Exhibit 10.1

 

LOAN AGREEMENT

 

March 10, 2005

 

Staktek Holdings, Inc.

8900 Shoal Creek Boulevard

Suite 125

Austin, Texas 78757

 

Ladies and Gentlemen:

 

This Loan Agreement (the “Loan Agreement”) will serve to set forth the terms of
the financing transactions by and between Staktek Holdings, Inc., a Delaware
corporation (“Borrower”), and Guaranty Bank (“Bank”). Terms used herein and not
otherwise defined are used with the meanings given such terms in Exhibit A
attached.

 

1. Credit Facilities

 

Subject to the terms and conditions set forth in this Loan Agreement and the
other Loan Documents, Bank hereby agrees to provide to Borrower the credit
facilities described below (collectively, the “Credit Facilities”):

 

1.1 Revolving Credit. Subject to the terms and conditions set forth herein, Bank
agrees to lend to Borrower, on a revolving basis from time to time during the
period commencing on the Closing Date and continuing through and including 11:00
a.m. (Austin, Texas time) on the Maturity Date, such amounts as Borrower may
request hereunder (the “Revolving Credit”); provided, however, the total
principal amount outstanding at any time shall not exceed the Credit Limit. If
at any time the aggregate principal amount outstanding under the Revolving
Credit shall exceed an amount equal to the Credit Limit, Borrower agrees to
immediately repay to Bank such excess amount, plus all accrued but unpaid
interest on the amount of principal prepaid. Subject to the terms and conditions
hereof, Borrower may borrow, repay and reborrow hereunder. All advances under
the Revolving Credit (individually, an “Advance” and, collectively, the
“Advances”) are sometimes collectively called the “Loans”.

 

1.2 Letter of Credit Facility. Subject to the terms and conditions of this Loan
Agreement, Bank shall issue letters of credit for Borrower’s account
(collectively, the “Letters of Credit”). Bank’s obligations under the Letters of
Credit shall expire on or before thirty (30) days prior to the Maturity Date.
The aggregate amount of the Letter of Credit Obligations (as hereinafter
defined) shall not exceed the Letter of Credit Limit. The obligation of Bank to
issue each Letter of Credit is subject to the fulfillment to the satisfaction of
Bank of the conditions set forth elsewhere in this Loan Agreement and of the
following further conditions:

 

(a) Borrower shall have executed and delivered to Bank a Letter of Credit
Agreement; and

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(b) Borrower shall have satisfied each of its obligations and the conditions set
forth in Section 4 of this Loan Agreement; and

 

(c) No Event of Default or Default shall then exist hereunder; and

 

(d) The aggregate amount of all of the Letters of Credit shall not exceed a sum
equal to the Maximum Committed Amount, less the outstanding principal amount of
all Advances under the Revolving Credit; and

 

(e) Borrower shall have paid the Issue Fee to Bank.

 

2. Credit Provisions

 

2.1 Promissory Note. The obligation of the Borrower to repay the Advances shall
be evidenced by a promissory note (together with any renewals, extensions and
increases thereof, the “Note”) duly executed by Borrower and payable to the
order of Bank, in form and substance acceptable to Bank. Interest on the Note
shall accrue at the rate set forth therein. The principal of and interest on the
Note shall be due and payable in accordance with the terms and conditions set
forth in the Note and in this Loan Agreement.

 

2.2 Guarantors. As a condition precedent to Bank’s obligation to make the
Advances to Borrower and to issue the Letters of Credit, Borrower agrees to
cause all of the Material Subsidiaries to each execute and deliver to Bank one
or more guaranty agreements (collectively, the “Guaranty Agreements”) in Proper
Form, which Guaranty Agreements shall provide (among other things) for the
unconditional guaranty of payment of the Indebtedness. Further, Borrower shall
cause each Subsidiary of the Borrower which now or hereafter exists and which is
or becomes a Material Subsidiary to each execute and deliver to Bank a Guaranty
Agreement in Proper Form, within ten (10) days following Bank’s demand,
providing for the unconditional guaranty of the payment of the Indebtedness.

 

2.3 Use of Proceeds. Subject to the provisions of Section 4, the proceeds of the
Advances under the Revolving Credit shall be available (and Borrower shall use
such proceeds) for general working capital, and to fund draws received pursuant
to Letters of Credit.

 

2.4 Default Interest. During the continuation of (a) any Default, and (b) any
Event of Default, Borrower shall pay, on demand, at Bank=s option, interest
(after as well as before judgment to the extent permitted by applicable law) on
the principal amount of all Advances outstanding and on all other Obligations
unpaid hereunder at a per annum rate equal to the Default Rate.

 

2.5 Issue Fee. In consideration of the commitment by Bank to issue any Letter of
Credit, Borrower hereby agrees to pay Bank an Issue Fee equal to the Applicable
L/C Percent per annum of the amount of each Letter of Credit, which fee shall be
calculated from the date of the respective Letter of Credit to the expiration
date thereof. The Issue Fee as to each Letter of Credit which is issued shall be
due and payable concurrently with the issuance by Bank of each such Letter of
Credit. In the event of the issuance by Bank of any extension or renewal of a
Letter of Credit, an additional

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fee for the extension or renewal thereof shall be payable in an amount
acceptable to Bank as a condition to the issuance of an extension or renewal
thereof. Nothing herein shall imply an obligation on the part of Bank to issue
an extension or renewal of any Letter of Credit.

 

2.6 Computations and Manner of Payments.

 

(a) Time and Place. Borrower shall make each payment hereunder and under the
other Loan Documents not later than 1:00 p.m., Austin, Texas time, on the day
when due in same day funds (by wire transfer or otherwise) to Bank at Bank’s
office at 8333 Douglas Avenue, Dallas, Texas 75225, to the attention of Loan
Administration.

 

(b) Computation of Interest. Interest on Advances, and other amounts due under
the other Loan Documents, shall be calculated at a daily rate based on a year of
360 days, with the daily rate so determined being applied for the actual number
of days elapsed, but not exceeding the Maximum Lawful Rate. Such computations
shall be made including the first day but excluding the last day occurring in
the period for which such interest or payment is payable. Each determination by
Bank of an interest rate hereunder shall be presumptively correct absent
manifest error. All payments under the Loan Documents shall be made in United
States dollars.

 

(c) Business Day. Whenever any payment to be made hereunder or under any other
Loan Documents shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, if
applicable.

 

3. Representations and Warranties.

 

Borrower hereby represents and warrants, and upon each request for an Advance
further represents and warrants, to Bank as follows:

 

3.1 Existence and Organization. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is authorized to transact business and is in good standing in all other
jurisdictions where the nature of its business or the ownership of its
properties requires it to be so authorized. Borrower has all requisite power and
authority to execute and deliver the Loan Documents. As of the Closing Date, the
only Material Subsidiary is Staktek Group L.P., a Texas limited partnership.

