EXHIBIT 10.3

REVOLVING LINE OF CREDIT NOTE

 

 

$10,000,000.00

Bloomington, Minnesota

 

July 1, 2009

          FOR VALUE RECEIVED, the undersigned RIMAGE CORPORATION (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at 7900 Xerxes Avenue South, 23rd Floor, Bloomington, Minnesota,
or at such other place as the holder hereof may designate, in lawful money of
the United States of America and in immediately available funds, the principal
sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be
advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.

DEFINITIONS:

          As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:

          (a)     “Base Rate” means, for any day, a fluctuating rate equal to
the highest of: (i) the Prime Rate in effect on such day, (ii) a rate determined
by Bank to be one and one-half percent (1.50%) above Daily One Month LIBOR in
effect on such day, and (iii) the Federal Funds Rate plus one and one-half
percent (1.50%).

          (b)     “Business Day” means any day except a Saturday, Sunday or any
other day on which commercial banks in Minnesota are authorized or required by
law to close.

          (c)     “Daily One Month LIBOR” means, for any day, the rate of
interest equal to LIBOR then in effect for delivery for a one (1) month period.

          (d)     “Federal Funds Rate” means, for any day, the rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers for the immediately preceding day, as published by the Federal
Reserve Bank of New York; provided that if no such rate is so published on any
day, then the Federal Funds Rate for such day shall be the rate most recently
published.

          (e)     “Fixed Rate Term” means a period commencing on a Business Day
and continuing for one month, as designated by Borrower, during which all or a
portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than One Hundred Thousand Dollars
($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond
the scheduled maturity date hereof. If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the
next succeeding Business Day.

          (f)     “LIBOR” means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the
following formula:

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EXHIBIT 10.3

 

 

LIBOR =

Base LIBOR

 

100% - LIBOR Reserve Percentage

                    (i)     “Base LIBOR” means the rate per annum for United
States dollar deposits quoted by Bank (A) for the purpose of calculating
effective rates of interest for loans making reference to LIBOR, as the
Inter-Bank Market Offered Rate, with the understanding that such rate is quoted
by Bank for the purpose of calculating effective rates of interest for loans
making reference thereto, on the first day of a Fixed Rate Term for delivery of
funds on said date for a period of time approximately equal to the number of
days in such Fixed Rate Term and in an amount approximately equal to the
principal amount to which such Fixed Rate Term applies, or (B) for the purpose
of calculating effective rates of interest for loans making reference to the
Daily One Month LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from
time to time for delivery of funds for one (1) month in amounts approximately
equal to the principal amount of such loans. Borrower understands and agrees
that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such
offers or other market indicators of the Inter-Bank Market as Bank in its
discretion deems appropriate including, but not limited to, the rate offered for
U.S. dollar deposits on the London Inter-Bank Market.

                    (ii)     “LIBOR Reserve Percentage” means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of
the Federal Reserve Board, as amended), adjusted by Wells Fargo Bank for
expected changes in such reserve percentage during the applicable term of this
Note.

          (g)     “Prime Rate” means at any time the rate of interest most
recently announced within Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Bank’s base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

INTEREST:

          (a)     Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 365-day year, actual days elapsed)
either (i) at a fluctuating rate per annum equal to Base Rate in effect from
time to time, or (ii) at a fixed rate per annum determined by Bank to be two and
one quarter percent (2.25%) above LIBOR in effect on the first day of the
applicable Fixed Rate Term. When interest is determined in relation to the Base
Rate, each change in the rate of interest hereunder shall become effective on
the date each Base Rate change is announced within Bank. With respect to each
LIBOR selection hereunder, Bank is hereby authorized to note the date, principal
amount, interest rate and Fixed Rate Term applicable thereto and any payments
made thereon on Bank’s books and records (either manually or by electronic
entry) and/or on any schedule attached to this Note, which notations shall be
prima facie evidence of the accuracy of the information noted.

          (b)     Selection of Interest Rate Options. At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Base Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Base Rate,

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EXHIBIT 10.3

Borrower may convert all or a portion thereof so that it bears interest
determined in relation to LIBOR for a Fixed Rate Term designated by Borrower. At
such time as Borrower requests an advance hereunder or wishes to select a LIBOR
option for all or a portion of the outstanding principal balance hereof, and at
the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i)
the interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at its sole option but
without obligation to do so, accepts Borrower’s notice and quotes a fixed rate
to Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate. If no specific designation of interest is made at the time any advance is
requested hereunder or at the end of any Fixed Rate Term, Borrower shall be
deemed to have made a Base Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.

          (c)     Taxes and Regulatory Costs. Borrower shall pay to Bank
immediately upon demand, in addition to any other amounts due or to become due
hereunder, any and all (i) withholdings, interest equalization taxes, stamp
taxes or other taxes (except income and franchise taxes) imposed by any domestic
or foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR. In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

          (d)     Payment of Interest. Interest accrued on this Note shall be
payable on the last day of each month, commencing July 31, 2009.

          (e)     Default Interest. From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder becomes due and
payable by acceleration or otherwise, or at Bank’s option upon the occurrence,
and during the continuance of an Event of Default, the outstanding principal
balance of this Note shall bear interest at an increased rate per annum
(computed on the basis of a 365-day year, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note.

BORROWING AND REPAYMENT:

          (a)     Borrowing and Repayment. Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings

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EXHIBIT 10.3

under this Note shall not at any time exceed the principal amount stated above.
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for Borrower, which balance may be endorsed hereon
from time to time by the holder. The outstanding principal balance of this Note
shall be due and payable in full on July 1, 2010.

          (b)     Advances. Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written
request of (i) Robert M. Wolf or Bernard P. Aldrich, any one acting alone, who
are authorized to request advances and direct the disposition of any advances
until written notice of the revocation of such authority is received by the
holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any deposit account of Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by Borrower.

          (c)     Application of Payments. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Base Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

          (a)     Base Rate. Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to the Base Rate at any
time, in any amount and without penalty.

          (b)     LIBOR. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

 

 

 

 

(i)

Determine the amount of interest which would have accrued each month on the
amount prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term applicable thereto.

 

 

 

 

(ii)

Subtract from the amount determined in (i) above the amount of interest which
would have accrued for the same month on the amount prepaid for the remaining
term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for

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EXHIBIT 10.3

 

 

 

 

 

new loans made for such term and in a principal amount equal to the amount
prepaid.

 

 

 

 

(iii)

If the result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2.0%) above the Prime
Rate in effect from time to time (computed on the basis of a 365-day year,
actual days elapsed).

EVENTS OF DEFAULT:

          This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of March 29, 2004, as amended from time to time (the “Credit Agreement”). Any
default in the payment or performance of any obligation under this Note, or any
defined event of default under the Credit Agreement, shall constitute an “Event
of Default” under this Note.

MISCELLANEOUS:

          (a)     Remedies. Upon the occurrence of any Event of Default, the
holder of this Note, at the holder’s option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of the holder’s in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder’s rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

          (b)     Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.

          (c)     Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Minnesota.

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EXHIBIT 10.3

          IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.

 

 

 

 

RIMAGE CORPORATION

 

 

 

By:

/s/ Robert M. Wolf

 

 

Robert M. Wolf, Secretary and

 

Chief Financial Officer

 

 

 

By:

/s/ Bernard P. Aldrich

 

 

Bernard P. Aldrich, President and

 

Chief Executive Officer

 

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