**Exhibit 10.1**

 

**AMENDED AND RESTATED**

**REVOLVING CREDIT NOTE**

 
| **$5,000,000.00** |   | **Naperville, Illinois** |
|-------------------|--------|--------------------------|
|              |   | **April 21, 2004**  |

 

FOR VALUE RECEIVED, **EBIX, INC., a Delaware corporation, f/k/a EBIX.COM,INC.** (“Maker”) promises to pay to the order of **LASALLE BANK, NATIONAL ASSOCIATION**, anational banking association (“Bank”) at its offices at 135 S. LaSalle Street,Chicago, Illinois, 60603, or at such other place as the holder of this Note maydesignate in writing to the Maker, on or before October 31, 2005, theprincipal sum of Five Million and 00/100 Dollars ($5,000,000.00),or, if less,the aggregate amount of the Revolving Credit Loan advanced and unpaid pursuantto a certain Amended and Restated Loan and Security Agreement made by andbetween the Maker and the Bank of even date herewith, as the same may beamended from time to time (the “Loan Agreement”), the terms of which areincorporated by reference and made a part of this Note as though fully set outherein.  Capitalized terms used and nototherwise defined herein shall have the meanings ascribed to such terms in theLoan Agreement.  The amount advanced andoutstanding under the Loan Agreement as shown on the books and records of theBank shall be considered correct and conclusively binding on the Maker absentmanifest error.

 

The Maker further promises to pay interest onthe Revolving Credit Loan as provided in the Loan Agreement.

 

All payments received from the Makerhereunder shall be applied by the Bank in accordance with the terms of the LoanAgreement.

 

This Note and any renewals and extensionshereof, and any other Obligations of the undersigned to the Holder hereof (theterm “Holder” shall include the Bank and any subsequent holder hereof) due orto become due, now existing or hereafter contracted, and howsoever acquired bythe Holder, are secured, inter alia, in the manner described in the LoanAgreement.

 

This Note is issued under the Loan Agreementand this Note and the Holder are entitled to all of the benefits provided forby the Loan Agreement or referred to therein, to which Loan Agreement referenceis made for a statement thereof. Pre-payments may be made hereon only at the times, in the events and inthe manner provided in the Loan Agreement.

 

All unpaid amounts owing on this Note or onany other Obligations immediately shall become due and payable at the option ofthe Holder, without notice or demand, upon the occurrence of any Event ofDefault.

 

In the event of default in the payment of anysums due under this Note, the Maker hereby agrees that the Bank may offset allmoney, bank or other deposits or credits now or hereafter held by the Bank orowed by the Bank to Maker against all amounts due under this Note or againstany other amounts which may be due the Bank from the Maker.

 

No clause or provision contained in this Noteor any documents related hereto shall be construed or shall so operate (a) toraise the interest rate set forth in this Note above the lawful maximum, ifany, in effect from time to time in the applicable jurisdiction for loans to borrowersof the type, in the amount, for the purposes, and otherwise

 

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of the kind contemplated, or (b) to require the payment or the doing ofany act contrary to law, but if any clause or provision contained shallotherwise so operate to invalidate this Note, in whole or in part, then (i)such clauses or provisions shall be deemed modified to the extent necessary tobe in compliance with the law, or (ii) to the extent not possible, shall bedeemed void as though not contained and the remainder of this Note and suchdocument shall remain operative and in full force and effect.

 

All makers and any endorsers, guarantors,sureties, accommodation parties and all other persons liable or to becomeliable for all or any part of this indebtedness, jointly and severally waivediligence, presentment, protest and demand, and also notice of protest, ofdemand, of nonpayment, of dishonor and of maturity and also recourse orsuretyship defenses generally; and they also jointly and severally herebyconsent to any and all renewals, extensions or modifications of the terms ofthis Note, including time for payment, and further agree that any suchrenewals, extension or modification of the terms of this Note or the release orsubstitution of any security for the indebtedness under this Note or any otherindulgences shall not affect the liability of any of the parties for theindebtedness evidenced by this Note. Any such renewals, extensions or modifications may be made without noticeto any of said parties.

 

The Maker shall be liable to the Holder forall costs and expenses incurred in connection with collection, whether by suitor otherwise, of any amount due under this Note, including, without limitation,attorneys’ fees, as more fully set forth in the Loan Agreement and theMortgage.

 

This Note shall be governed by and construedin accordance with the laws of the State of Illinois.

 
|   | **EBIX, INC.,  a Delaware corporation,** |
|--------|------------------------------------------|
|   | **f/k/a  EBIX.COM, INC.**                |
|   |                                     |
|   |                                     |
|   | By:                                      | /s/ R. J. Baum |
|   |                                     |   |
|   | Print Name:                              |   | R. J. BAUM |
|   |                                     |   |
|   | Title:                                   |   | CFO |
|        |                                          |  |  |  |  |

 

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**AMENDED AND RESTATED****LOAN AND SECURITY AGREEMENT**

 

**THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT**, (“Agreement”)dated as of April 21, 2004, is entered into by and between **EBIX, INC**.,a Delaware corporation f/k/a **EBIX.COM, INC**. (the “Borrower”), and **LaSALLE BANK NATIONAL ASSOCATION**, a national banking association (the“Bank”).

 

**WHEREAS**, the Bank has previously loaned or committed to loan the Borrower theoriginal principal sum of up to $5,000,000.00, comprised of a certain RevolvingCredit Loan Commitment not to exceed the sum of $5,000,000.00 as evidenced,secured and governed by, among other documentation, that certain Business LoanAgreement dated October 31, 2003 by and between the Borrower and the Bank(the “**Original****Revolving Credit Loan**”), the termsof which are incorporated by reference and made a part of this Amendment asthough fully set out herein; and

 

**WHEREAS,** the parties wish to restate and amend the termsof the Original Revolving Credit Loan in its entirety and further wish toincrease the amount of Original Revolving Credit Loan, according to the termsof this Agreement.

 

**NOW THEREFORE**, in consideration of the mutual covenantsset forth herein, the parties hereto agree as follows:

 

**ARTICLE I.**

**DEFINITIONS.**

 

1.01         Definitions; Other Interpretive Provisions. When used herein, the following terms have the following meanings (suchdefinitions to be applicable to both the singular and plural forms of such terms):

 

“Account Debtor” shall mean any party whois obligated on any Account, Contract Right, Chattel Paper or GeneralIntangible.

 

“Affiliate” shall mean any Person which,directly or indirectly, owns or controls, on an aggregate basis, including allbeneficial ownership and ownership or control as a trustee, guardian or otherfiduciary, any of the outstanding Stock having ordinary voting power to elect amajority of the board of directors (irrespective of whether, at the time, Stockof any other class or classes of such corporation have or might have votingpower by reason of the happening of any contingency) of the Borrower, or whichcontrols, is controlled by or is under common control with the Borrower or anystockholders of the Borrower.  Forpurposes hereof, “control” means the possession, directly or indirectly, of thepower to direct or cause the direction of management and policies, whetherthrough the ownership of voting securities, by contract or otherwise.

 

“Authorized Borrower Representative” shallmean any of Robin Raina, Chairman, Chief Executive Officer and President ofBorrower or Richard J. Baum, Chief Financial Officer and Vice President ofBorrower, or such other person or person approved by resolution of the Board ofDirectors of the Borrower form time to time, a certified copy of whichresolution shall be delivered to the Bank.

 

“Bank” shall mean LaSalle Bank, NationalAssociation, a national banking association with its principal place ofbusiness at 135 S.LaSalle Street, Chicago, Illinois 60603.

 

“Borrower” shall mean Ebix, Inc., aDelaware corporation, f/k/a Ebix.com, Inc., having its principal place ofbusiness at 1900 E. Golf Road, Suite 1200, Schaumburg, Illinois, 60173.

 

“Business Day” shall mean any day, otherthan a Saturday or Sunday, on which commercial banks are open for domesticbusiness in Chicago, Illinois.

 

“Closing Date” shall mean APRIL 21,2004.

 

“Collateral” shall have the meaningspecified in Section 4.01.

 

“Computer Hardware and Software” shall mean all of the Borrower’s rights (including rights as licenseeand lessee) with respect to (i) computer and other electronic dataprocessing hardware, including all integrated computer systems, central

 

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processing units, memory units, display terminals, printers, computerelements, card readers, tape drives, hard and soft disk drives, cables,electrical supply hardware, generators, power equalizers, accessories,peripheral devices and other related computer hardware; (ii) all Softwareand all software programs designed for use on the computers and electronic dataprocessing hardware described in clause (i) above, including alloperating system software, utilities and application programs in whatsoeverform (source code and object code in magnetic tape, disk or hard copy format orany other listings whatsoever); (iii) any firmware associated with any ofthe foregoing; and (iv) any documentation for hardware, software andfirmware described in clauses (i), (ii) and (iii)above, including flow charts, logic diagrams, manuals, specifications, trainingmaterials, charts and pseudo codes.

 

“Contract Right”shall mean any right of the Borrower to payment under a contract for the saleor lease of goods or the rendering of services, which right is at the time notyet earned by performance.