 

3.2 Binding Obligations. The execution, delivery, and performance of this Loan
Agreement and all of the other Loan Documents by Borrower have been duly
authorized by all necessary corporate action by Borrower, and constitute legal,
valid and binding obligations of Borrower, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors’ rights and except
to the extent specific remedies may generally be limited by equitable
principles.

 

3.3 No Consent. The execution, delivery and performance of this Loan Agreement
and the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, do not (i) conflict with, result in a violation
of, or constitute a default under (A) any provision of its articles of
incorporation or bylaws, or any agreement or other instrument binding upon
Borrower, or (B) any Governmental Requirements, court decree or order applicable
to Borrower, or (ii) require the consent, approval or authorization of any third
party.

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3.4 Financial Condition. The financial statements of the Borrower dated as of
September 30, 2004 and furnished to Bank (collectively, the “Prior Financial
Statements”) truly disclose and fairly present the financial condition of the
Borrower as of the date of each such statements. There has been no material
adverse change in the financial condition or results of operations of the
Borrower subsequent to the date of the Prior Financial Statement. Except for
Liabilities incurred in the normal course of business and not material in amount
(either individually or in the aggregate), Borrower has no liabilities, direct
or contingent, that have arisen or been incurred or accrued subsequent to the
date of the Prior Financial Statements.

 

3.5 Litigation. Except as set forth on Schedule 3.5 attached hereto, there are
no actions, suits or proceedings, pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any Material Subsidiary, or the
properties of Borrower or any Material Subsidiary, before any Governmental
Authority, which, if determined adversely to Borrower, would have a material
adverse effect on the financial condition, properties, or operations of Borrower
or any Material Subsidiary.

 

3.6 No Default. No Event of Default or Default exists at the date of this
Agreement. Borrower is not in default in any respect under any Governmental
Requirement binding upon or affecting Borrower or by which any of its assets may
be bound or affected, or under any agreement or other undertaking or instrument
to which it is a party or by which it is bound (including, without limitation,
this Agreement), and nothing has occurred which would adversely affect in any
material respect the ability of Borrower to carry on its business as now
conducted and proposed to be conducted or to perform its obligations under any
such Governmental Requirement, agreement or other undertaking or agreement.

 

3.7 Taxes; Governmental Charges. Borrower and each Material Subsidiary have
filed all federal, state and local tax reports and returns required by any law
or regulation to be filed by it and have either duly paid all taxes, duties and
charges indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof, and the assessment of any material amount of
additional taxes in excess of those paid and reported is not reasonably
expected.

 

3.8 Patents, Trademarks, Franchises, Licenses, Etc. To the best of Borrower’s
knowledge, Borrower and each Material Subsidiary have obtained and holds all
franchises, licenses, governmental permits, leases, patents, trademarks, service
marks, tradenames, copyrights, and other authorizations necessary to conduct its
business as presently conducted and as proposed to be conducted (collectively,
“Rights”), and each thereof is in full force and effect and no event has
occurred which constitutes or, after notice or lapse of time or both, would
constitute, a default under any thereof. To the best of Borrower’s knowledge, no
claim has been asserted by any Person with respect to the use of any of Rights
by Borrower or any Material Subsidiary which could result in a Material Adverse
Change. To the best of Borrower’s knowledge, the use of such Rights by Borrower
and each Material Subsidiary does not infringe on the rights of any Person,
subject to such claims and infringements as do not, in the aggregate, give rise
to any liabilities on the part of Borrower or any Material Subsidiary which
would result in a Material Adverse Change.

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3.9 Securities Acts. Borrower has not issued any unregistered securities in
violation of the registration requirements of Section 5 of the Securities Act of
1933, as amended, or any other law and is not violating any material rule,
regulation or requirement under the Securities Act of 1933, as amended, or the
Securities and Exchange Act of 1934, as amended. Borrower is not required to
qualify this Loan Agreement or any other Loan Document as an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its execution and
delivery of the Notes.

 

3.10 Governmental Requirements. Borrower is conducting its business, and the
Material Subsidiaries are conducting their respective businesses, in compliance
in all material respects with all Governmental Requirements imposed by any
Governmental Authority (including without limitation, all applicable
environmental statutes, rules, regulations and ordinances).

 

3.11 ERISA. Each employee benefit plan as to which Borrower or any Material
Subsidiary may have any liability complies in all material respects with all
applicable Governmental Requirements, and (i) no “reportable event” nor
“prohibited transaction” (as defined in ERISA) has occurred with respect to any
such plan, (ii) neither Borrower nor any Material Subsidiary has withdrawn from
any such plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other than
those previously disclosed to Bank in writing.

 

3.12 No Margin Stock. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Advance will be used to purchase or carry any such margin
stock and no part of the proceeds of any Advance will be used to extend credit
to others for the purpose of purchasing or carrying any such margin stock.

 

3.13 Full Disclosure. Neither this Loan Agreement nor any certificate or
statement or any other data furnished by Borrower in connection with the
negotiation of this Loan Agreement or the transactions contemplated hereby
contains any untrue statement of a material fact or omits a material fact known
to Borrower necessary to make the statements contained herein or therein not
misleading.

 

3.14 Survival of Representations and Warranties. All representations and
warranties contained in this Loan Agreement and any other Loan Documents shall
survive, and not be waived by, the execution hereof by Bank, any investigation
or inquiry by Bank, or by the making of the Loans.

 

4. Conditions Precedent to Advances.

 

Bank’s obligation to make any advance under this Loan Agreement and to issue any
Letter of Credit shall be subject to the conditions precedent that, (i) as of
the date of such Advance or the date of issuance of such Letter of Credit, and
after giving effect thereto (a) all representations and warranties made to Bank
by Borrower in this Loan Agreement and the other Loan Documents shall be true
and correct, as of and as if made on such date, (b) no Material Adverse Change
since the effective date of the most recent financial statements furnished to
Bank by Borrower shall have occurred and be continuing, (c) no Default or Event
of Default shall exist, (d) the outstanding principal amount of all Advances
Credit shall not exceed the Credit Limit, and (ii) Bank’s shall have

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received (a) all Loan Documents appropriately executed by Borrower and all other
proper parties, (b) a Compliance Certificate, and (c) all other instruments,
documents, agreements and certificates, and satisfaction of the conditions, set
forth on the General Conditions of Borrowing attached hereto as Exhibit B. As a
further condition precedent to the obligation of Bank to make any Advances or
issue any Letters of Credit, Borrower shall furnish to Bank documentation that
demonstrates that the proceeds of previous Advances have been used and that the
proceeds of requested Advances shall be used as provided in Section 2.3 hereof.
Bank’s right to approve the use of proceeds of Advances as provided in Section
2.3 hereof is for the protection and benefit of Bank only and neither Borrower,
nor any third party shall have any right to rely upon Bank’s approval or
disapproval, nor shall Bank be liable or responsible (a) should it fail to
exercise its right to approve the use of any proceeds of Advances or (b) for the
application of any proceeds in a manner not approved by Bank.

