), no matter when made, under which any
Party is obligated to any Person. (4) Applicable Rate: whichever of the Loan Rate or increased
Rate is the applicable interest rate at any time. (5) Bank: Bank Hapoalim B.M. (6) Borrower:
the Person(s) executing this Note at paragraph 9 or any one or more of them. “Borrower” may
refer to one or more Persons. (7) Business Day: any day on which
both (a) banks are
regularly open for business in New York City and (b) the Office is open for ordinary business.
In the Bank’s discretion, the Office may be closed on any Saturday, Sunday, legal holiday or
other day on which it is lawfully permitted to close.
(8) Control: the power, alone or in
conjunction with others, directly or indirectly, through voting securities, by contract or
otherwise, to direct or cause the direction of a Person’s management and policies, (9) Costs
and Expenses: any and all reasonable costs and expenses (including but not limited to
attorneys’ fees and disbursements) incurred in connection with the Borrower and/or the
Liabilities, including but not limited to those for (a) any action taken, whether or not by
litigation, to collect, or to protect rights or interests with respect to, or to preserve any
collateral securing, any of the Liabilities, (b) compliance with any legal process or any
order or directive of any Governmental Authority with respect to any Party, (c) any litigation
or administrative proceeding relating to any Party, and/or (d) any amendment, modification,
extension or waiver with respect to any of the Liabilities.
(10) Debt: any Party’s obligation
of any sort (in whole or in part) for the payment of money to any Person, whether (a) absolute
or contingent, (b) secured or unsecured, (c) joint, several or independent, (d) now or
hereafter existing, or (e) due or to become due. (11) Debtor Relief Action: the
commencement by any Party or (unless dismissed or terminated within 30 days) against any Party
of any proceeding under any law of any jurisdiction (domestic or foreign) relating to
bankruptcy, reorganization, insolvency, arrangement, composition, receivership, liquidation,
dissolution, moratorium or other relief of financially distressed debtors, or the making by
any Party of an assignment for the benefit of creditors.
(12) Default: any breach, default or
event of default under, or any failure to comply with, any provision
of any Agreement. (13)
Event of Default: any event set forth in paragraph D.
(14) Exchange Control Permit: any permit
or license issued by
a Governmental Authority outside the United States under which any Party is permitted (a) to incur
and pay any of the Liabilities in the United States in any currency(ies) in which denominated or
(b) to enter into, incur and/or perform any other obligation or Agreement. (15) Governmental
Authority: any domestic or foreign, national or local, (a) government, (b) governmental,
quasi-governmental or regulatory agency or authority, (c) court
or (d) central bank or other
monetary authority. (16) Increased Rate: (a) If the Loan
Rate is a Variable Prime-Based Rate, the
increased Rate with respect to the entire outstanding principal
balance shall be the Loan Rate plus
2% per year. (b) If the Loan Rate is not a Variable Prime-Based Rate, the increased Rate with
respect to any amount of principal or installment shall be (i) the Loan Rate plus 2% per year prior
to the applicable Payment Date and (ii) the Prime Rate plus 4% per year on or subsequent to the
applicable Payment Date. (17) Law: any treaty, law, regulation, rule, judgment, order, decree,
guideline, interpretation or request (whether or not having the force of law) issued by any
Governmental Authority. (18) Liabilities: (a) any and all of the Debt evidenced by this Note, and
any and all other Debt of Borrower to, or held or to be held by, the Bank in any jurisdiction
worldwide for its own account or as agent for another or others, whether created directly or
acquired by Transfer or otherwise, and (b) any and all obligations of any other Party with respect
to any of such Debt. (19) Loan Rate: the interest rats determined under paragraph 2. (20) Material:
malarial to the business or financial condition of any Party on a consolidated or consolidating
basis. (21) Office: the Bank’s office at 1177 Avenue of the Americas, New York, New York 10036, or
such other place as the Bank may specify by notice. (22) Party: (a) borrower; (b) any maker,
co-maker or endorser of any Agreement evidencing-, or any guarantor, surety, accommodation party or
indemnitor with respect to-, or any Person that provides any collateral as security for-, or any
Person that issues a subordination, comfort letter, standby letter of credit, repurchase agreement,
put agreement, option, other Agreement or other credit support with
respect to-, any of the
Liabilities; (c) if any Party is a partnership or joint venture, any general partner or joint
venture in such Party; and (d) any Person (i) that is under the Control of any Party and (ii)
whose business or financial condition is Material to such Party. (23) Payment Date: any Business
Day on which any part of the principal or any installment of this Note becomes due and payable
under paragraph 1 (and not on account of an Acceleration). (24) Person: any person, partnership,
Joint venture, company, corporation, unincorporated organization or association, trust, estate,
Government Authority, or any other entity. (25) Prepaid
Principal: any amount of principal or any
installment of this Note which Borrower pays prior to the applicable
Payment Date for such amount.
(26) Prepayment Costs: all losses, costs and expenses incurred as a result of receiving Prepaid
Principal and of reinvesting it at rate(s) which may be less than the Applicable Rate for such
Prepaid Principal. (27) Prime Rate: the Bank’s New York Branches’ stated Prime Rate as
reflected in its books and records as such Prime Rate may change from time to time. The Bank’s
determination of its Prime Rate shall be conclusive and final. The Prime Rate is a reference rate
and not necessarily the lowest interest rate charged by the Bank. (28) Regulatory Costs: any and
all costs and expenses of complying with any Law, including but not limited to with respect to (a)
any reserves or special deposits maintained for or with, or pledges to, or assessments, insurance
premiums or special charges paid to, any Governmental Authority, or (b) any capital, capital
equivalency ledger account, ratio of assets to liabilities, risk-based capital assessment or any
other capital substitute, risk-based or otherwise. (29) Taxes: any and all present and future
taxes, levies, imposts, deductions, charges and withholdings in any jurisdiction worldwide, and all
liabilities with respect thereto, which are imposed with respect to this Note or to any amount
payable under this Note, excluding taxes determined on the basis of the net