 

“Debt” shall mean, with respect to thesubject Person, all of the following items of indebtedness, obligation orliability, whether matured or unmatured, liquidated or unliquidated, direct orindirect, or joint or several:

 

(A)          All Obligations of such Person;

 

(B)           All indebtedness in effect guaranteed,directly or indirectly, in any manner, or endorsed (other than for collectionor deposit in the ordinary course of business) or discounted with recourse;

 

(C)           All indebtedness in effect guaranteed,directly or indirectly through agreements, contingent or otherwise: (1) topurchase such indebtedness, or (2) to purchase, sell or lease (as lessee orlessor) property, products, materials or supplies or to purchase or sellservices, primarily for the purpose of enabling the debtor to make payment ofsuch indebtedness or to assure the owner of the indebtedness against loss, or(3) to supply funds to or in any other manner invest in any Person;

 

(D)          All indebtedness secured (or for which theholder of such indebtedness has a right, contingent or otherwise, to besecured) by any mortgage, trust deed, deed of trust, pledge, lien, securityinterest or other charge or encumbrance upon property owned or acquired subjectthereto, whether or not the liabilities secured thereby have been assumed; and

 

(E)           All indebtedness incurred as the lessee ofgoods or services under leases that, in accordance with GAAP, are or should bereflected on the lessee’s balance sheet as a capital lease.

 

“Debt to Tangible Net Worth Ratio” shallmean the ratio of Debt to Tangible Net Worth.

 

“Documents” shall mean this Agreement, theNotes and any other documents, instruments or certificates to be executed anddelivered hereunder or in connection herewith by or on behalf of the Borroweror any of its Affiliates.

 

“Environmental Laws” shall mean anyfederal, state or local law, statute, ordinance, order, decree, rule orregulation relating to releases, discharges, emissions or disposals to air,water, land or groundwater, to the withdrawal or use of groundwater, to theuse, handling or disposal of polychlorinated biphenyls, asbestos or ureaformaldehyde, to the treatment, storage, disposal or management of HazardousSubstances, to exposure to toxic, hazardous or other controlled, prohibited orregulated substances and to the transportation, storage, disposal, managementor release of gaseous or other liquid substances, including the ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980, as amended bythe Superfund Amendments and Reauthorization Act of 1986, 42 USC §9601 etseq., the Resource, Conservation and Recovery Act of 1976, as amended bythe Hazardous Solid Waste Amendments of 1984, 42 USC §6901 etseq.,the Toxic Substances Control Act, 15 USC §2601 etseq., theOccupational Safety and Health Act of 1970, 29 USC §651 etseq.,the Clean Air Act of 1966, as amended, 42 USC §7401 etseq., andthe Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977,33 USC §1251 etseq., and all rules, regulations and guidancedocuments promulgated pursuant thereto or published thereunder.

 

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

 

“Event of Default” shall have the meaningspecified in Section 9.01.

 

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“Financial Statements” shall mean, at anytime, the audited financial statements of the Borrower for its most recentlyended fiscal year, the unaudited financial statements for the most recentlyended quarterly accounting period of the Borrower, and any other similarinformation and reports concerning the financial affairs of the Borrower(including without limitation pro forma financial statements), copies of whichhave been furnished to the Bank.

 

“GAAP” shall mean generally acceptedaccounting principles consistently applied throughout the period involved.

 

“General Intangibles” shall mean all“general intangibles” as defined in the UCC, and in any event shall includewithout limitation the choses in action, designs, patents, trademarks, servicemarks, trade names, copyrights, trade secrets, customer lists, inventions,Software, software programs, good will, applications for registration,registrations, licenses, franchises, customer lists, tax refund claims,guarantee claims, security interest, rights to indemnification and all otherintangible property of every nature (other than Accounts).

 

“Governmental Authority” shall mean theUnited States of America, any state, territory or district thereof, and anyother political subdivision or body politic created pursuant to any applicableLaw, and any court, agency, department, commission, board, bureau orinstrumentality of any of the foregoing.

 

“Hazardous Substances” shall mean (i) anyhazardous or toxic substance, chemical or waste, or any pollutant orcontaminant defined as such in any now or hereafter existing Environmental Law,(ii) asbestos, (iii) radon, (iv) petroleum, its derivative by-products andother hydrocarbons, (v) polychlorinated biphenyls, (vi) explosives, (vii)radioactive materials and (viii) any additional substances or materials whichat any time are classified or considered to be hazardous or toxic under anyEnvironmental Laws.

 

“Intellectual Property”means all past, present and future: trade secrets, know-how and other proprietary information; trademarks,Internet domain names, service marks, trade dress, trade names, business names,designs, logos, slogans (and all translations, adaptations, derivations andcombinations of the foregoing) indicia and other source and/or businessidentifiers, and the goodwill of the business relating thereto and allregistrations or applications for registrations which have heretofore been ormay hereafter be issued thereon throughout the world; copyrights (includingcopyrights for computer programs) and copyright registrations or applicationsfor registrations which have heretofore been or may hereafter be issuedthroughout the world and all tangible property embodying the copyrights;unpatented inventions (whether or not patentable); patent applications andpatents; industrial designs, industrial design applications and registeredindustrial designs; license agreements related to any of the foregoing andincome therefrom; books, records, writings, computer tapes or disks, flowdiagrams, specification sheets, computer software, source codes, object codes,executable code, data, databases and other physical manifestations, embodimentsor incorporations of any of the foregoing; the right to sue for all past,present and future infringements of any of the foregoing; all otherintellectual property; and all common law and other rights throughout the worldin and to all of the foregoing.

 

“Laws” shall mean any federal, state orlocal law, statute, ordinance, order, decree, rule or regulation.

 

“Letter of Credit” shall have the meaningspecified in Section 2.01(E).

 

“Loan” shall mean the Revolving CreditLoan.

 

“Net Earnings” shall mean, with respect toany Person and for any period, the amount of such Person’s net income aftertaxes, determined in accordance with GAAP, excluding therefrom any gains andlosses from dispositions of fixed assets, income and losses from discontinuedoperations, gains and losses from disposition of discontinued operations andextraordinary items.

 

“Non-Tangible Collateral” means, with respect to any Debtor,collectively, such Debtor’s Accounts, Contract Rights and General Intangibles.

 

“Note” shall mean the Revolving CreditNote.

 

“Obligations” shall mean, with respect toany Person, all of such Person’s liabilities, obligations and indebtedness tothe Bank of any and every kind and nature, including the Loans, such Person’sother liabilities and obligations to the Bank under this Agreement, and suchPerson’s liabilities and obligations to the Bank under any other agreement,document or instrument,

 

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(including any guaranty of another Person’s Obligations), whetherheretofore, now or hereafter owing, arising, due or payable by or from suchPerson to the Bank, howsoever evidenced, created, incurred, acquired or owing,and whether joint, several, primary, secondary, direct, contingent, fixed orotherwise.

 

“Permitted Liens” shall mean (1) liens andsecurity interest securing Obligations owed by Borrower to Bank; (2) liens fortaxes, assessments, or similar charges either not yet due to being contested ingood faith; (3) liens of materialmen, mechanics, warehouseman, or carriers, orother like liens arising in the ordinary course of business and securingobligations which are not yet delinquent; (4) purchase money liens or purchasemoney security interests upon or in any property acquired or held by Borrowerto secure indebtedness outstanding on the date of this Agreement or permittedto be incurred under this Agreement; (5) liens and security interests which, asof the date of this Agreement, have been disclosed to and approved by the Bankin writing; (6) those liens and security interests which in the aggregate constitutean immaterial and insignificant monetary amount with respect to the net valueof Borrower’s assets and (7) a lien in favor of Craig Wm. Earnshaw and ColleenEarnshaw on the Stock of Lifelink Corporation, a subsidiary of Borrower.

 

“Person” shall mean any individual,corporation, partnership, association, joint-stock company, trust,unincorporated association, joint venture, court, Governmental Authority, orany other similar entity.

 

“Premises” shall mean the Borrower’sprincipal place of business located at 1900 E. Golf Road, Suite 1200,Schaumburg, Illinois, 60173.

 

“Prime Rate” shall mean the rate ofinterest referred to by the Bank from time to time as its prime rate, as fixedby the management of the Bank for the guidance of its loan officers, whether ornot such rate is otherwise published, with each change in such prime rate totake effect on the same day as the determination of each change by theBank.  Such rate is not necessarily themost favorable rate offered by the Bank to its borrowers.

 

“Revolving Credit Loan” shall have themeaning specified in Section 2.01(A).

 

“Revolving Credit Loan Commitment” shallhave the meaning specified in Section 2.01(A).

 

“Revolving Credit Loan Termination Date”shall have the meaning specified in Section 2.01(A).

 

“Revolving Credit Note” shall have themeaning specified in Section 2.01(D).

 

“Special Collateral” shall have the meaningspecified in Section 4.06.

 

“Stock” shall mean all shares, options,interests, participations or other equivalents, howsoever designated, of or ina corporation, partnership or similar entity, whether voting or nonvoting,including common stock, warrants, preferred stock, convertible debentures,partnership interests and all agreements, instruments and documentsconvertible, in whole or in part, into any one or more of the foregoing.