 

5. Affirmative Covenants.

 

Until (i) the Indebtedness and all other Obligations are fully paid and
satisfied, and (ii) the Bank has no further commitment to make Advances or issue
Letters of Credit hereunder, Borrower agrees that it will, unless Bank shall
otherwise consent in writing:

 

5.1 Accounts and Records. Borrower shall maintain its books and records in
accordance with GAAP.

 

5.2 Right of Inspection. Borrower shall permit Bank to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower’s books and records, at all reasonable times following
three days notice (written or oral) or such lesser notice as may be reasonable
under the circumstances and without notice during the continuance of a Default
or Event of Default.

 

5.3 Right to Additional Information. Borrower shall furnish Bank with such
additional information and statements, lists of assets and liabilities, tax
returns, and other reports with respect to Borrower’s financial condition and
business operations as Bank may reasonably request from time to time.

 

5.4 Compliance with Laws. Borrower shall conduct its business, and cause the
Material Subsidiaries to conduct their respective businesses, in an orderly and
efficient manner consistent with good business practices, and perform and comply
in all material respects with all Governmental Requirements imposed by any
Governmental Authority upon Borrower, its businesses, operations and properties
(including without limitation, all applicable environmental statutes, rules,
regulations and ordinances).

 

5.5 Taxes. Borrower shall (and shall cause each Material Subsidiary to) pay and
discharge when due all of its respective indebtedness and obligations, including
without limitation, all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or any Material
Subsidiary or their respective properties, income, or profits, prior to the date
on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any properties, income, or profits of Borrower or
any Material Subsidiary; provided, however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long as
the legality or propriety of the same shall be contested in good faith by
appropriate judicial, administrative or other legal proceedings.

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5.6 Insurance. Borrower shall (and shall cause each Material Subsidiary to)
maintain insurance from responsible companies in such amounts and against such
risks as shall be customary and usual in the industry for companies of similar
size and capability, but in no event less than the amounts and types insured as
of the Closing Date. Borrower shall furnish to Bank, upon request of Bank from
time to time, reports on each then existing insurance policy showing such
information as Bank may reasonably request, including without limitation the
following: (a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the properties insured; (e) the then current property values on
the basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy.

 

5.7 Notice of Indebtedness. Borrower shall promptly inform Bank of the creation,
incurrence or assumption by Borrower or any Material Subsidiary of any actual or
contingent liabilities not permitted under this Loan Agreement.

 

5.8 Notice of Litigation. Borrower shall promptly after the commencement
thereof, notify Bank of all actions, suits and proceedings before any court or
any Governmental Authority affecting Borrower or any Material Subsidiary or any
of their respective properties which, if adversely determined, could result in a
Material Adverse Change.

 

5.9 Notice of Material Adverse Change. Borrower shall promptly inform Bank of
the occurrence of any and all Material Adverse Changes.

 

5.10 Additional Costs. If the imposition of or any change in any law, rule,
regulation or guideline, or the interpretation or application of any thereof by
any court or administrative or governmental authority (including any request or
policy not having the force of law) shall impose, modify or make applicable any
taxes (except U. S. federal, state or local income or franchise taxes imposed on
Bank), reserve requirements, capital adequacy requirement or other obligations
which would (a) increase the cost to Bank for extending or maintaining either of
the Credit Facilities, (b) reduce the amounts payable to Bank under this Loan
Agreement or the other Loan Documents, or (c) reduce the rate of return on
Bank’s capital as a consequence of Bank’s obligations with respect to either of
the Credit Facilities, then Borrower agrees to pay Bank such additional amounts
as will compensate Bank therefor, within five (5) days after Bank’s written
demand for such payment, which demand shall be accompanied by an explanation of
such imposition or charge and a calculation in reasonable detail of the
additional amounts payable by Borrower, which explanation and calculations shall
be presumptively correct in the absence of manifest error.

 

5.11 Deposit/Sweep Balances. Borrower shall maintain Deposit/Sweep Balances with
Bank at all times in an amount no less than $5,000,000.00.

 

5.12 Additional Documentation. Borrower shall execute and deliver, or cause to
be executed and delivered, any and all other agreements, instruments or
documents which Bank may reasonably request in order to give effect to the
transactions contemplated under this Loan Agreement and the other Loan
Documents.

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6. Negative Covenants.

 

Until (i) the Indebtedness and all other obligations are fully paid and
satisfied, and (ii) the Bank has no further commitment to lend or issue Letters
of Credit hereunder, Borrower agrees that, without the prior written consent of
Bank:

 

6.1 Nature of Business. Borrower will not make (nor permit any Material
Subsidiary to make) any material change in the nature of its respective business
as carried on as of the date hereof nor cease operations of its or their
respective business.

 

6.2 Liquidations, Mergers, Consolidations. Borrower will not liquidate, merge or
consolidate with or into any other entity or change the nature of its
organization as a Delaware corporation, nor permit any Material Subsidiary to
liquidate, merge with or into any other entity (other than a merger with
Borrower, if it is the surviving entity, or a merger between Material
Subsidiaries).

 

6.3 Indebtedness. Borrower will not create, incur or assume any Debt, nor permit
any Subsidiary to create, incur, or assume any Debt, other than (a) Debt owing
to Bank, (b) Debt owing with respect to which the obligee and the obligor are
both Material Subsidiaries which have guaranteed the Obligations in accordance
with the provisions of Section 2.2 hereof, (c) Debt owing by or to Borrower and
to or from any such Material Subsidiary, (d) other Debt not exceeding the
aggregate principal amount of $10,000,000.00 at any one time, and (e)
intercompany Debt.

 

6.4 Liens; Other Agreements. Borrower shall not, and shall not permit any of its
Subsidiaries to, create or suffer to exist any Lien upon any of its or their
respective properties, other than Permitted Liens. Borrower shall not, and shall
not permit any of its Subsidiaries to, enter into any agreement, other than this
Agreement and the other Loan Documents, or any purchase money mortgages or
leases permitted by this Agreement (in which cases, any prohibition or
limitation shall only be effective against the assets financed thereby) (a)
which prohibits or limits the ability of Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Liens upon any of its respective
properties, whether now owned or hereafter acquired or (b) which prohibits or
requires the consent of any Person to any amendment, modification or supplement
to this Agreement or any of the other Loan Documents.

 

6.5 Transactions with Affiliates. Enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate (as hereinafter defined) of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower’s
business and upon fair and reasonable terms no less favorable to Borrower than
would be obtained in a comparable arm’s-length transaction with a person or
entity not an Affiliate of Borrower. As used herein, the term “Affiliate” means
any individual or entity directly or indirectly controlling, controlled by, or
under common control with, another individual or entity.