4

 

	 	 	income of a Person or of any of its offices. (30) Transfer: any negotiation, assignment,
participation, conveyance, grant of a security interest, lease, delegation, or any other direct or
indirect transfer of a complete or partial, legal, beneficial, economic or other interest or
obligation. (31) Transferee: any Person to whom a Transfer is
made. (32) Transferred items: items
defined in paragraph I. (33) Treasury Obligation: a note, bill
or bond issued by the United States
Treasury Department as a full faith and credit general obligation of the United States. (34)
Variable Prime-Based Rate: any Applicable Rate which is determined based on the Prime Rate. Any
such rate shall change automatically when and as the Prime Rate changes.

5exv10w29

 

EXHIBIT 10.29

PROMISSORY NOTE

	 	 	 	 	 	 	 
	 
	Borrower:

	 	Valentec Systems, Inc.
	 	Lender:
	 	JPMorgan Chase Bank, NA
	 

	 	2618 York Avenue
	 	 	 	Shreveport Business Banking LPO
	 

	 	Minden, LA 71055
	 	 	 	400 Texas Street 3rd Floor
	 

	 	 	 	 	 	Shreveport, LA 71101
	 
	 
	 	 	 	 	 	 
	Principal Amount:

	 	$2,000,000.00
	 	 	 	          Date of Note: December 22, 2005

PROMISE TO PAY. Valentec Systems, Inc. (“Borrower”) promises to pay to the order of JP Morgan Chase
Bank, NA (“Lender”), in lawful money of the United States of America the sum of Two Million &
00/100 Dollars (U.S. $2,000,000.00) or such other or lesser amounts as may be reflected from time
to time on Lender’s books and records as evidencing the aggregate unpaid principal balance of loan
advances made to Borrower on a revolving line of credit basis as provided herein, together with
simple interest assessed on a variable rate basis at the rate per annum equal to 0.750 percentage
points under the Index provided herein, as the Index under this Note may be adjusted from time to
time, one or more times, with interest being assessed on the unpaid principal balance of this Note
as outstanding from time to time, commencing on December 22, 2005 and continuing until this Note is
paid in full.

LINE OF CREDIT. This Note evidences a revolving line of credit “master note”. The unpaid principal
balance of this Note shall increase and decrease with each new advance and payment hereunder, as
the case may be. Subject to the terms hereof, Borrower may borrow, repay and reborrow hereunder.
Advances under this Note, as well as directions for payment from Borrower’s accounts may be
requested orally or in writing by Borrower or by an authorized person. Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be liable for all sums
either: (A) advanced in accordance with the instructions of an authorized person or (B) credited
to any of Borrower’s deposit accounts with Lender. Lender will have no obligation to advance funds
under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor’s guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds
provided pursuant to this Note for purposes other than those acceptable to Lender; or (E) Lender in
good faith believes itself insecure with regard to repayment of this Note.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on May 1, 2006. In addition, Borrower will pay regular monthly payments of all
accrued unpaid interest due as of each payment date, beginning February 1, 2005, with all
subsequent interest payments to be due on the same day of each month after that until this Note is
paid in full. Payments and any other credits shall be allocated among principal, interest and fees
at the discretion of Lender unless otherwise required by applicable law. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender’s
address shown on loan account statements sent to the Borrower, Lender’s address shown in any
payment coupon book provided to the Borrower, or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based
on changes in an index which is the Prime Rate (the “Index”). “Prime Rate” shall mean the rate
announced from time to time by Lender as its prime rate (which rate may not be the lowest, best or
most favorable rate of interest which Lender may charge on loans to its customers). Each change in
the rate to be charged on this Note will become effective without notice on the same day as the
Index changes. The interest rate to be applied to the unpaid principal balance of this Note will be
at a rate of 0.750 percentage points under the Index. Under no circumstances will the interest rate
on this Note be more than the maximum rate allowed by applicable law.