 

“Stockholders” shall mean those parties whoown stock in Borrower.

 

“Subsidiary” shall mean, with respect toany Person, any corporation, partnership or similar entity of which fiftypercent (50%) or more of the outstanding Stock having ordinary voting power isat the time, directly or indirectly, owned by such Person and/or one or more ofsuch Person’s Subsidiaries (irrespective of whether, at the time, Stock of anyother class or classes of such entity shall have or might have voting power byreason of the happening of any contingency).

 

“Supplemental Documentation” means allagreements, instruments, documents, financing statements, warehouse receipts,schedules of accounts assigned, mortgages, certificates of title and otherwritten matter necessary or requested by the Bank to create, evidence, enforce,perfect or maintain perfected the Bank’s security interest in the Collateraland the Premises and to consummate the transactions contemplated in or by thisAgreement and the other Documents.

 

“Tangible Net Worth” shall mean Borrower’stangible assets less liabilities, prepaids (including without limitationprepaid rents and prepaid bonuses), and amounts due from officers, employees,shareholders and Affiliates, determined in

 

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accordance with GAAP.  Withoutlimiting in any way those assets which are generally deemed to be “intangible”and therefore not included in a calculation of “tangible assets,” the partiesspecifically acknowledge that organization costs and non-competition agreementsare “intangible assets.”

 

“UCC” means the UniformCommercial Code as in effect in the State of Illinois on the date of thisAgreement, as may be amended or otherwise modified, including by the UCCRevisions;

 

“UCC Revisions”means, the revisions to Article 9 and other Articles of the UniformCommercial Code, as adopted by the State of Illinois, effective July 1,2001.

 

“Unused Balance” shall have themeaning specified in Section 2.05.

 

1.02         Any accounting terms used in this Agreementwhich are not specifically defined shall have the meaning customarily giventhem in accordance with GAAP; provided, however, that, in theevent that changes in generally accepted accounting principles shall bemandated by the Financial Accounting Standards Board, or any similar accountingbody of comparable standing, or shall be recommended by the Borrower’scertified public accountants, to the extent that such changes would modify suchaccounting terms or the interpretation or computation thereof, such changesshall be followed in defining such accounting terms only from and after suchdate as the Borrower and the Bank shall have amended this Agreement to theextent necessary to reflect any such changes in the financial covenants andother terms and conditions of this Agreement.

 

1.03         All other terms contained in this Agreementshall, when the context so indicates, have the meanings provided for by the UCCor UCC Revisions, to the extent the same are used or defined therein.

 

**ARTICLE II.**

**THE LOAN****.**

 

2.01         (A)          Subject to the terms and conditions of thisAgreement, the Bank will make a revolving credit facility (the “RevolvingCredit Loan Commitment”) available to the Borrower, pursuant to which the Bankmay from time to time make revolving credit advances (each, a “Revolving CreditLoan”) to the Borrower.  The aggregateamount of advances outstanding under the Revolving Credit Loan Commitment shallat no time exceed the sum of $5,000,000.00 (the “Revolving Loan CommitmentAmount”), minus the amount of all outstanding Letters of Credit (includingdrawn but unreimbursed Letters of Credit). Amounts borrowed under this Section may be repaid and reborrowed duringthe term of this Agreement.  TheRevolving Credit Loan Commitment shall terminate on October 31, 2005 (the“Revolving Credit Loan Termination Date”).

 

(A)          On the Closing Date, a Revolving CreditLoan in the amount of Three Million Dollars ($3,000,000.00) shall be depositedinto an interest bearing account at the Bank for the benefit of Borrower (“CashAccount”).  The Cash Account shall beopened in the name of Borrower but shall be pledged to the Bank as additionalsecurity for the Revolving Credit Loan and will not be available for use byBorrower.

 

(B)           The proceeds of Revolving Credit Loans(excluding the amount deposited into the Cash Account) shall be disbursed bydeposit to the Borrower’s account maintained at the Bank or otherwise inaccordance with the written instructions of the Borrower or the otherprovisions of this Agreement.  RevolvingCredit Loans shall be used by the Borrower solely for working capital purposes.

 

(C)           All outstanding Revolving Credit Loanstogether with any accrued but unpaid interest thereon shall be repaid in fullon the Revolving Credit Loan Termination Date. In addition, outstanding Revolving Credit Loans shall be repaid upondemand if and to the extent that they exceed the limitations imposed bySection 2.01(A) above.  Borrowermay repay and reborrow under the Revolving Credit Loan Commitment subject tothe terms and conditions of this Agreement.

 

(D)          The Revolving Credit Loans shall beevidenced by a Revolving Credit Note in the form attached as **Exhibit A**.

 

(E)           The Bank may issue letter(s) of credit(“Letter(s) of Credit”) for Borrower’s account not exceeding in the aggregatethe lesser of (i) the “Revolving Loan Commitment Amount”; or (ii) One MillionFive Hundred Thousand and 00/100 Dollars ($1,500,000.00) (including drawn butunreimbursed Letters of Credit).  EachLetter of Credit will have an expiry date of

 

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no later than 365 days after the Revolving Credit Loan Termination Datebut will be secured by cash on terms acceptable to Bank at any time after theRevolving Credit Loan Termination Date, if the Revolving Loan is not extendedby Bank.  Borrower agrees to execute anyfurther documentation in connection with the Letters of Credit as Bank mayreasonably request.

 

2.02         (A)          Except as provided in Section 2.02(B)below, the Revolving Credit Loans shall bear interest at a floating per-annumrate equal to the Prime Rate.  Interestshall be adjusted daily and calculated on the basis of a 360-day year, countingthe actual number of days elapsed, and shall be paid monthly in arrearscommencing on May 1, 2004 and continuing on the first day of each monththereafter.

 

(B)           Any Obligation of the Borrower which is notpaid when due, whether at stated maturity, by acceleration or otherwise, shallbear interest payable on demand at an interest rate equal to the Prime Ratethen in effect plus five percent (5%) per annum until paid.  In addition, after the occurrence of anyEvent of Default and delivery to the Borrower of the Bank’s notice to chargepost-default interest, all Obligations of the Borrower shall bear interest atthe highest rate provided for in the immediately preceding sentence.

 

2.03         If, at any time, the interest rate andother charges imposed hereunder shall be deemed by any competent GovernmentalAuthority to exceed the maximum rate of interest permitted by any applicableLaws, for such time as the interest and such charges would be deemed excessive,its application shall be suspended and there shall be charged instead themaximum rate of interest and charges permissible under such Laws.

 

2.04         All payments, which are not prepayments,received from the Borrower for payment on the Loans shall be applied by theBank first to unpaid interest due and payable on the Revolving Credit Loans,second to any unpaid fees or expenses incurred by or owed to the Bank, third toany late charges or fees, and fourth to the reduction of the principaloutstanding on the Loan.

 

2.05         The Borrower shall pay to Bank anon-refundable usage fee in an amount equal to the product of .25% times theper annum average Unused Balance.  Theunused balance means the result of (i) the Revolving Line Commitment Amountminus (ii) the aggregate amount of all Revolving Credit Loans, and minus (iii)the face amount of all outstanding Letters of Credit (including drawn butunreimbursed Letters of Credit).

 

2.06         All payments received from the Borrowerhereunder shall be paid directly to the Bank without setoff or counterclaim inimmediately available funds.  The Bankshall send the Borrower statements of all amounts due hereunder, whichstatements shall be considered correct and conclusively binding on the Borrowerabsent manifest error.

 

2.07         (A)If (x) Regulation D of the Board of Governors of the FederalReserve System, or (y) the adoption of any applicable law, treaty, rule,regulation or guideline, or any change therein, or any change in theinterpretation or administration thereof by any governmental authority, centralbank or comparable agency charged with the interpretation or administrationthereof, or compliance by Bank or its lending branch with any request ordirective (whether or not having the force of law) of any such authority,central bank or comparable agency, (a) shall subject Bank, its lendingbranch or any Loan to any tax, duty, change, stamp tax, fee, deduction,withholding or other charge in respect of this Agreement, any Loan or theobligation of Bank to make or maintain any Loan, or shall change the basis oftaxation of payments to Bank of the principal of or interest on any Loan or anyother amounts due under this Agreement in respect of any Loan or its obligationto make or maintain any Loan (except for changes in the rate of tax on theoverall net income of Bank imposed by the federal, state or local jurisdictionin which Bank’s principal executive office or its lending branch is located);(b) shall impose, modify or deem applicable any reserve (including,without limitation, any reserve imposed by the Board of Governors of theFederal Reserve System), special deposit or similar requirement against assetsof, deposits with or for the account of, or credit extended by, Bank; or(c) shall impose on Bank any penalty with respect to the foregoing or anyother condition affecting this Agreement, the Loan or the obligation of Bank tomake or maintain the Loan; and the result of any of (a) through (c) aboveis to increase the cost to (or to impose a cost on) Bank of making ormaintaining the Loan, or to reduce the amount of any sum received or receivableby Bank under this Agreement then Bank shall notify Borrowers after it receivesfinal notice of any of the foregoing and, within 45 days after demand byBank (which demand shall be accompanied by a statement setting forth the basisof such demand), Borrowers shall pay directly to Bank such additional amount oramounts as will compensate the Bank for such increased cost or such reduction.