 

6.6 Fiscal Year. Borrower shall not change its fiscal year.

 

7. Financial Covenants.

 

Until (i) the Notes and all other obligations and liabilities of Borrower under
this Loan Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Bank has no further commitment to lend hereunder, Borrower will
maintain the following financial covenants:

 

7.1 Tangible Net Worth. Borrower will not allow its Tangible Net Worth as of the
end of each month to be less than $70,000,000.00.

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7.2 EBITDA. Borrower shall not permit its EBITDA to be less than $3,000,000.00
during any of its fiscal quarters.

 

7.3 Senior Debt to EBITDA Ratio. Borrower will maintain, as of the end of each
of its fiscal quarters, a Senior Debt to EBITDA Ratio of not greater than 2.0 to
1.0.

 

8. Reporting Requirements.

 

Until (i) the Indebtedness and all other Obligations are fully paid and
satisfied, and (ii) the Bank has no further commitment to lend or issue Letters
of Credit hereunder, Borrower will, unless Bank shall otherwise consent in
writing, furnish to Bank.

 

8.1 Interim Financial Statements. As soon as available, and in any event within
forty-five (45) days after the end of each fiscal quarter of Borrower, a
consolidated balance sheet and income statement and statement of cash flow of
Borrower as of the end of such fiscal quarter, all in form and substance and in
reasonable detail satisfactory to Bank and duly certified (subject to year-end
review adjustments) by the President and/or Chief Financial Officer of Borrower
(i) as being true and correct in all material aspects to the best of his or her
knowledge and (ii) as having been prepared in accordance with GAAP.

 

8.2 Annual Financial Statements. As soon as available and in any event within
ninety (90) days after the end of each fiscal year of Borrower, a consolidated
balance sheet and income statement and statement of cash flow of Borrower as of
the end of such fiscal year, in each case audited by independent public
accountants of recognized standing acceptable to Bank.

 

8.3 Compliance Certificate. While any Advances remain outstanding, a certificate
in the form of Exhibit C attached, signed by the President and/or Chief
Financial Officer of Borrower, (i) within forty-five (45) days after the end of
each fiscal quarter (including the fourth calendar quarter), and (ii) within
ninety (90) days after the end of each fiscal year, in each case stating that
Borrower is in full compliance with all of its obligations under this Loan
Agreement and all other Loan Documents and is not in default of any term or
provisions hereof or thereof, and demonstrating compliance with all financial
ratios and covenants set forth in this Loan Agreement, or if Borrower is not in
compliance or is in default, stating the nature of non-compliance or default and
Borrower’s plan for achieving compliance or curing such default. The
certificates furnished within the forty-five (45) day period shall be based upon
unaudited financial statements and those certificates furnished within the
ninety (90) day period of the fiscal year shall be based upon audited financial
statements.

 

9. Events of Default.

 

Each of the following shall constitute an “Event of Default” under this Loan
Agreement:

 

9.1 The failure, refusal or neglect of Borrower to pay when due any part of the
principal of, or interest on, the Note or any other indebtedness owing to Bank
by Borrower from time to time.

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9.2 The failure of Borrower to timely and properly observe, keep or perform any
covenant set forth in Section 7 hereof.

 

9.3 The failure of Borrower to timely and properly observe, keep or perform any
other covenant, agreement, warranty or condition required herein or in any of
the other Loan Documents.

 

9.4 The occurrence of an event of default under any of the other Loan Documents
or under any other agreement now existing or hereafter arising between Bank and
Borrower.

 

9.5 Any representation contained herein or in any of the other Loan Documents
made by Borrower was false or misleading in any material respect as of the date
made.

 

9.6 The occurrence of any event which permits the acceleration of the maturity
of any indebtedness owing by Borrower to any third party under any agreement or
understanding.

 

9.7 If Borrower: (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due; (iii) has a receiver, trustee or
custodian appointed for, or take possession of, all or substantially all of the
assets of Borrower, either in a proceeding brought by Borrower or in a
proceeding brought against Borrower and such appointment is not discharged or
such possession is not terminated within sixty (60) days after the effective
date thereof or Borrower consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called “Applicable
Bankruptcy Law”) or an involuntary petition for relief is filed against Borrower
under any Applicable Bankruptcy Law and such involuntary petition is not
dismissed within sixty (60) days after the filing thereof, or an order for
relief naming Borrower is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by Borrower; (v) fails to
have discharged within a period of thirty (30) days any attachment,
sequestration or similar writ levied upon any property of Borrower; or (vi)
fails to pay within thirty (30) days any final money judgment against Borrower.

 

9.8 The liquidation, dissolution, merger or consolidation of Borrower.

 

9.9 The entry of any judgment against Borrower or any of its Subsidiaries
awarding damages against Borrower or any Subsidiary of Borrower, whether
individually or jointly and severally with others, in an amount of
$10,000,000.00 or more in excess of any applicable insurance coverage, if
undischarged, unbonded or undismissed within thirty (30) days after such entry.

 

9.10 Remedies. Upon the occurrence of any one or more of the foregoing Events of
Default, (a) the entire unpaid balance of principal of the Note, together with
all accrued but unpaid interest thereon, and all other indebtedness owing to
Bank by Borrower at such time shall, at the option of Bank, become immediately
due and payable without further notice, demand, presentation, notice of
dishonor, notice of intent to accelerate, notice of acceleration, protest or
notice of protest of any kind, all of which are expressly waived by Borrower,
and (b) Bank may, at its sole discretion, require Borrower to pay immediately to
Bank, for application against drawings under any outstanding Letters of Credit,
the outstanding principal amount of any such Letters of Credit which

--------------------------------------------------------------------------------

have not expired, and (c) Bank may, at its option, cease further Advances;
provided, however, concurrently and automatically with the occurrence of an
Event of Default under Section 9.7 in the immediately preceding paragraph, (ii)
further Advances shall cease, and (ii) the Note and all other indebtedness owing
to Bank by Borrower at such time shall, without any action by Bank, become due
and payable, without further notice, demand, presentation, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest or notice of
protest of any kind, all of which are expressly waived by Borrower. All rights
and remedies of Bank set forth in this Loan Agreement and in any of the other
Loan Documents may also be exercised by Bank, at its option to be exercised in
its sole discretion, upon the occurrence of an Event of Default.

 

10. Miscellaneous.

 

10.1 Rights Cumulative. All rights of Bank under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Bank under
any and all other agreements between Borrower and Bank (including, but not
limited to, the other Loan Documents), and not in substitution or diminution of
any rights now or hereafter held by Bank under the terms of any other agreement.