PREPAYMENT. Borrower may pay without fee all or a portion of the principal amount owed hereunder
earlier than it is due. All prepayments shall be applied to the indebtedness in such order and
manner as Lender may from time to time determine in its sole discretion. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note,
and Borrower will remain obligated to pay any further amount owed to Lender. All written
communications concerning disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or that is tendered
with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Small Business Loan Servicing Disputed Accounts Department, P.O. Box 4661 Houston, TX
77210.

LATE CHARGE. If Borrower fails to pay any payment under this Note in full within 10 days of when
due, Borrower agrees to pay Lender a late payment fee In an amount equal to 5.000% of the regularly
scheduled payment or $25.00, whichever is greater. Late charges will not be assessed following
declaration of default and acceleration of the maturity of this Note.

INTEREST AFTER DEFAULT. It Lender declares this Note to be in default, Lender has the right
prospectively to adjust and fix the simple interest rate under this Note until this Note is paid in
full, as follows: (A) If the original principal amount of this Note is $250,000, or less, the
fixed default interest rate shall be equal to eighteen (18%) percent per annum, or three (3%) per
cent per annum in excess at the interest rate under this Note, whichever is greater. (B) if the
original principal amount of this Note is more then $250,000, the fixed default interest rate shall
be equal to twenty-one (21 %) percent per annum, or three (3%) percent per annum in excess of the
interest rate under this Note at the time of default, whichever is greater.

DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) undo, this
Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Default Under Security Agreements. Should Borrower or any guarantor violate, or fail to
comply fully with any of the terms and conditions of, or default under any security right,
instrument, document or agreement directly or indirectly securing repayment of this Note.

Other Defaults in Favor of Lender. Should Barrower or any guarantor of this Note default
under any other loan, extension of credit, security right, instrument, document or
agreement, or obligation in favor of Lender.

Default in Favor of Third Parties. Should Borrower or any guarantor default under any loan,
extension of credit security agreement, purchase or sales agreement, or any other agreement,
in favor of any other creditor or person that may affect any property or other collateral
directly or indirectly securing repayment of this Note.

Insolvency. Should the suspension, failure or insolvency, however evidenced, of Borrower or
any Guarantor of this Note occur or exist.

Death or Interdiction. Should any guarantor of this Note die or be interdicted.

Readjustment of Indebtedness. Should proceedings for readjustment of indebtedness,
reorganization, bankruptcy, composition or extension under any insolvency law be brought by
or against Borrower or any guarantor.

Assignment for Benefit of Creditors. Should Borrower or any guarantor file proceedings for a
respite or make a general assignment for the benefit of creditors.

Receivership. Should a receiver of all or any part of Borrower’s property, or the property
of any guarantor, be applied for or appointed.

Dissolution Proceedings. Proceedings for the dissolution or appointment of a liquidator of
Borrower or any guarantor are commenced.

False Statements. Any warranty, representation or statement made or furnished to Lender by
Borrower or on Borrower’s behalf under this Note or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at anytime thereafter.

Judgments or Decrees. One or more judgments or decrees shall be entered against the Borrower
and such judgments or decrees shall not have been vacated, discharged, stayed or banded
pending appeal.

Materiel Adverse Change. Should any material adverse change occur in the financial condition
of Borrower or any guarantor of this Note or should any material discrepancy exist between
the financial statements submitted by Borrower or any guarantor and the actual financial
condition of Borrower or such guarantor.

Events Affecting Guarantor. Any of the preceding Events of Default occurs with respect to
any guarantor of the Indebtedness as if the word “guarantor” were substituted for the word
“Borrower” in such Event of Default, or any guarantor dies or becomes incompetent, or
revokes or disputes the validity of, or liability under, any guaranty.

Insecurity. Lender in good faith believes itself insecure with regard to repayment of this
Note.

LENDER’S RIGHTS. Upon the occurrence of any Event of Default, Lender may declare the entire unpaid
principal balance an this Note and the Indebtedness and all accrued unpaid interest immediately
due, without notice (except that in the case of any Event of Default of the type described in the
DEFAULT — Insolvency section herein, such acceleration shall be automatic and not at Lender’s
option), and then Borrower will pay that amount. Borrower shall be liable for any deficiency
remaining after disposition of any collateral which Lender may choose to realize

 

 

	 	 	 	 	 
	PROMISSORY NOTE (Continued)

	 	 	 	Page 3

effect.