 

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(B)  If either (i) the introduction of orany change in or change in the interpretation of any law or regulation or(ii) compliance by Bank with any guideline or request from any centralbank or other governmental authority (whether or not having the force of law)affects or would affect the amount of capital required or expected to bemaintained by Bank or any corporation controlling Bank and Bank determines thatthe amount of such capital is increased solely by or solely based upon theexistence of Bank’s commitment to lend hereunder and other commitments of thistype, then, upon demand by Bank, Borrower shall immediately pay to Bank, fromtime to time as specified by Bank, additional amounts sufficient to compensateBank in the light of such circumstances, to the extent that Bank reasonablydetermines such increase in capital to be allocable to the existence of Bank’scommitment to lend hereunder.

 

**ARTICLE III.**

**CONDITIONS PRECEDENT**

 

The obligation of the Bank to make the Loans issubject to the following conditions precedent:

 

3.01         The Borrower shall have delivered or causedto be delivered to the Bank on the Closing Date the following Documents, eachto be satisfactory to the Bank in all respects:

 

(A)          The Revolving Credit Note duly executed bythe Borrower.

 

(B)           A certificate of the secretary or anassistant secretary of the Borrower, dated the date of the Closing Date, as toincumbency, resolutions, charter, bylaws, and such other matters as Bank shallrequire.

 

(C)           A certificate, dated within 30 days of theClosing Date, of the Secretary of State of Delaware evidencing the goodstanding of the Borrower.

 

(D)          UCC Financing Statements regarding allCollateral, duly executed by the Borrower, as debtor, in a form acceptable tothe Bank and filed in such offices as Bank shall require.

 

(E)           Pledge Agreement in favor of Bank pledgingthe Cash Account.

 

(F)           Evidence of insurance in the amounts and inform required under this Agreement.

 

(G)           Such other documents, certificates orevidence as the Bank may request to consummate the transactions contemplatedhereby.

 

3.02         At the time of the Closing, at the time ofeach subsequent disbursement under the Revolving Credit Loan Commitment and onthe last day of each fiscal quarter of the Borrower after the date hereof, eachof the following statements shall be true.

 

(A)          The representations and warranties setforth in this Agreement are true and correct as of such date.

 

(B)           No Event of Default shall have occurred andbe continuing, and no event shall have occurred and be continuing that, withthe giving of notice or passage of time or both, would be an Event of Default.

 

(C)           No material adverse change shall haveoccurred in the financial condition of the Borrower since the date of thisAgreement.

 

(D)          All liens onCollateral are and remain valid first priority liens (subject only to PermittedLiens) in full force and effect.

 

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**ARTICLE IV.**

**SECURITY AGREEMENT**

 

4.01         The property in which a security interestis granted pursuant to the provisions of Sections 4.02 and 4.03 is hereincollectively called the “Collateral.” The Collateral, together with all of the Borrower’s other property ofany kind held by the Bank, shall stand as one general, continuing collateralsecurity for all Obligations of the Borrower and may be retained by the Bankuntil all such Obligations have been satisfied in full, and this Agreement isterminated.

 

4.02         As security for the prompt satisfaction ofall Obligations of the Borrower, the Borrower hereby assigns, transfers andsets over to the Bank all of its right, title and interest in and to, andgrants the Bank a lien on and a security interest in, all amounts that may beowing from time to time by the Bank to the Borrower in any capacity, including,but without limitation, any balance or share belonging to the Borrower of anydeposit or other account with the Bank, which lien and security interest shallbe independent of any right of set-off which the Bank may have.

 

4.03         Grant of Security Interest.  Assecurity for the payment of all Obligations of the Borrower, the Borrowerhereby assigns to Bank, and grants to Bank a continuing security interest in,the following, whether now or hereafter existing or acquired:

 

All of Borrower’s:

 

(i)            Accounts;

 

(ii)           Certificated Securities;

 

(iii)          Chattel Paper;

 

(iv)          Computer Hardware and Software and all rightswith respect thereto, including, any and all licenses, options, warranties,service contracts, program services, test rights, maintenance rights, supportrights, improvement rights, renewal rights and indemnifications, and anysubstitutions, replacements, additions or model conversions of any of theforegoing;

 

(v)           Contract Rights;

 

(vi)          Deposit Accounts;

 

(vii)         Documents;

 

(viii)        Financial Assets;

 

(ix)           General Intangibles, including PaymentIntangibles and Software;

 

(x)            Goods (including all of its Equipment,Fixtures and Inventory), and all accessions, additions, attachments,improvements, substitutions and replacements thereto and therefor;

 

(xi)           Instruments;

 

(xii)          Intellectual Property;

 

(xiii)         Investment Property;

 

(xiv)        money (of every jurisdiction whatsoever);

 

(xv)         Letter-of-Credit Rights;

 

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(xvi)        Security Entitlements;

 

(xvii)       Supporting Obligations;

 

(xviii)      Uncertificated Securities; and

 

(xix)         to the extent not included in the foregoing,other personal property of any kind or description;

 

together with all books, records, writings,data bases, information and other property relating to, used or useful inconnection with, or evidencing, embodying, incorporating or referring to any ofthe foregoing, and all Proceeds, products, offspring, rents, issues, profitsand returns of and from any of the foregoing; provided that to the extent thatthe provisions of any lease or license of Computer Hardware and Software orIntellectual Property expressly prohibit (which prohibition is enforceableunder applicable law) the assignment thereof, and the grant of a securityinterest therein, Bank will not enforce its security interest in Borrower’srights under such lease or license (other than in respect of the Proceeds thereof)for so long as such prohibition continues, it being understood that uponrequest of the Bank, Borrower will in good faith use reasonable efforts toobtain consent for Bank’s enforcement of such security interest in Borrower’srights under such lease or license.

 

Borrowerwarrants that:  (i) no financingstatement (other than “Permitted Liens”) covering any of the Collateralis on file in any public office; (ii) Borrower is and will be the lawfulowner of all Collateral, free of all liens and claims whatsoever, other thanthe security interest hereunder and Permitted Liens, with full power andauthority to execute this Agreement and perform Borrower’s obligationshereunder, and to subject the Collateral to the security interest hereunder;(iii) all information with respect to Collateral and Account Debtors setforth in any schedule, certificate or other writing at any time heretofore orhereafter furnished by Borrower to Bank is and will be true and correct in allmaterial respects as of the date furnished; (iv) Borrower’s state ofincorporation or organization, Type of Organization, Organizational I.D. Numberand place of business (or, if Borrower has more than one place of business, itschief executive office) are as set forth on Schedule 4.03(a) hereto(and Borrower has not changed its state of incorporation or organization, normaintained its place of business (or, if Borrower has more than one place ofbusiness, its chief executive office) at any other location at any time);(v) each other location where Borrower maintains a place of business isset forth on Schedule 4.03(b) hereto; (vi) except as set forthon Schedule 4.03(c) hereto, Borrower is not now known and duringthe five years preceding the date hereof has not previously been known by anytrade name; (vii) Debtor’s exact legal name is as set forth on thesignature pages of this Agreement, except as set forth on Schedule 4.03(c)hereto, during the five years preceding the date hereof Borrower has not beenknown by any legal name different from the one set forth on the signature pagesof this Agreement nor has Borrower been the subject of any merger or othercorporate or organizational reorganization; (viii) Schedule 4.03(d)hereto contains a complete listing of all of Borrower’s Intellectual Propertywhich is subject to registration statutes; (ix) Schedule 4.03(e)hereto contains a complete listing of all of Borrower’s Instruments, DepositAccounts, Investment Property, Letter-of-Credit Rights, Chattel Paper,Documents and Commercial Tort Claims; (x) except as set forth on Schedule 4.03(f)hereto, Debtor has no tangible Collateral located outside of the United States;(xi) Schedule 4.03(g) hereto contains a complete listing ofDebtor’s tangible Collateral located with any bailee, warehousemen or other thirdparties; and (xii) Schedule 4.03(h) hereto contains a completelisting of all of such Collateral which is subject to certificate of titlestatutes.

 

4.04         The liens created in Sections 4.02 and 4.03shall be first and prior liens, subject only to Permitted Liens.

 

4.05         With respect to Accounts, except asotherwise disclosed by the Borrower to the Bank in writing:

 

(i)            the Accounts aregenuine, in all respects what they purport to be and are not evidenced by ajudgment;

 

(ii)           the Accountsrepresent undisputed, bona fide transactions completed in accordance with theterms and provisions contained in the invoices and other documents evidencingsame;

 

(iii)          the amountsthereof, which are shown on all such invoices and statements, are actually andabsolutely owing to the Borrower and are not contingent for any reason;

 

(iv)          there are nosetoffs, counterclaims or disputes existing or asserted with respect to theAccounts and the Borrower has not made any agreement with any Account Debtorthereof for any deduction therefrom;

 

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(v)           there are nofacts, events or occurrences which in any way impair the validity orenforceability of the Accounts or tend to reduce the amount payable thereunderfrom the amount thereof;

 

(vi)          to the best ofthe Borrower’s knowledge, all of the Account Debtors have the capacity tocontract and are solvent;

 

(vii)         none of theAccounts is pursuant to an invoice requiring payment in more than thirty (30)days.