 

10.2 Waiver and Agreement. Neither the failure nor any delay on the part of Bank
to exercise any right, power or privilege herein or under any of the other Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the
same shall be in writing and signed by Bank, and then shall be effective only in
the specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.

 

10.3 Benefits. This Loan Agreement shall be binding upon and inure to the
benefit of Bank and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Bank, assign any rights, powers, duties or obligations under this Loan Agreement
or any of the other Loan Documents.

 

10.4 Notices. All notices, requests and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered in
person (including delivery by an express delivery service during the recipient’s
regular business hours) to the officer of Borrower or of Bank, respectively,
named below, or three business days after such notice is enclosed in a properly
sealed envelope, certified or registered, and deposited (postage and
certification or registration prepaid) in a post office or collection facility
regularly maintained by the United States Postal Service and addressed as
follows:

--------------------------------------------------------------------------------

If to Borrower:

 

Staktek Holdings, Inc.

8900 Shoal Creek Blvd., Suite 125

Austin, Texas 78757

Attn: Controller

 

With a copy (which shall not constitute notice) to:

 

Staktek Holdings, Inc.

8900 Shoal Creek Blvd., Suite 125

Austin, Texas 78757

Attn: General Counsel

 

If to Bank:

 

Guaranty Bank

301 Congress Avenue, Suite 300

Austin, Texas 78701

Attn: Mike McConnell

 

With a copy (which shall not constitute notice) to:

 

Graves, Dougherty, Hearon & Moody

401 Congress Avenue, Suite 2200

Austin, Texas 78701

Attn: Roy C. Snodgrass III

 

Either party may change the address to which such communications are to be sent
by written notice to the other party as provided herein. Anything herein to the
contrary notwithstanding, requests for Advances shall not be effective until
actually received by Bank.

 

10.5 Savings Clause. It is not the intention of any party to any of the Loan
Documents to make an agreement violative of the laws of any applicable
jurisdiction relating to usury. Regardless of any provision in any of the Loan
Documents, Bank shall never be entitled to receive, collect or apply, as
interest on the Loans, any amount which would cause the interest rate thereon to
exceed the Maximum Lawful Rate. If Bank ever receives, collects or applies, as
interest, any such excess, such amount which would be excessive interest shall
be deemed a partial repayment of principal and treated hereunder as such; and if
principal is paid in full, any remaining excess shall be paid to Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, would cause the interest rate to exceed the Maximum Lawful Rate,
Borrower and Bank shall, to the maximum extent permitted under applicable laws,
(i) characterize any nonprincipal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effect thereof, and
(iii) amortize, prorate, allocate and spread in equal parts, the total amount of
interest among all of the Loans throughout the entire contemplated term of the
Loans so that the interest rate is uniform throughout the entire term of the
Loans; provided that if the Loans are paid in

--------------------------------------------------------------------------------

full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof would cause the interest
rate to exceed the Maximum Lawful Rate, Bank shall refund to Borrower the amount
of such excess or credit the amount of such excess against the total principal
amount owing, and, in such event, Bank shall not be subject to any penalties
provided by any laws for contracting for, charging or receiving interest in
excess of the Maximum Lawful Amount. This Section 10.5 shall control every other
provision of all agreements among the parties to this Loan Agreement pertaining
to the transactions contemplated by or contained in any of the Loan Documents.

 

10.6 Construction. This Loan Agreement and the other Loan Documents have been
executed and delivered in the State of Texas, shall be governed by and construed
in accordance with the laws of the State of Texas, and shall be performable by
the parties hereto in Dallas County, Texas.

 

10.7 Invalid Provisions. If any provision of this Loan Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

 

10.8 Expenses. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys’ fees) in connection with (i) the negotiation,
documenting and closing the transactions reflected by the provisions of this
Loan Agreement and any amendments, modifications, replacements and additions
hereto and to the other Loan Documents, and (ii) any action in the enforcement
of Bank’s rights upon the occurrence of an Event of Default; provided, however,
that the costs and expenses for which Borrower is responsible hereunder in
connection with the negotiation, documenting and closing the transactions
reflected by the provisions of this Loan Agreement shall not exceed $10,000.00
and shall be subject to the following limitations: (a) travel expenses, meals,
word processing time and overtime shall not be included in the costs and
expenses for which Borrower is responsible and (b) invoices shall set forth fees
and expenses in reasonable detail. To the extent not prohibited by applicable
law and subject to the provisions of Section 10.5 hereof, Borrower will pay all
reasonable costs and expenses and reimburse Bank for any and all reasonable
expenditures of every character incurred or expended from time to time by Bank
to third parties for services rendered in connection with Bank=s exercising any
of its rights and remedies under this Loan Agreement, the Note, or any of the
other Loan Documents, or at law; provided, however, in the case of any matter
which is contested by legal proceedings, Borrower shall pay only such fees and
costs to the extent ordered by the court. Any amount to be paid hereunder by
Borrower to Bank to the extent not prohibited by applicable law, shall bear
interest from the date of expenditure until reimbursed to Bank by Borrower at
the Default Rate.

 

10.9 Participation of the Loans. Borrower agrees and consents to Bank’s sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Bank. Bank may
provide, without any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Bank may have about Borrower
or about any other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters; provided, however,
that Bank shall not disclose any information which is not in the public domain
to any such purchaser unless such purchaser has

--------------------------------------------------------------------------------

signed a confidentiality agreement in form acceptable to Borrower. Borrower
additionally waives any and all notices of sale of participation interest, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Bank or against any
purchaser of such a participation interest and unconditionally agrees that
either Bank or such purchaser may enforce Borrower’s obligation under the Loans
irrespective of the failure or insolvency of any holder of any interest in the
Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that borrower may have against Bank.

 

10.10 JURY WAIVER. BORROWER, THE OTHER OBLIGATED PARTIES, AND BANK EACH HEREBY
WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

 

10.11 Entire Agreement. This Loan Agreement (together with the other Loan
Documents) contains the entire agreement among the parties regarding the subject
matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.

 

10.12 Conflicts. In the event any term or provision hereof is inconsistent with
or conflicts with any provision of the other Loan Documents, the terms and
provisions contained in this Loan Agreement shall be controlling.

 

10.13 Counterparts. To facilitate execution, this Loan Agreement may be executed
in any number of counterparts as may be convenient or necessary, and it shall
not be necessary that the signatures of all parties hereto be contained on any
one counterpart hereof. Additionally, the parties hereto hereby covenant and
agree that, for purposes of facilitating the execution of this Loan Agreement,
(a) the signature pages taken from separate individually executed counterparts
of this Loan Agreement may be combined to form multiple fully executed
counterparts and (b) a facsimile transmission shall be deemed to be an original
signature. All executed counterparts of this Loan Agreement shall be deemed to
be originals, but all such counterparts taken together or collectively, as the
case may be, shall constitute one and the same agreement.