WAIVERS. Borrower and each guarantor of this Note hereby waive demand, presentment for payment,
protest notice of protest and notice of nonpayment, and all pleas of division and discussion, and
severally agree that their obligations and liabilities to Lender hereunder shall be on a “solidary”
or “joint and several” basis. Borrower and each guarantor further severally agree that discharge or
release of any party who is or may be liable to Lender for the indebtedness represented hereby, or
the release of any collateral directly or indirectly securing repayment hereof, shall not have the
effect of releasing any other party or parties, who shall remain liable to Lender, or of releasing
any other collateral that is not expressly released by Lender. Borrower and each guarantor
additionally agree that Lender’s acceptance of payment other than in accordance with the terms of
this Note, or Lender’s subsequent agreement to extend or modify such repayment terms, or Lender’s
failure or delay in exercising any rights or remedies granted to Lender, shall likewise not have
the effect of releasing Borrower or any other party or parties from their respective obligations to
Lender, or of releasing any collateral that directly or indirectly secures repayment hereof. In
addition, any failure or delay on the part of Lender to exercise any of the rights and remedies
granted to Lender shall not have the effect of waiving any of Lender’s rights and remedies. Any
partial exercise of any rights and/or remedies granted to Lender shall furthermore not be construed
as a waiver of any other rights and remedies; it being Borrower’s intent and agreement that
Lender’s rights and remedies shall be cumulative in nature. Borrower and each guarantor further
agree that, should any default event occur or exist under this Note, any waiver or forbearance on
the part of Lender to pursue the rights and remedies available to Lender, shall be binding upon
Lender only to the extent that Lender’s specifically agrees to any such waiver or forbearance in
writing. A waiver or forbearance on the part of Lender as to one default event shall not be
construed as a waiver or forbearance as to any other default. Borrower and each guarantor of this
Note further agree that any late charges provided for under this Note will not be charges for
deferral of time for payment and will not and are not intended to compensate Lender’s for a grace
or cure period, and no such deferral, grace or cure period has or will be granted to Borrower in
return for the imposition of any late charge. Borrower recognizes that Borrower’s failure to make
timely payment of amounts due under this Note will result in damages to Lender, including but not
limited to Lender’s loss of the use of amounts due, and Borrower agrees that any late charges
imposed by Lender hereunder will represent reasonable compensation to Lender for such damages.
Failure to pay in full any installment or payment timely when due under this Note, whether or not a
late charge is assessed, will remain and shall constitute an Event of Default hereunder.

SUCCESSORS AND ASSIGNS LIABLE. Borrower’s and each guarantor’s obligations and agreements under
this Note shall be binding upon Borrower’s and each guarantor’s respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and remedies granted to
Lender under this Note shall inure to the benefit of Lender’s successors and assigns, as well as to
any subsequent holder or holders of this Note.

CAPTION HEADINGS. Caption headings in this Note are for convenience purposes only and are not to be
used to interpret or define he provisions of this Note.

SEVERABILITY. If any provision of this Note is held to be invalid, illegal or unenforceable by any
court, that provision shall be deleted from this Note and me balance of this Note shall be
interpreted as if the deleted provision never existed.

APPLICABLE LENDING LAW. To the extent not preempted by federal law, this business or commercial
loan is being made under the terms and provisions of La. R.S. 9:3509, at seq.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING
THE VARIABLE INTEREST RATE PROVISIONS.

BORROWER:

VALENTEC SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Robert A. Zummo, Chairman of Valentec Systems, Inc.
	 	 

 

 

COMMERCIAL PLEDGE AGREEMENT

	 	 	 	 	 	 	 
	 
	Grantor:

	 	Valentec Systems, Inc.
	 	Lender:
	 	JPMorgan Chase Bank, NA
	 

	 	2618 York Avenue
	 	 	 	Shreveport Business Banking LPO
	 

	 	Minden, LA 71065
	 	 	 	400 Taxes Street 3rd Floor
	 

	 	 	 	 	 	Shreveport, LA 71101
	 
	 	 	 	 	 	 
	 

THIS COMMERCIAL PLEDGE AGREEMENT dated December 22, 2005, is made and executed between Valentec
Systems, Inc. (“Grantor”) and JPMorgan Chase Bank, NA (“Lender”).

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor transfers, pledges and grants to
Lender a continuing security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the Collateral. In addition
to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means individually,
collectively and interchangeably Grantor’s present and future rights, title and interest in and to,
together with any and all present and future additions thereto, substitutions therefore, and
replacements thereof, and further together with all income and Proceeds as described herein:

Irrevocable Letter of Credit, Number 670-24171-18, Dated 12-08-2005, Issued by Israel Discount
Bank, Ltd.