 

4.06         Immediately upon the Borrower’s receipt ofthat portion of the Collateral, if any, which is evidenced by an instrumentand/or document, including promissory notes, documents of title, certificatedsecurities and warehouse receipts (collectively the “Special Collateral”) forthe purpose of perfecting the Bank’s security interest in such SpecialCollateral, the Borrower shall deliver the original thereof to the Bank,together with appropriate endorsements and/or specific evidence of theassignment thereof to the Bank, in form and substance acceptable to the Bank.

 

4.07         If and to the extent that any of theCollateral is evidenced by, or arises under, any contract with the UnitedStates of America or any agency or instrumentality thereof, the Borrower willimmediately notify the Bank.

 

4.08         The Borrower covenants and agrees with theBank as follows:

 

(A)          The Borrower will not hereafter grant asecurity interest in the Collateral, or transfer the Collateral to any otherPerson, except as specifically permitted by this Agreement.

 

(B)           The Borrower will at all times defend theCollateral against any and all claims of any Person adverse to the claims ofthe Bank.

 

(C)           All Collateral covered by this Agreement isand will be kept only at Borrower’s Principal Place of Business.  Collateral shall not be removed to, or keptat, and Borrower shall not establish a place of business at, any other placewithout the prior written consent of the Bank. If Collateral is at any time kept or located at locations other thanBorrower’s Principal Place of Business, the Bank’s security interest thereinshall continue.

 

(D)          The Borrower will promptly notify the Bankin writing of the Borrower’s acquisition of any Non-Tangible Assets hereafteroccurring.

 

(E)           The Equipment will not at any time beaffixed or attached to any real estate in such a manner that it will become afixture, unless the Bank shall have a first priority, perfected lien on suchreal estate as security for the Obligations of the Borrower.  The Equipment will be used or bought for usesolely for business purposes.

 

(F)           The Borrower shall permit the Bank toinspect and evaluate the Collateral and any books and records of the Borrowerrelating thereto at all reasonable times and to verify any Accounts by anymethod satisfactory to the Bank, all at the expense and risk of the Borrower.

 

(G)           The Borrower will keep its recordsconcerning the Non-Tangible Collateral in such a manner as will enable Bank orits designees to determine at any time the status of the Non-TangibleCollateral;

 

(H)          By identifying Accounts on anyschedule or other document delivered to Bank the Borrower shall be deemedto be making the representations and warranties contained in Section 4.05with respect to such Accounts.

 

(I)            With respect toAccounts, the Borrower shall:

 

(i)            promptly upon theBorrower’s learning thereof, inform the Bank in writing of any delay in theBorrower’s performance of any of its obligations to any Account Debtor and ofany assertion of any claims, offsets or counterclaims by any Account Debtor andof any extraordinary allowances, credits and/or other monies granted by theBorrower to any Account Debtor;

 

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(ii)           not permit oragree to any extension, compromise or settlement or make any change ormodification of any kind or nature with respect to any Eligible Accounts,including any of the terms relating thereto;

 

(iii)          not permit oragree to any extension, compromise or settlement or make any change ormodification of any kind or nature with respect to any Account other thanEligible Accounts;

 

(iv)          promptly upon theBorrower’s receipt or learning thereof, furnish to and inform the Bank of allmaterial adverse information relating to the financial condition of any AccountDebtor; and

 

(v)           keep all goodsreturned by any Account Debtor and all goods repossessed or stopped in transitby the Borrower from any Account Debtor segregated from the other property ofthe Borrower, immediately notify the Bank of the Borrower’s possession of suchgoods and hold the same as trustee for the Bank until otherwise directed inwriting by the Bank.

 

(J)            With respect toInventory, the Borrower shall from and after the date hereof keep correct andaccurate records itemizing and describing the type and quantity of Inventory,the Borrower’s cost therefor and the selling price thereof, all of whichrecords shall be available at all reasonable times, upon demand, to any of theBank’s officers, employees or agent for inspection and copying thereof.

 

(K)          The Borrower shall keep and maintain theEquipment in good operating condition and repair and shall make all necessaryreplacements thereof and renewals thereto so that the value and operatingefficiency thereof shall at all times be maintained and preserved.

 

(L)           The Borrower shall, immediately on demandby the Bank, deliver to the Bank any and all evidence of ownership of anyEquipment, including any certificates of title and/or applications for titlethereto.

 

(M)         The Borrower shall notify the Bank within10 days after the Borrower acquires any vehicles or other property covered by acertificate of title and shall deliver to the Bank, upon demand by the Bank,certificates of title relating to such vehicles or other property andappropriate financing statements, if required by applicable law, duly completedby the Borrower, to enable the Bank to perfect its lien in such property.

 

4.09         The Borrower shall, at its sole cost andexpense, keep and maintain the Collateral insured for the greater of the fullinsurable value or the full replacement value thereof against loss or damage byfire, theft, explosions, sprinklers and all other hazards and risks (i) coveredby extended coverage and/or (ii) ordinarily insured against by other owners orusers of properties in similar businesses. All such policies of insurance shall be in form, with insurers and insuch amounts as may be satisfactory to the Bank.  The Borrower shall deliver to the Bank a certificate of insurancewith respect to each policy of insurance and evidence of payment of allpremiums for each such policy.  Suchpolicies of insurance shall contain a lender’s loss payable endorsement, inform and substance acceptable to the Bank, showing loss payable to theBank.  Such endorsement or anindependent instrument furnished to the Bank shall provide that all insurancecompanies shall give the Bank at least thirty (30) days prior written noticebefore any such policy or policies of insurance shall be altered or cancelledand that no act or default of the Borrower or any other Person shall affect theright of the Bank to recover under such policy or policies of insurance in caseof loss or damage.  The Borrower herebydirects all insurers under such policies of insurance to pay all proceedspayable thereunder directly to the Bank. The Borrower irrevocably appoints the Bank and all officers, employeesor agents designated by the Bank as the Borrower’s true and lawful attorney andagent in fact for the purpose of making, settling and adjusting claims undersuch policies of insurance, endorsing the name of the Borrower on any check,draft, instrument or other item of payment for the proceeds of such policies ofinsurance and for making all determinations and decisions with respect to suchpolicies of insurance.  If Borrower atany time or times hereafter shall fail to obtain or maintain any of thepolicies of insurance required above, or to pay any premium in whole or in partrelating thereto, the Bank, without waiving or releasing any of the Obligationsof the Borrower or any Event of Default, may at any time or times thereafter,but shall be under no obligation to do so, obtain and maintain such policies ofinsurance and pay such premiums and take any other action with respect theretowhich the Bank deems necessary or advisable. All sums so disbursed by the Bank, including attorney’s fees, courtcosts, expenses and other charges relating thereto, shall be part of theObligations, payable by the Borrower to the Bank on demand.

 

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4.10         The Bank may, at any time or timeshereafter, in its sole discretion, without waiving or releasing any obligation,liability or duty of the Borrower under this Agreement or the other Documents,or any Event of Default, pay, acquire and/or accept an assignment of any securityinterest, lien, claim or encumbrance asserted by any Person against theCollateral.  All sums paid by the Bankin respect thereof and all costs, fees and expenses, including, withoutlimitation, attorneys’ fees, court costs, expenses and other charges relatingthereto, which are incurred by the Bank on account thereof, shall be payable,upon demand, by the Borrower to the Bank and shall be additional Obligations ofthe Borrower hereunder secured by the Collateral.

 

4.11         Each of the representations, warranties andagreements set forth in this Article IV shall survive the execution anddelivery of this Agreement and shall remain effective until this Agreementshall have been terminated and all Obligations of the Borrower shall have beenpaid and satisfied in full.

 

**ARTICLE V.**

**REPRESENTATIONS AND WARRANTIES**

 

To induce the Bank to consummate the transactionscontemplated hereby, the Borrower represents and warrants to the Bank asfollows:

 

5.01         The Borrower is a corporation dulyorganized, validly existing and in good standing under the laws of the State ofDelaware, has the lawful power and authority to own its properties and to carryon its business as now conducted, is qualified to do business and is in goodstanding as a foreign corporation in each jurisdiction wherein the nature ofthe business transacted or to be transacted by it or property owned or to beowned by it makes such qualification necessary and where the failure to be soqualified would have a material adverse effect on its business, properties orcondition, financial or otherwise and possesses all material permits necessaryto operate the business it conducts.