 

10.14 USA Patriot Act Notification. The following notification is provided to
the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:

 

Bank hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow Bank to identify the Borrower in
accordance with the Act.

--------------------------------------------------------------------------------

If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.

 

Very truly yours, GUARANTY BANK By:  

 

--------------------------------------------------------------------------------

    Mike McConnell, Vice President

 

ACCEPTED as of the date first written above.

 

BORROWER:

 

STAKTEK HOLDINGS, INC., a Delaware corporation By:  

 

--------------------------------------------------------------------------------

    W. Kirk Patterson     Vice President and Chief Financial Officer

--------------------------------------------------------------------------------

DEFINED TERMS

 

1. Certain Definitions: As used in this Loan Agreement:

 

“Advance” or “Advances” shall have the meanings set forth in Section 1.1 of the
Loan Agreement.

 

“Applicable L/C Percent” shall mean the following percentages per annum, based
upon the Borrower’s Deposit/Sweep Balances:

 

Pricing Level

--------------------------------------------------------------------------------

 

Deposit/Sweep Balances

--------------------------------------------------------------------------------

 

Applicable L/C Percent

--------------------------------------------------------------------------------

Level 1

  $5MM <$10MM   1.60%

Level 2

  $10MM <$15MM   1.55%

Level 3

  $15MM <$20MM   1.50%

Level 4

  $20MM <$30MM   1.45%

Level 5

  $30MM <$50MM   1.40%

Level 6

  $50MM   1.25%

 

Any increase or decrease in the Applicable L/C Percent resulting from a change
in the Deposit/Sweep Balances shall become effective as of the first Business
Day following the date a change in Borrower’s Deposit/Sweep Balances occurs that
effects such a change in the Applicable L/C Percent.

 

“Base Rate”, as used herein, means the Base Rate as set by Bank from time to
time for the guidance of its loan officers, regardless how such rate is
published or otherwise announced, as a general reference rate of interest,
taking into account such factors as Bank may deem appropriate, it being
understood that many of Bank’s commercial or other loans are not priced in
relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer, that Bank may make various commercial or other
loans at rates of interest having no relationship to such rate, and that rates
on other loans or credit facilities may be based on indices other than the Base
Rate.

 

“Business Day” shall mean any day (other than a Saturday or Sunday) on which
Bank is open to conduct all regular business and is not authorized or required
to be closed.

 

“Capital Leases” shall mean capital leases and subleases, as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 13, dated November 1976, as amended.

 

EXHIBIT A

--------------------------------------------------------------------------------

“Capitalized Lease Obligations” shall mean the amount of the obligations of
Borrower under Capital Leases which would be shown as a liability on a balance
sheet of Borrower prepared in accordance with GAAP.

 

“Capital Stock” shall mean, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a corporation, membership interests in any Person that is
a limited liability company and partnership and joint venture interests (general
and limited) in any Person that is a partnership or joint venture.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.

 

“Closing Date” shall mean the date of this Agreement or such later date as may
be agreed to in writing by Bank.

 

“Credit Facilities” shall have the meaning given such term in Section 1.

 

“Credit Limit” shall mean an amount equal at any time to the Maximum Committed
Amount, less the Letter of Credit Obligations.

 

“Debt” shall mean as to any Person, all indebtedness as determined in accordance
with GAAP and, in any event, shall include (a) all indebtedness secured by any
lien upon property owned by such Person, even though such Person has not assumed
or become liable for the payment of such indebtedness and (b) all indebtedness
of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property and
(c) all Capitalized Lease Obligations. For all purposes of this Agreement, the
Debt of any Person shall include all recourse Debt of any partnership and joint
venture in which such Person is a general partner or a joint venturer.

 

“Default” shall mean any occurrence which, but for the passage of time or giving
of notice or both, or the happening of any further condition, event or act,
would be an Event of Default.

 

“Default Rate” shall mean a variable rate per annum equal to the lesser of (a)
the Maximum Lawful Rate, and (b) the Base Rate, plus five percent (5%) per
annum. The rate per annum at which interest accrues at the Default Rate shall be
adjusted without notice to Borrower on the effective date of any change in the
Base Rate or the Maximum Lawful Rate, as the case may be.

 

“Deposit/Sweep Balances” shall mean, collectively, deposit balances and
investment balances maintained by Borrower with or through Bank, which balances
may be in such type and combination as Borrower may determine in its sole
discretion from time to time, including (without limitation) interest bearing
accounts, certificates of deposit, demand deposits, sweep accounts and
investment accounts.

 

EXHIBIT A

--------------------------------------------------------------------------------

“EBITDA” shall mean, as to Borrower for any trailing four fiscal quarter period,
Net Income plus, without duplication and to the extent deducted in determining
Net Income, the sum of (a) Interest Expense, (b) taxes on Borrower’s income, (c)
depreciation expense, (d) amortization expense, and (e) extraordinary or unusual
losses deducted in calculating Net Income less extraordinary or unusual gains
added in calculating such Net Income, in each case determined in accordance with
GAAP for such period.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“Event of Default” shall mean any of the events specified or referred to in
Section 9 of this Agreement with respect to which any requirement in connection
with such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act, has been satisfied.

 

“GAAP” shall mean, as to a particular Person and subject to the provisions of
Section 2 of this Exhibit A, such accounting practice as, in the opinion of the
independent accountants of recognized standing regularly retained by such Person
and acceptable to Bank, conforms at the time to generally accepted accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
Person furnished to Bank, and (c) which are consistently applied for all periods
after the date hereof so as to reflect properly the financial condition, and
results of operations and changes in cash flow, of such Person.

 

“Governmental Authority” shall mean any governmental authority, including that
of the United States of America, any State of the United States, any foreign
country, and any political subdivision of any of the foregoing, and any domestic
or foreign agency, department, commission, board, bureau or court.

 

“Governmental Requirement” shall mean any law, ordinance, order, rule,
regulation or directive (or interpretation of any of the foregoing) of, and the
terms of any license or permit issued by, a Governmental Authority.

 

“herein,” “hereof,” “hereto,” “hereunder” and similar terms, shall refer to this
Loan Agreement and not to any particular section or provision of this Agreement.

 

“Interest Expense” shall mean, with respect to Borrower for any period without
duplication, interest expense (including the interest component of Capitalized
Lease Obligations) net of interest income, whether paid or accrued, on all
indebtedness of Borrower for such period determined in accordance with GAAP.

 

“Issue Fee” shall mean the fee to be paid by the Borrower to the Bank in
accordance with the provisions of Section 2.5 of this Agreement.

 

“Letter of Credit or Letters of Credit” shall mean a letter of credit or letters
of credit which are to be issued by Bank for the account of Borrower under the
Letter of Credit Facility.