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all obligations, debts and
liabilities, plus interest thereon, of Grantor to Lender, or any one or more of them, as well as
all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter
arising, whether related or unrelated as the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute or contingent,
liquidated or unliquidated whether Grantor may be liable individually or jointly with others,
whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon
such amounts may be or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise unenforceable.

DELIVERY OF COLLATERAL. Contemporaneous with the execution of this Agreement, Grantor has delivered
or will deliver to Lender or Lender’s designated agent the above described Collateral. As long as
this Agreement remains in effect, Grantor further agrees to immediately deliver in Lender, or
Lender’s designated agent, any and all additions to or substitutions or replacements for the
Collateral. In the event that Grantor is unable to deliver any of the Collateral to Lender or
Lender’s designated agent at the time this Agreement is executed, or should Grantor ever withdraw
or obtain temporary possession of any of the Collateral while this Agreement remains in effect,
either under a trust receipt or otherwise, Grantor unconditionally agrees to deliver immediately to
Lender the Collateral or, alternatively, such substitute or replacement collateral security as may
then his satisfactory to Lender.

CONTINUING SECURITY INTEREST TO SECURE PRESENT AND FUTURE INDEBTEDNESS. Grantor affirms that
Grantor has granted a continuing security interest in the Collateral in favor of Lender to secure
any and all present and future indebtedness of Grantor in favor of Lender, as may be outstanding
from time to time set forth above, in principal, interest, costs, expenses, attorneys’ fees and
other fees and charges, with me continuing preferences and priorities provided under applicable
Louisiana law. Grantor agrees that all such additional loans and indebtedness will be secured under
this Agreement without the necessity that Grantor (or any of them) agree or consent to such a
result at the time such additional loans are made and Indebtedness incurred, without the further
necessity that the note or notes evidencing such additional loans or Indebtedness refer to the fact
that such notes are secured by this Agreement, Grantor further agrees Grantor may not subsequently
have a change of mind and insist that any such additional loans or Indebtedness not be secured by
this Agreement unless Lender specifically agrees to such a request in writing.

DURATION OF AGREEMENT. This Agreement shall remain in full force and effect until such time as this
Agreement and the security interests created hereby are terminated and cancelled by Lender under a
written cancellation instrument in favor of Grantor.

ADDITIONAL COLLATERAL. In the event that any of the Collateral should at any time decline in value
or become unsatisfactory to Lender for any reason, Grantor agrees to immediately provide Lender
with such additional collateral security as may then be acceptable to Lender.

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor represents and warrants to
Lender that:

Ownership. Grantor at ell times will continue to be the legal and lawful owner of the
Collateral free and clear of all security interests, liens, Encumbrances and claims of
others except as disclosed to and accepted by Lender in writing prior to execution of this
Agreement.

Authorized. Grantor’s execution, delivery, and performance of this Agreement and all the
Related Documents have bean duly authorized by all necessary action by Grantor and do not
conflict with, result in a violation of, or constitute a default under (1) any provision of
articles of incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Grantor or (2) any law, governmental regulation, court decree, or order
applicable to Grantor or to Grantor’s properties.

Perfection of Security Interest. Upon delivery of the Collateral to Lender, this Agreement
shall create a valid first lien upon, and perfect a security interest in the Collateral
subject to no prior security interest, lien, charge, individually, collectively and
interchangeably any and all presently existing Smaller future mortgages, liens, privileges
and other contractual and/or statutory security interests and rights, of every nature and
kind, whether in admiralty, at law, or in equity, that now and/or in the future may affect
the Collateral at any part or parts thereof, or other agreement purporting to grant to any
third party a security interest in the Collateral.

Authority; Binding Effect. Grantor has the full right, power and authority to enter into
this Agreement and to grant a security interest in the Collateral to Lender. This Agreement
is binding upon Grantor as well as Grantor’s successors and assigns, and is legally
enforceable in accordance with its terms. The foregoing representations and warranties, and
all other representations and warranties contained in this Agreement are and shall be
continuing in nature and shall remain in full force and effect until such time as this
Agreement is terminated or cancelled as provided herein.

No Further Assignment. Grantor has not, and shall not, sell, assign, transfer, encumber or
otherwise dispose of any of Grantor’s rights in the Collateral except as provided in this
Agreement.

No Defaults. There are no defaults existing under the Collateral, and there are no offsets
or counterclaims to the same. Grantor will strictly and promptly perform each of the terms,
conditions, covenants and agreements, if any, contained in the Collateral which are to be
performed by Grantor.

No Violation. The execution and delivery of this Agreement will not violate any law or
agreement governing Grantor or to which Grantor is a party, and its certificate or articles
of incorporation and bylaws do not prohibit any term or condition of this Agreement.