 

5.02         The Borrower is empowered to perform allacts and things undertaken and done pursuant to this Agreement and has takenall corporate or other action necessary to authorize the execution, deliveryand performance of the Documents.  Theofficers of Borrower executing the Documents have been duly elected orappointed and have been fully authorized to execute such Documents at the time executed.  The Documents, when executed and delivered,will be the legal, valid and binding obligations of the Borrower, enforceableagainst it in accordance with their respective terms.

 

5.03         The Financial Statements are complete andaccurate, fairly present the financial condition of the Borrower at therespective dates thereof and the results of operations for the respectiveperiods covered thereby, and (subject to normal year-end adjustments withrespect to interim Financial Statements) were prepared in accordance withGAAP.  The Borrower does not have anymaterial liabilities or obligations (contingent or otherwise), liability fortaxes or unusual forward or long-term commitments, except as disclosed in theFinancial Statements.

 

5.04         Since the date of Borrower’s most recentFinancial Statements, there has been no material change in the assets,liabilities or condition, financial or otherwise, of Borrower, other thanchanges arising from transactions in the ordinary course of business and thefinancing transactions contemplated by this Agreement, and none of such changeshas been materially adverse.

 

5.05         Other than as set forth in the FinancialStatements, there are no actions, suits or proceedings pending, or, to the bestof the knowledge of the Borrower, threatened against or affecting the Borrowerat law or in equity or before or by any Governmental Authority or any foreignequivalent thereof, which involve the possibility of any material judgment orliability, or which are, in the aggregate, material in light of the financialcondition and assets of the Borrower. There are no actions, suits, investigations or proceedings pending, orto the best of the knowledge of the Borrower, threatened against the Borrower orits properties regarding Environmental Laws, the manufacture, storage ortreatment of Hazardous Substances or products liability.

 

5.06         The Borrower is not in violation of, andthe execution and delivery of the Documents and the performance by the Borrowerof its obligations under the Documents, do not and will not result in theBorrower being in violation of or in conflict with, or constitute a defaultunder any of, the Borrower’s organizational documents, any term or provision ofany note, mortgage, indenture, contract, agreement, instrument, judgment or Lawapplicable to the Borrower, or result in the creation or imposition of anymortgage, lien, charge or encumbrance of any nature whatsoever (other thanthose in favor of Bank) upon any of the assets of the Borrower pursuant to anysuch term or provision.  The Borrower isnot in default, after the expiration of any

 

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applicable grace or cure periods, in any respect in the performance orfulfillment of any of its obligations, covenants or conditions contained in anyagreement or instrument to which it is a party or by which any of itsproperties may be bound, and the Borrower does not know of any disputeregarding any such agreement or instrument.

 

5.07         The Borrower’s uses of the proceeds of theLoans are, and will continue to be, legal and proper corporate uses which areconsistent with all applicable Laws, with Borrower’s Articles of Incorporation,its By-Laws, the resolutions of its Board of Directors, and the terms of thisAgreement.

 

5.08         The Borrower does not have outstanding anyDebt (except to Bank, if any) or other obligation for borrowed money, or forthe deferred purchase price of property or services and the Borrower is notobligated as guarantor, co-signer or otherwise on any Debt or other obligationof any kind of any other Person, except and to the extent shown on theFinancial Statements at the date of this Agreement or incurred in the ordinarycourse of business.  No Person is indefault under any of said obligations.

 

5.09         All tax returns and reports of the Borrowerrequired by law to be filed, have been duly filed, and all taxes, assessments,fees and other governmental charges (other than those presently payable withoutpenalty or interest) upon the Borrower or upon any of its properties or assets,which are due and payable, have been paid. The charges, accruals and reserves on the books of the Borrower inrespect of taxes are considered adequate by the Borrower, and the Borrower doesnot know of any assessment of a material nature against it.

 

5.10         Except to the extent that failure to complywould not materially interfere with the conduct of the business of theBorrower, or affect in any way the Borrower’s obligations (or Bank’s rights)under the Documents, the Borrower has complied with all applicable laws withrespect to: (i) any restrictions, specifications or other requirementspertaining to the services Borrower performs, (ii) the conduct of its businessand (iii) the use, maintenance, and operation of the real and personal propertiesowned or leased by it in the conduct of its business.

 

5.11         No authorization, consent, license orapproval of, or filing or registration with, or notification to, anyGovernmental Authority is required in connection with the execution, delivery orperformance of the Documents by the Borrower, except for filings necessary toperfect Bank’s Lien on the Collateral.

 

5.12         The Borrower has good and marketable titleto all of its assets, all subject to no security interest, encumbrance, lien orclaim of any Person excepting only Permitted Liens, and there are no financingstatements or other evidence of any such security interest, encumbrance or lienor any claim of any Person on file in any public office other than thoseevidencing Permitted Liens.

 

5.13         Except as set forth on Schedule 5.13,the Borrower does not own, directly or indirectly, any Stock.  All outstanding shares of the Borrower havebeen duly authorized, validly issued, fully paid and are nonassessable.

 

5.14         The Borrower has no liability in respect ofany Defined Benefit Pension Plan, as defined in ERISA, and is not a party toany such plan.

 

5.15         The Borrower is solvent, no transactionunder or contemplated by this Agreement renders or will render the Borrowerinsolvent, the Borrower retains sufficient capital for the business andtransactions in which it engages or intends to engage, no obligation incurredhereby is beyond the ability of the Borrower to pay as such obligation matures,the Borrower is not contemplating either the filing of a petition under anystate or federal bankruptcy or insolvency laws or the liquidating of all or amajor portion of any of its property, and Borrower has no knowledge of anyperson contemplating the filing of any such petition against it.

 

5.16         There exists no actual or to Borrower’sknowledge, threatened termination, cancellation or limitation of, or anymodification or change in, the proposed business relationship of Borrower withany customer or group of customers whose purchases individually or in the aggregateare material to the current business of Borrower, or in the proposed businessrelationship of Borrower with any material supplier, and Borrower reasonablyanticipates that all such customers and suppliers will continue a businessrelationship with Borrower on a basis no less favorable to the Borrower thanthat heretofore conducted; and there exists no other condition or state offacts or circumstances which would materially adversely affect the current

 

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operation of the business of Borrower after the consummation of thetransactions contemplated by this Agreement on a basis no less favorable to theBorrower than that on which it has heretofore been conducted by Borrower.

 

5.17         No representation or warranty by theBorrower contained herein or in any certificate or other document furnished byor on behalf of the Borrower in connection with the transactions hereundercontains any untrue statement of material fact or omits to state a materialfact necessary to make such representation or warranty not misleading in lightof the circumstances under which it was made.

 

5.18         All of the representations and warrantiesset forth in this Article V shall survive and continue to be true,complete and correct until all Obligations of the Borrower hereunder are paidand satisfied in full and this Agreement shall have been terminated.

 

**ARTICLE VI.**

**NEGATIVE COVENANTS**

 

The Borrower covenants that until all Obligationsof Borrower are paid and satisfied in full, and the Bank’s obligationshereunder have terminated, the Borrower will not, directly or indirectly,without the prior consent in writing of the Bank:

 

6.01         Except as provided in this Agreement,create, assume, incur or suffer or permit to exist any mortgage, pledge,encumbrance, security interest, assignment, lien or charge of any kind orcharacter upon any of its assets, including its inventory and equipment,whether owned at the date hereof or hereafter acquired, excepting onlyPermitted Liens.

 

6.02         Make any loans, or advances, whethersecured or unsecured, to, or make any guaranty of, or otherwise becomeobligated on behalf of any other Person for, any such loans or advances to, anyPerson, except for guaranties in favor of the Bank.

 

6.03         Dispose by sale, assignment, lease, saleand leaseback or otherwise any Collateral (other than obsolete or worn outEquipment not used or useful in its business), whether now owned or hereafteracquired, except that, so long as no Event of Default shall have occurred andbe continuing, such Person may sell its Inventory in the ordinary course ofbusiness as conducted by it on the date of this Agreement.

 

6.04         Transfer, directly or indirectly, any ofits assets or pay out, directly or indirectly, money or property or provide servicesor do any other act, or fail to do any act, which would have the effect ofmaterially and adversely affecting its ability to perform its obligationshereunder.

 

6.05         Except as set forth on Schedule 5.13,own, hold, purchase or acquire Stock, bonds, debentures or other securities of,or make any capital contribution to, any Person, or form any Subsidiary.

 

6.06         Make any material change in its financialstructure, make any material change in its management (except on prior noticeto the Bank), change its name (except on 90 days prior notice to the Bank),enter into any merger, consolidation, dissolution, liquidation, reorganizationor recapitalization, or reclassification of its Stock, or issue any Stock orissue any warrant, right or option pertaining thereto or other securityconvertible into any of the foregoing.

 

6.07         Engage in business activities or operationssubstantially different from and unrelated to its business activities on thedate of this Agreement.

 

6.08         Declare or pay any dividends, or redeem orrepurchase any of, or make any other payment or distribution on account of, anyStock.

 

6.09         Enter into any sale-leaseback transaction.

 

6.10         Prepay any Debt (except as expresslypermitted hereunder) or enter into or modify any agreement as a result of whichthe terms of payment of any Debt are waived or modified.