 

EXHIBIT A

--------------------------------------------------------------------------------

“Letter of Credit Agreement” shall mean an Application for Issuance of Letter of
Credit and a Letter of Credit Agreement, each in the form of Bank’s standard
version of such documents at the time a Letter of Credit is issued under the
Letter of Credit Facility and otherwise in Proper Form.

 

“Letter of Credit Facility” shall mean the letter of credit facility to be
established by Bank for the account of Borrower under this Loan Agreement, as
referred to in Section 1.2 hereof.

 

“Letter of Credit Limit” shall mean the principal amount of $5,000,000.00.

 

“Letter of Credit Obligations” shall mean the amount of all Letters of Credit
which are outstanding at any given time.

 

“Liabilities” shall mean all indebtedness and other items of indebtedness or
liability (except capital and surplus, but including reserves) which in
accordance with GAAP would be included in determining total liabilities as shown
on a balance sheet.

 

“Liens” shall mean any mortgage, pledge, security interest, encumbrance, lien,
or charge of any kind, including without limitation any agreement to give or not
to give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement or other similar form of public notice under the
laws of any jurisdiction (except for the filing of a financing statement or
notice in connection with an operating lease).

 

“Loan Documents” shall mean this Agreement, the Note, the Guaranty Agreements,
each Letter of Credit Agreement, and all other security agreements, documents,
financing statements, agreements, and certificates executed and delivered by any
Person in connection with any thereof.

 

“Material Adverse Change” shall mean any circumstance or event that (a) can
reasonably be expected to cause an Event of Default, (b) otherwise can
reasonably be expected to (i) be material and adverse to the continued operation
of Borrower and its Material Subsidiaries taken as a whole, or (ii) be material
and adverse to the financial condition, business operations, prospects or
properties of Borrower and its Material Subsidiaries taken as a whole, or (c) in
any manner whatsoever does or can reasonably be expected to materially and
adversely affect the validity or enforceability of any of the Loan Documents.

 

“Material Subsidiary” shall mean each Subsidiary of Borrower which, at any given
time, either (a) has revenues equal to or exceeding ten percent (10%) of the
aggregate revenues of Borrower and its Subsidiaries on a consolidated basis, or
(b) is a U.S. Subsidiary and owns ten percent (10%) or more of the consolidated
assets of Borrower and its Subsidiaries, excluding intercompany investments and
accounts.

 

“Maturity Date” shall mean March 9, 2006.

 

“Maximum Committed Amount” shall mean the principal amount of $20,000,000.00.

 

EXHIBIT A

--------------------------------------------------------------------------------

“Maximum Lawful Rate” shall mean the maximum rate of nonusurious interest, and
the term “Maximum Lawful Amount” shall mean the maximum amount of non-usurious
interest permitted with respect to the Indebtedness from time to time by
applicable law after taking into account any and all fees, payments, and other
charges that constitute interest under applicable law. Unless changed in
accordance with applicable law, the applicable rate ceiling under Texas law
shall be the weekly ceiling in effect from time to time, as provided in Chapter
303 of the Texas Finance Code (as amended), subject to the provisions of Section
303.009 of the Texas Finance Code (as amended).

 

“Net Income” shall mean, with respect to any period, net earnings (after taxes)
of Borrower for such period, but excluding (i) any gain or loss arising from the
sale of capital assets; (ii) any gain arising from any write-up of assets; (iii)
earnings of any other Person, substantially all of the assets of which have been
acquired by Borrower in any manner, to the extent that such earnings were
realized by such other Person prior to the date of such acquisition; and (iv)
any gain arising from the acquisition of any securities of a Person.

 

“Note” shall have the meaning given in Section 2.1 of the Loan Agreement.

 

“Obligations” shall mean any and all of the covenants, conditions, warranties,
representations and other obligations (including obligations to repay the Credit
Facilities) made or undertaken by Borrower as set forth in this Loan Agreement,
the Note, and any other Loan Documents.

 

“Permitted Liens” shall mean:

 

(a) Liens and security interests securing indebtedness owed by Borrower to Bank;

 

(b) Liens for taxes, assessments, or similar charges either not yet due or being
contested in good faith;

 

(c) Liens of materialmen, mechanics, warehousemen, or carriers, or other like
Liens arising in the ordinary course of business and securing obligations which
are not yet delinquent;

 

(d) purchase money Liens or purchase money security interests or Capital Leases
upon or in any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness or capital lease obligations incurred for the
purpose of acquiring such property; and

 

(e) Liens which, as of the Closing Date, have been disclosed to and approved by
Bank in writing.

 

“Person” shall mean any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated association, Governmental
Authority or any other form of entity.

 

“Proper Form” shall mean such form as is reasonably satisfactory in form and
substance to Bank and legal counsel for Bank.

 

“Revolving Credit” shall have the meaning given such term in Section 1.1.

 

EXHIBIT A

--------------------------------------------------------------------------------

“SARA” shall mean the Superfund Amendments and Reauthorization Act of 1986 as
now or hereafter amended.

 

“Senior Debt” shall mean Debt owing to Bank, plus Capitalized Lease Obligations.

 

“Senior Debt to EBITDA Ratio” shall mean the ratio of Borrower’s Senior Debt to
its EBITDA (for the trailing twelve month period on the date of determination),
as determined in accordance with GAAP.

 

“Subsidiary” shall mean, as to any Person, any other Person in which any Capital
Stock having ordinary voting power (other than securities having such power only
by reason of the happening of a contingency) is owned by such Person, or one or
more Subsidiaries of such Person or a combination thereof.

 

“Tangible Assets” shall mean the total of all assets of Borrower, as determined
in accordance with GAAP, less the sum of the following:

 

(a) All intangibles such as goodwill, trademarks, tradenames, franchises,
copyrights, patents, licenses and any rights thereof;

 

(b) Unamortized discounts and expenses;

 

(c) Reserves not deducted for accounting purposes from the related assets;

 

(d) All capitalized future tax benefits; and

 

(f) All other assets as are properly classified as intangible assets in
accordance with GAAP.

 

2. Other Documents; Accounting Terms. All terms defined in this Agreement shall
be used with such defined meanings when used in any note, certificate, schedule,
report or other document made or delivered pursuant to this Agreement, unless
specifically required otherwise. Each accounting term not specifically defined
herein shall have the meaning given in accordance with GAAP and, when applied to
a Person, shall mean such Person and its Subsidiaries on a consolidated basis,
unless otherwise expressly stated. If any change in any accounting principle or
practice is required by the Financial Accounting Standards Board in order for
such principle or practice to continue as a generally accepted accounting
principal or practice and such change results in a change in the method or
calculation of financial covenants, standards or terms in this Agreement, then
the Borrower and the Bank agree to enter into negotiations in order to amend
such provisions of this Agreement so as to equitably reflect such change with
the desired result being that the criteria for evaluating the Borrower’s
financial condition shall be the same after such change as if such change had
not been made. Until such time as such an amendment shall have been executed and
delivered by the Borrower and the Bank, all financial covenants, standards and
terms in this Agreement shall continue to be calculated as if such change had
not occurred.