LENDER’S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender shall have the following
rights in addition to all other rights Lender may have by law:

Maintenance and Protection of Collateral. Lender may, but shall not be obligated to, take
such steps as it deems necessary or desirable to protect, maintain, insure, store, or Tara
for the Collateral, including paying of any liens at claims against the Collateral. This may
include such things as hiring other people, such as attorneys, appraisers or other expend.
Lender may charge Grantor for any cost incurred in so doing. When applicable law provides
more than one method of perfection of Lender’s Security Interest, Lender may choose the
method(s) to be used. Lender may also require Grantor to notify, or Lender may notify, third
parties of the fact that the Collateral has been pledged to Lender.

Income and Proceeds from the Collateral. Lender shall have the right, whether or not an
Event of Default exists under this Agreement, to directly collect and receive any and all
Income and Proceeds as such become due and payable. In order to permit the foregoing,
Grantor unconditionally agrees to deliver to Lender, immediately following demand, any and
all such Income and proceeds that may be received by or that may be payable to Grantor.
Grantor further unconditionally agrees that Lender shall have the right to notify all other
Obligors to pay and deliver such Income and Proceeds directly to Lender or Lender’s nominee
at an address to be designated by Lender, and to do any and all other things as Lender may
deem necessary and proper, within Lender’s sole discretion, to carry out the terms and
intent of this Agreement. Lender shall have the further right. where appropriate, and within
Lender’s sale discretion, to file suit, either in Lender’s awn name or in the name of
Grantor, to collect and enforce performance, payment and delivery of any and all such Income
and Proceeds.

Where it is necessary for Lender to enforce performance, payment and delivery of any such
Income and Proceeds from the Obligor therefor, Grantor unconditionally agrees that Lender
may compromise or take such other actions, either in Grantor’s name or in Grantor’s name as
Lender may deem appropriate, within Lender’s sole judgment, with regard to performance,
collection and payment of the same, without effecting the obligations and liabilities of
Grantor under this Agreement or any Indebtedness secured by this Agreement. In artier to
further permit the foregoing, Grantor agrees that Lender shall have the additional
irrevocable rights, coupled with an interest, to: (1) receive, open and dispose of all mall
addressed to Grantor pertaining to any of the Collateral; (2) notify the postal authorities
to change the address and delivery of mail addressed to Grantor pertaining to any of the
Collateral to such address as Lender may designate: and (3) enders, Grantor’s name on any
and all notes, acceptances, checks, drafts, money orders Or other instruments of payment of
such Income and Proceeds that may come into Lender’s possession, and to deposit or otherwise
collect me same, applying such funds to the unpaid balance

 

 

	 	 	 
	COMMERCIAL PLEDGE AGREEMENT (Continued)

	 	Page 3

perishable or threatens to decline speedily in value or is of a type customarily sold on a
recognized market Lender shall give or mail to Grantor, or any of them, notice at least ten
1101 days in advance of the time and place of any public sale, at of the date after which
any private sale may be made. Grantor agrees that any requirement of reasonable notice is
satisfied if Lender mails notice by ordinary mail addressed to Grantor, or any of them, at
the last address Grantor has given Lender in writing. It a public sale is held, there shall
be sufficient compliance with all requirements of notice to the public by a single
publication in any newspaper of general circulation in the parish or county where the
Collateral is located, setting forth the time and place of sale and a brief description of
the property to be sold. Lender may be a purchaser at any public sale. Grantor agrees that
any such sale shall be conclusively deemed to be conducted in a commercially reasonable
manner if it is made consistent with the standard of similar sales of collateral by
commercial banks in Shreveport, Louisiana.

Foreclosure. Maintain a Judicial suit for foreclosure and sale of the Collateral.

Specific Performance. Lender may, in addition to or in lieu of the foregoing remedies, in
Lender’s sole discretion, commence an appropriate action against Grantor seeking specific
performance of any covenant contained in this Agreement or in aid of the execution or
enforcement of any power in this Agreement granted.

Transfer Title. Effect transfer of title upon sale of all or part of the Collateral. For
this purpose, Grantor Irrevocably appoints Lender as Grantor’s attorney-intact to execute
endorsements, assignments and instruments in the name of Grantor and each of them (if more
than one) as shall be necessary or reasonable.

Other Rights and Remedies. Have and exercise any or all of the rights and remedies of a
secured creditor under the provisions of the Louisiana Commercial Laws (La. RS. 10; 9.101,
at seq.), at law, in equity, or otherwise.