 

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6.11         Directly or indirectly apply any part ofthe proceeds of the Loans for any purpose other than as set forth herein.

 

6.12         Directly or indirectly apply any part ofthe proceeds of the Loans to the purchasing or carrying of any “margin stock”within the meaning of Regulation U of the Board of Governors of the FederalReserve System, or any regulations, interpretations or rulings thereunder.

 

6.13         Engage in any “prohibited transaction”within the meaning of Section 4975 of the Internal Revenue Code orSection 406 of ERISA with respect to any “employee benefit plan,” asdefined in Section 3(3) of ERISA; or effect any termination of any Planwhich would result in a liability to Borrower.

 

6.14         Create, incur or assume any Debt other than(i) the Loan, and (ii) Debt disclosed in Financial Statements provided to theBank on or before the date hereof.

 

6.15         Enter into, or be a party to, any transactionwith any Affiliate, except in the ordinary course of and pursuant to thereasonable requirements of its business and upon fair and reasonable termswhich are fully disclosed in writing to the Bank and are no less favorable tosuch Person than would be obtained in a comparable arm’s length transactionwith a person not an Affiliate.

 

6.16         Maintain deposit accounts jointly with anyAffiliate or commingle any funds with funds of any Affiliate.

 

6.17         Change its fiscal year.

 

6.18         Furnish the Bank any certificate or otherdocument that will contain any untrue statement of material fact or that willomit to state a material fact necessary to make it not misleading in light ofthe circumstances under which it was furnished.

 

**ARTICLE VII.**

**AFFIRMATIVE COVENANTS**

 

The Borrower covenants that until all Obligationsof the Borrower are paid and satisfied in full, and the Bank’s obligationshereunder have terminated, the Borrower will:

 

7.01         Furnish and deliver to the Bank:

 

(i)            as soon as practicable, and in any eventwithin ninety (90) days after the end of each fiscal year, the FinancialStatements of Borrower, audited by certified public accountants selected by theBorrower and reasonably acceptable to the Bank;

 

(ii)           as soon aspracticable, and in any event within forty-five  (45) days after the end of the each fiscal quarter of Borrower,(a) a statement of cash flows of the Borrower for such month and the portion ofthe fiscal year then ended, (b) an income statement of the Borrower for suchmonth and the portion of the fiscal year then ended and (c) a balance sheet ofthe Borrower as of the end of such month; all in reasonable detail andcertified by an Authorized Borrower Representative as complete and accurate inall material respects, fairly presenting the financial condition of theBorrower and prepared in accordance with GAAP;

 

(iii)          within 5 days of filing, copies of all statements, reports andnotices made available to Borrower’s security holders and all reports onForm 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;

 

(iv)          prompt notice of any material change in the composition of theIntellectual Property, including any subsequent ownership right of Borrower inor to any copyright, patent or trademark or knowledge of an event that materiallyadversely affects the value of the Intellectual Property;

 

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(v)           with each set ofFinancial Statements delivered hereunder, a certificate of an AuthorizedBorrower Representative (a) calculating Borrower’s compliance (or lack thereof)with the financial covenants in Article VIII hereof, in reasonable detail,and (b) stating that no Event of Default has occurred and is continuing or ifan Event of Default has occurred and is continuing setting forth a descriptionof such event and the steps being taken to remedy such event;

 

(vi)          upon request bythe Bank, evidence satisfactory to the Bank of the insurance coverages requiredunder this Agreement; and

 

(vii)         with reasonablepromptness, such other information materially concerning the business,properties, conditions or operations, financial or otherwise, of the Borrower,or compliance by the Borrower with any of the covenants in the Documents, asthe Bank may from time to time reasonably request.

 

7.02         Furnish and deliver to Bank:

 

(i)            immediately afterthe occurrence thereof, notice of any Event of Default or of any fact,condition or event that with the giving of notice or passage of time or both,could become an Event of Default, or of the failure by the Borrower to observeany of its respective undertakings hereunder;

 

(ii)           immediately afterthe occurrence thereof, notice of any default under any Debt, or under anyindenture, mortgage or other agreement relating thereto for which the Borroweris liable;

 

(iii)          immediately afterobtaining knowledge thereof, notice of any litigation or proceeding in whichthe Borrower is a party involving potential claims in excess of $100,000.00(whether or not the claim is considered to be covered by insurance);

 

(iv)          immediately afterreceipt of notice thereof, notice of the institution of any other suit orproceeding involving the Borrower that might materially and adversely affectthe Borrower’s business, properties or conditions or operations, financial orotherwise; and

 

(v)           immediately afterthe occurrence thereof, notice of any other matter which has resulted in, ormight result in, a materially adverse change in the business, properties, orthe conditions or operations, financial or otherwise, of the Borrower.

 

7.03         Promptly pay and discharge when due alltaxes, assessments and other governmental charges imposed upon it, or upon itsincome, profits or property, and all claims for labor, material or supplieswhich, if unpaid, might by law become a lien or charge upon its property;provided, however, that it shall not be required to pay any tax, assessment,charge or claim if so permitted by law, so long as the validity thereof shallbe contested in good faith by appropriate proceedings and adequate reservestherefor in accordance with GAAP shall be maintained on its books.

 

7.04         Maintain its inventory, equipment, realestate and other properties in good condition and repair (normal wear and tearexcepted), pay and discharge or cause to be paid and discharged when due, thecosts of repairs to or maintenance of the same, and pay or cause to be paid allrental or mortgage payments due on the same except if it is in good faithcontesting by appropriate proceedings such amounts due and is maintainingadequate reserves for such liability in accordance with GAAP.

 

7.05         Maintain and comply with leases coveringreal property, if any, used by it in accordance with the respective termsthereof so as to prevent any default thereunder which may result in theexercise or enforcement of any landlord’s or other lien against it or itsproperty; provided, however, that it may contest any matters in connection withsuch leases in good faith and by appropriate proceedings if it makes suchpayments as are required by law and maintains adequate reserves on its books inaccordance with GAAP in connection therewith.

 

7.06         Maintain its corporate existence, maintainall rights, privileges, franchises, permits and approvals necessary ordesirable for the continuation of its business, and comply with therequirements of all material agreements to which it is a party

 

16

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or by which any of its assets is bound, and all applicable Laws,including Environmental Laws, and orders of any Governmental Authority,noncompliance with which would materially adversely affect its business,properties, condition, financial or otherwise, or ability to repay itsObligations.

 

7.07         Keep adequate records and books of accountand inventory, in which complete entries will be made in accordance with itspast practices and consistent with sound business practice, reflecting all ofits financial transactions, and collect its accounts only in the ordinarycourse of business.

 

7.08         Permit any of the Bank’s representatives toexamine and inspect the Collateral, the Premises, all other of its propertiesand operations, and all books of account, records, reports and other papers andto make copies and extracts therefrom, and to discuss its affairs, finances andaccounts with its officers and employees or its independent public accountants(and by this provision the Borrower authorizes said accountants to discuss thefinances and affairs of the Borrower) all at such reasonable times and as oftenas may be reasonably requested.  The Borrowershall pay all of Bank’s expenses incurred in connection with such examinationsand inspections.

 

7.09         Pay when due all of its Debt except if(with respect to Debt other than the Obligations) it is in good faithcontesting by appropriate proceedings such amounts due and has maintainedadequate reserves for such liability in accordance with GAAP.

 

7.10         At the Bank’s request, execute and/ordeliver to the Bank, at any time or times hereafter, all SupplementalDocumentation that the Bank may request, in form and substance acceptable tothe Bank, and pay the costs of any recording or filing of the same.  The Borrower hereby irrevocably makes,constitutes and appoints the Bank (and all Persons designated by the Bank forthat purpose) as Borrower’s true and lawful attorney, effective immediatelyupon the failure or refusal of the Borrower to execute and/or deliver to theBank any Supplemental Documentation required hereby, to sign the name of theBorrower on any of the Supplemental Documentation and to deliver any of theSupplemental Documentation to such Persons as the Bank, in its sole discretion,may elect.  The Borrower agrees that acarbon, photographic, photostatic, or other reproduction of this Agreement orof a financing statement is sufficient as a financing statement and may befiled by the Bank in any filing office.

 

7.11         Maintain, in addition to the insurance onCollateral required pursuant to Section 4.09 above, liability insurance inform, with insurers and in amounts as may be reasonably satisfactory to theBank, showing the Bank as an additional insured and with insurers and inamounts as may be satisfactory to the Bank.

 

7.12         Maintain itsprincipal banking accounts with the Bank.

 

**ARTICLE VIII.**

**FINANCIAL COVENANTS**

 

The Borrower covenants that until all Obligationsof Borrower have been paid and satisfied in full, and the Bank’s obligationshereunder have terminated, the Borrower will:

 

(A)          Tangible NetWorth.  Maintain a Tangible Net Worthof at least $3,750,000.00, measured quarterly based upon the FinancialStatements to be delivered pursuant to Section 7.01(ii) of this Agreement.

 

(B)           Profitability.  Maintain a minimum net income of at least$100,000.00 for each fiscal year ended December 31 during the term of thisAgreement, as reported on the Financial Statements.