 

EXHIBIT A

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3. Use of Pronouns. Terms defined or used in the singular shall include the
plural, and those in the plural shall include the singular, unless the context
shall otherwise require, and the use of masculine, feminine and neuter pronouns
shall include each gender as the context may require.

 

4. Amendments, Etc. Unless the context otherwise requires or unless otherwise
provided, the terms defined in Section 1 of this Exhibit A which mean or refer
to a particular agreement, instrument or document shall also mean, refer to and
include when appropriate all amendments, renewals, extensions, substitutions and
modifications of such agreement, instrument or document, provided that nothing
contained in this Section 4 shall be construed to authorize the execution or
entering into by any Person of any such renewal, extension or modification
except as may be permitted by other provisions of this Agreement.

 

EXHIBIT A

--------------------------------------------------------------------------------

GENERAL CONDITIONS OF BORROWING

 

1. Closing Proceedings. The making of each advance under the Loans shall be
subject to the following conditions, in addition to those stated in other
provisions of this Agreement, which shall each have been and remain at the time
satisfied by Borrower or waived by Bank:

 

1.1 This Loan Agreement shall have been duly and validly executed and delivered
by Borrower and Bank and Borrower shall have duly and validly executed and
delivered or caused to be executed and delivered to Bank the Note, and all other
Loan Documents, and each Loan Document which is to be filed or recorded shall
have been properly filed or recorded and the fees and taxes, if any, for filing
or recording the same shall have been paid by Borrower.

 

1.2 There shall have occurred no Material Adverse Change.

 

1.3 No event shall have occurred and then be continuing (or would occur after
giving effect to the Loans) which constitutes (or would constitute after giving
effect to the Loans) an Event of Default and a certificate to such effect signed
by the President or a Vice President of Borrower shall be delivered to Bank.

 

1.4 Each and all of the representations and warranties of Borrower in this Loan
Agreement and the other Loan Documents shall be true, correct and accurate as of
the date any Loan is requested and a certificate to such effect signed by the
President or a Vice President of Borrower shall be delivered to Bank.

 

1.5 Borrower shall have delivered or caused to be delivered to Bank in Proper
Form:

 

(a) Evidence that all necessary action on the part of Borrower and each Material
Subsidiary has been taken with respect to the execution and delivery of this
Agreement and the other Loan Documents and the performance of their respective
terms and the consummation of the transactions contemplated hereby and thereby,
so that this Agreement and all Loan Documents to be executed and delivered by or
on behalf of Borrower or any Material Subsidiary will be valid and binding upon
Borrower and the person or entity executing and delivering such document;

 

(b) Such documents, instruments, certificates and public authority documents as
Bank may reasonably require to evidence the status, organization or authority of
Borrower and each Material Subsidiary.

 

1.6 Borrower shall have duly and timely performed each and all of its agreements
and undertakings contained in this Loan Agreement.

 

1.7 Bank shall have received payment of all fees and reimbursement of all
reasonable attorneys’ fees and expenses incurred by Bank in connection with the
preparation, negotiation and consummation of the loan transaction evidenced by
this Loan Agreement and the other Loan Documents.

 

EXHIBIT B

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1.8 Borrower shall have obtained and furnished to Bank evidence of the existence
of insurance and endorsements thereto as required pursuant to the provisions of
Section 5.6 hereof and shall have paid all premiums therefor.

 

1.9 Bank shall have completed all due diligence deemed necessary in its sole
discretion, and all such information revealed in connection with such due
diligence shall be acceptable to Bank in its sole discretion.

 

1.10 All necessary consents shall have been obtained and copies and other
evidence thereof as Bank may reasonably require.

 

2. General Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Loan Agreement and the other Loan Documents
and all documents incident hereto or thereto, and all actions necessary to
evidence, create, and perfect the security interests contemplated hereby, shall
have been taken and be in Proper Form and Bank shall have received copies of all
documents which it may reasonably request in connection with such transactions
and all corporate proceedings with respect thereto, in Proper Form.

 

3. Sole Benefit of Bank. All conditions precedent to the obligation of Bank to
make the Loans are imposed hereby solely for the benefit of Bank and no other
party may require satisfaction of any such condition precedent or be entitled to
assume that Bank will refuse to make the Loans in the absence of strict
compliance with such conditions precedent. Any requirement of this Loan
Agreement may be waived by Bank, in whole or in part, at any time. Any
requirement herein of submission of evidence of the existence or non-existence
of a fact shall be deemed, also, to be a requirement that the fact shall exist
or not exist, as the case may be, and without waiving any condition or
obligation of Borrower, Bank may at all times independently establish to its
satisfaction such existence or non-existence.

 

EXHIBIT B

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COMPLIANCE CERTIFICATE

 

Date:                     , 200    

 

TO:     Guaranty Bank     301 Congress Avenue, Suite 1500     Austin, Texas
78701

 

In accordance with the provisions of Section 8.3 of that certain Loan Agreement
(the “Loan Agreement”) dated as of March 10, 2005, by and between Staktek
Holdings, Inc., a Delaware corporation (the “Borrower”) and Guaranty Bank (the
“Lender”), the undersigned, as the [chief financial officer/chief executive
officer] of the Borrower, hereby certifies as of                     , 200    
(the “Certification Date”) to the best of his knowledge to the following:

 

1. As of the Certification Date, the Borrower’s compliance with the following
provisions of the Loan Agreement was as show below:

 

Section

Reference

--------------------------------------------------------------------------------

  

Covenant

Description

--------------------------------------------------------------------------------

  

Required

--------------------------------------------------------------------------------

  

Actual

--------------------------------------------------------------------------------

  

Compliance

Yes    No

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7.1    Tangible Net Worth    No less than $70,000,000         ______ ______ 7.2
   EBITDA    $3,000,000 or more         ______ ______ 7.3    Senior Debt to
EBITDA Ratio    No greater than 2.00 to 1.00         ______ ______

 

2. As of the Certification Date, no Event of Default (or event, which after
notice or lapse of time or both, would be an Event of Default) had occurred
[other than     . Such Event is not continuing or, if continuing, the Borrower
is taking the following steps to cure the same:            .]

 

3. Terms used herein and not otherwise defined are used with the same meanings
given such terms in the Loan Agreement.

 

STAKTEK HOLDINGS, INC., a Delaware corporation By:  

 

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Name:  

 

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Title:  

 

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EXHIBIT C

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LITIGATION

 

Helen Holzwasser v. Staktek Holdings, Inc.

(a class action securities lawsuit filed in the U.S. District Court of New
Mexico)

 

Schedule 3.5