Application of Proceeds and Payments. Any and all proceeds, interest, profits, and Income
and Proceeds that Lender actually receives and collects, whether resulting from the public
or private sale of the Collateral and/or collection or exercise of any of Lender’s rights
provided hereunder, shall be applied rust to reimburse Lender for its costs of collecting
the some (including, but hot limited m, any attorneys’ foes Incurred by Lender and Lender’s
court costs, whether or not there is a lawsuit, including any fees an appeal incurred by
Lender in connection with the collection or sale of the Collateral), with the balance being
applied to principal, interest, costs, expenses, attorneys’ fees and other fees and charges
under The Indebtedness, in such order and with such preferences and priorities as Lender
shall determine within its sole discretion

Election of Remedies. Except as may be prohibited by applicable law, ail of Lender’s rights
and remedies, whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy will not bar any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor under this Agreement,
after Grantor’s failure To perform, shall not affect Lender’s right to declare a default and
exercise its remedies, Nothing under this Agreement or otherwise shall be construed so as to
limit or restrict the rights and remedies available to Lender fallowing an Event of Default,
or in any way to limit or restrict the rights and ability of Lender to proceed directly
against Grantor and/or against any other Go-maker, guarantor, surety or endorser and/or to
proceed against any other collateral directly or indirectly securing the Indebtedness.

PROTECTION OF LENDER’S SECURITY RIGHTS. Grantor agrees to appear in and to defend all actions or
proceedings purporting to affect Lender’s security rights and Interests granted under this
Agreement. In the event that Lender elects to defend any such action or proceeding, Grantor agrees
to reimburse Lender for Lender’s costs associated therewith, including without limitation, Lender’s
attorneys’ fees, which additional costs and expenses shall be secured by this Agreement.

INDEMNIFICATION OF LENDER. Grantor agrees to indemnity, to defend and to save and hold Lender
harmless from any and all claims, suits, obligations, damages. losses, costs, expenses (including
without limitation, Lender’s reasonable attorneys’ fees), demands, liabilities, penalties, fines
and forfeitures of any nature whatsoever which may be asserted against or incurred by Lender,
arising out of or in any manner occasioned by this Agreement or the rights and remedies granted to
Lender hereunder. The foregoing Indemnity provision shall survive the cancellation of this
Agreement as to all matters arising or accruing prior to such cancellation, and the foregoing
indemnify provision shall further survive in the event that Lender elects to exercise any of the
remedies as provided under this Agreement following any Event of Default hereunder.

ADDITIONAL OBLIGATIONS OF GRANTOR. Grantor shall have the following additional obligations under
this Agreement:

Additional Collateral. In the event that any of the Collateral should at any time decline in
value or become unsatisfactory to Lender for any reason, Grantor agrees to immediately
provide Lender with such additional collateral security as may Nan be acceptable to Lender,

No Sale or Encumbrance. As long as This Agreement remains in effect, Grantor unconditionally
agrees not to sell, option, assign, pledge, or create or permit to exist any lien or
security interest in or against any of the Collateral in favor of any person other than
Lender.

No Settlement or Compromise of Rights. Grantor will not, without the prior written consent
of Lender, compromise, settle, adjust or extend payment under any of Grantor’s Collateral.

Additional Pledge Agreement: Effect. Grantor acknowledges and agrees that Grantor may, from
Time to time, one or more times, enter into additional pledge and security agreements with
tender under which Grantor may undertake, to pledge or grant to Lender a security interest
in the same Collateral. Grantor further acknowledges and agrees that the execution of such
additional agreements, including any such agreements now in effect, will not have the effect
of cancelling, coveting or otherwise modifying this Agreement; it being Grantor’s full
intent and agreement that all such pledge agreements )including this Agreement) shall be
cumulative in nature and shall remain in full force and effect until expressly cancelled by
Lender under a written cancellation instrument delivered to Grantor.

Additional Documents. Grantor agrees, at any time, from time. in time, one or more times,
upon written request by Under, to execute and deliver such further documents and do such
further acts and things as Lender may reasonably request, within Lender’s sole discretion,
to effect the purposes of this Agreement.

Notification of Lender. Grantor will promptly deliver to Lender all written notices, and
will promptly give Lender written notice of any other notices received by Grantor with
respect to the Collateral.

EFFECT OF WAIVERS. Grantor has waived, and/or does by these presents waive, presentment for
payment, protest, notice of protest and notice of nonpayment under all of the Indebtedness secured
by this Agreement. Grantor has further waived, and/or does by these presents waive, all pleas of
division and discussion, and all similar rights with regard to the Indebtedness, and agrees That
Grantor shall remain liable, together with any and all Guarantors of the Indebtedness, on a
“soildary” or “joint and several” basis. Grantor further agrees that discharge or release of any
party who is, may, or will be liable to Lender under any of the Indebtedness, or the release of the
Collateral or any other collateral directly or indirectly securing repayment of the same, shall not
have the effect of releasing or otherwise diminishing or reducing the actual or potential liability
of Grantor and/or any other party or parties guaranteeing payment of the Indebtedness, who shall
remain liable to Lender, and/or remain liable m Lender, and/or of releasing any Collateral or other
collateral that is not expressly released by Lender.

Grantor additionally agrees that Lender’s acceptance of payments other than in accordance with the
terms of any agreement, or agreements governing repayment of the Indebtedness, at Lender’s
subsequent agreement to extend or modify such repayment terms, shall likewise not have the effect
of releasing Grantor, and/or any other party or parties guaranteeing payment of the Indebtedness,
from their respective obligations to Lender, and/or of releasing any of the Collateral or other
collateral directly or indirectly securing repayment of the Indebtedness. In addition, no course of
dealing between Grantor and Lender, nor any failure or delay on the part of Lender to exercise any
of the rights and remedies granted to Lender under this Agreement, or under any other agreement or
agreements by and between Grantor and Lender, shall have the effect of waiving any of Lender’s
rights and remedies. Any partial exercise of any rights and remedies granted to Lender shall
furthermore not constitute a waiver of any of Lender’s other rights and remedies, it being
Grantor’s intent and agreement that Lender’s rights and remedies shag be cumulative in nature.
Grantor further agrees that, upon the occurrence of any Event of Default under this Agreement, any
waiver or forbearance on the part of Lender la pursue the rights and remedies available to Lender,
shall be binding upon Lender only to the extant that Lender specifically agrees to any such waiver
or forbearance in writing. A waiver or forbearance as to one Event of Default shall not constitute
a giver or forbearance as to any other Event of Default. None of the warranties, conditions,
provisions and Terms contained in this Agreement or any other agreement, document, or instrument
now or hereafter executed by Grantor and delivered to Lender, shall be deemed to have been waived
by any act or knowledge of lender. Lender’s agents, officers or employees; but only by an
instrument in writing specifying such waiver signed by a duly authorized officer of Lender and
delivered to Grantor.

JURY WAIVER, THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER
ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT, THE RELATED DOCUMENTS, OR ANY RELATIONSHIP
BETWEEN OR AMONG THE UNDERSIGNED AND LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO
PROVIDE THE FINANCING EVIDENCED BY THIS DOCUMENT AND THE RELATED DOCUMENTS.

 

 

	 	 	 	 	 
	COMMERCIAL PLEDGE AGREEMENT (Continued)

	 	 	 	Page 5

modified tram time to time, together with all exhibits and schedules attached or to be attached to
this Commercial Pledge Agreement from time to time.

Borrower. The word “Barrower” moans Valentec Systems, Inc., and all other persons and entities
signing the Note in whatever capacity.

Collateral. The ward “Collateral” means all of Grantor’s right, title and interest in and to all
the Collateral as described In the Collateral Description section of this Agreement.

Default. The word “Default” means the Default set torch in this Agreement in the section titled
“Default”.

Encumbrance. The word “Encumbrance” means individually, collectively and interchangeably any and
all presently existing and(or future mortgages, liens, privileges and other contractual and/or
statutory security interests and rights, of every nature and kind, whether in admiralty, at law, or
in equity, that now and/or in the future may affect the Collateral or any pan or parts thereof.

Event of Default. The words “Event of Default” mean any of the Events of Default set forth in this
Agreement in the Default sections of this Agreement.

Grantor. The word “Grantor” means Valentec, Systems, Inc.

Income and Proceeds. The words ‘Income and Proceeds’ mean all present and future income, proceeds,
earnings, increases, and substitutions from or for the Collateral of every kind and nature,
including without limitation all payments, Interest, profits, distributions, benefits, rights,
options, monies, claims for money due and to become due, proceeds of any insurance an the
Collateral, and all other types of proceeds, and all other property of every type and description
which Grantor is entitled to receive on account of such Collateral, including accounts, documents,
instruments, chattel paper, and general intangibles.

Indebtedness. The word “indebtedness” means the indebtedness evidenced by the Note or Related
Documents, in principal, interest, costs, expanses and attorneys’ fees and all other tees and
charges together with all other Indebtedness and casts and expenses for which Grantor Is
responsible under this Agreement or under any of the Related Documents. In addition, and without
limitation, the term “Indebtedness” includes all amounts identified in the Cross-Collateralization,
Revolving Line of Credit and Future Advances paragraphs as contained in this Agreement or in one or
more of the Related Documents.

Lender. The ward “Lender” means JPMorgan Chase Bank, NA, its successors and assigns, and any
subsequent holder or holders of the Note or any interest therein.

Note. The word “Note” means the Note executed by Grantor in the principal amount of $2,000,000.00
acted December 22, 2005, together with all renewals, extensions, modifications, refinancings,
consolidations and substitutions of and for the note or credit agreement.

Obligor. The word “Obligor” means without limitation any and all persons obligated to pay money or
to perform some other act under the Collateral.

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust,
security deeds, collateral mortgages, and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREES
TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 22, 2005.

GRANTOR:

VALENTEC SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Robert A. Zummo, Chairman of Valentec Systems, Inc.

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