 

**ARTICLE IX.**

**EVENTS OF DEFAULT**

 

9.01         The occurrence of any of the followingevents or acts shall constitute an Event of Default (“Event of Default”):

 

(A)          The Borrower defaults in the payment of anyof its Obligations or any part thereof when the same shall become due andpayable, either by their terms or as otherwise herein provided which is not cured within 5 days.

 

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(B)           Any Financial Statement, representation orwarranty made by the Borrower herein or delivered by the Borrower pursuanthereto or otherwise made in writing by the Borrower in connection with thisAgreement proves to have been false in any material respect as of the date onwhich it was made or deemed made.

 

(C)           The Borrower defaults in the performance ofany of the covenants, conditions or agreements contained in this Agreementwhich is not cured within thirty (30) days, other than as set forth in 9.01(A)and 9.01(B).

 

(D)          The Borrower fails to pay any Debt whendue, or suffers to exist any other event of default giving rise to anyobligation under any agreement binding the Borrower and such failure or eventof default continues beyond any applicable grace period.

 

(E)           The Borrower files a petition under anysection or chapter of the United States Bankruptcy Code or any similarfederal or state law or regulation, the Borrower admits its inability to paydebts as they mature, the Borrower makes an assignment for the benefit of oneor more of its creditors, the Borrower makes an application for the appointmentof a receiver, trustee or custodian for any of its assets, or the Borrowerfiles any case or proceeding for its reorganization, dissolution or liquidationor for relief from creditors.

 

(F)           The Borrower is enjoined, restrained or inany way prevented by court order from conducting all or any material part ofits business affairs, a petition under any section or chapter of theUnited States Bankruptcy Code or any similar federal or state law or regulationis filed against the Borrower, any case or proceeding is filed against theBorrower for its reorganization, dissolution or liquidation or for creditorrelief, or an application is made by any Person other than the Borrower for theappointment of a receiver, trustee, or custodian for any of the Borrower’sassets, and such injunction, restraint, petition or application is notdismissed or stayed within forty-five (45) days after the entry or filingthereof.

 

(G)           The Borrower conceals or removes or permitsto be concealed or removed any part of its property with intent to hinder,delay or defraud its creditors or any of them, or makes or suffers to be made atransfer of any of its property that may be fraudulent under any federal orstate bankruptcy, fraudulent conveyance or similar law.

 

(H)          The Borrower permits any of its assets tobe attached, seized, subjected to a writ or distress warrant, or levied upon,or to come within the possession of any receiver, trustee, custodian orassignee for the benefit of creditors and does not cause the same to beterminated within thirty (30) days thereafter.

 

(I)            Other thanPermitted Liens, a notice of any charge is filed of record with respect to allor any of the Borrower’s assets or any charge becomes a lien or encumbranceupon any such assets and the same is not released within thirty (30) days afterthe same becomes a lien or encumbrance.

 

(J)            The occurrence ofany of the following events:  (i) thehappening of a Reportable Event with respect to any Plan which the Bankdetermines in good faith might constitute grounds for the termination by thePBGC of such Plan or for the appointment by the appropriate United Statesdistrict court of a trustee to administer such Plan; (ii) any Plan which is not“sufficient for benefit liabilities” (as determined underSection 4041(d)(1) of ERISA) shall be terminated; (iii) the Borrower orany ERISA Affiliate shall effect a complete or partial withdrawal from anyMultiemployer Plan without the prior written consent of the Bank and shall havea withdrawal liability (as determined under the Multiemployer Pension PlanAmendments Act of 1980); (iv) the Borrower or any ERISA Affiliate shall,without the prior written consent of the Bank, withdraw from a Plan under whichliability may be imposed pursuant to Section 4063 of ERISA; (v) theappointment of a trustee by an appropriate United States district court toadminister any Plan; or (vi) the institution of any proceedings by the PBGC toterminate any Plan or to appoint a trustee to administer any Plan.

 

(K)          The Borrower suffers a final judgment forpayment of money which shall not be on appeal and does not discharge the samewithin a period of thirty (30) days.

 

(L)           A judgment creditor of the Borrower obtainspossession of any Collateral by any means, including without limitation, levy,distraint, replevin or self-help.

 

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(M)         The occurrence of a default or an Event ofDefault under any of the other Documents which is not cured within the time, ifany, specified therefor in such other Document; or the actual or attemptedunilateral termination, modification or abrogation by any Person other than theBank of any obligation under, or of any right or remedy of Bank under, any ofthe Documents.

 

9.02         Upon the occurrence of any Event ofDefault, and at any and all times while any Event of Default shall becontinuing, the Bank shall have all rights and remedies provided by thisAgreement or any other Document and by applicable law and, without limiting thegenerality of the foregoing, may, at its option, declare the Revolving CreditLoan Commitment to be terminated by giving written notice thereof to theBorrower, and upon such declaration, all Obligations of the Borrower shallthereupon be and become forthwith, due and payable, without any presentment,demands, protest or other notice of any kind, all of which are hereby expresslywaived.  Further, in addition to all therights and remedies provided in Article 9 of the UCC and any otherapplicable law, the Bank may (but is under no obligation to do so):  take physical possession of any of theCollateral and sell, lease or otherwise dispose of the Collateral in whole orin part; require the Borrower to assemble the Collateral to which the Borrowerhas or is entitled to possession at a place designated by the Bank, which isreasonably convenient to both parties; collect any money due or to become dueand enforce in the Borrower’s name all rights with respect to the Collateral;receive and open mail addressed to the Borrower; and/or notify any AccountDebtors (whether or not such Account Debtors are in default) to make paymentsdirectly to the Bank.  The Borroweragrees to deliver to the Bank promptly upon receipt thereof, in the form inwhich received (together with all necessary endorsements), all paymentsreceived by the Borrower in respect of any Account.  The Bank may apply all such payments against the Borrower’sObligations or at the Bank’s option to any of the Borrower’s accountsmaintained at the Bank.

 

9.03         In exercising its right to sell, lease orotherwise dispose of the Collateral, the Bank may sell, lease or otherwisedispose of all or any Collateral in its then condition, or after any furthermanufacturing or processing thereof, at public or private sale or sales, withsuch notice as may be required by law, in lots or in bulk, all as the Bank, inits sole discretion, may deem advisable; such sales may be adjourned from timeto time with or without notice.  TheBank shall have the right to conduct such sales on the Borrower’s premises orelsewhere and shall have the right to use the Borrower’s premises withoutcharge for such sales for such time or times as the Bank may see fit.  The Bank is hereby granted a license or otherright to use, without charge, the Borrower’s labels, patents, copyrights,rights of use of any name, trade secrets, tradenames, trademarks, service marksand advertising matter, or any property of a similar nature, as it pertains tothe Collateral, in advertising for sale and selling any Collateral and theBorrower’s rights under all licenses and all franchise agreements shall inureto the Bank’s benefit.  The Bank shallhave the right to sell, lease or otherwise dispose of the Collateral, or anypart thereof, for cash, credit or any combination thereof, and the Bank maypurchase all or any part of the Collateral at public or, if permitted by law,private sale and, in lieu of actual payment of such purchase price, may set offthe amount of such price against the Borrower’s Obligations.  The proceeds realized from the sale of anyCollateral shall be applied first to the costs, expenses and attorneys’ feesand expenses incurred by the Bank for collection and for acquisition,completion, protection, removal, storage, sale and delivery of the Collateral;second to interest due upon any of the Borrower’s Obligations; and third to theprincipal of the Borrower’s Obligations. If any deficiency shall arise, the Borrower shall remain liable to theBank therefor.

 

9.04         Any notice of any sale, lease, other disposition,or other intended action by the Bank shall be reasonable if it is given to theBorrower at least ten (10) days in advance of the intended disposition or otherintended action.

 

9.05         Upon and after the occurrence of an Eventof Default, the Borrower irrevocably designates, makes, constitutes andappoints the Bank (and all persons designated by the Bank) as the Borrower’strue and lawful attorney, and the Bank or its agent, may, without notice to theBorrower, and at such time or times thereafter as the Bank or said agent, inits sole discretion, may determine, in the Borrower’s or the Bank’s name:  (i) demand payment of the Accounts; (ii)enforce payment of the Accounts, by legal proceedings or otherwise; (iii)exercise all of the Borrower’s rights and remedies with respect to thecollection of the Accounts and Special Collateral; (iv) settle, adjust,compromise, extend or renew the Accounts; (v) settle, adjust or compromise anylegal proceedings brought to collect the Accounts or any other dispute withrespect thereto; (vi) if permitted by applicable law, sell or assign theAccounts and Special Collateral upon such terms, for such amounts and at suchtime or times as the Bank deems advisable; (vii) discharge and release theAccounts and Special Collateral; (viii) prepare, file and sign the Borrower’sname on a Proof of Claim in Bankruptcy or similar document against any AccountDebtor; (ix) prepare, file and sign the Borrower’s name on any notice of lien,assignment or satisfaction of lien or similar document in connection with theAccounts and Special Collateral; (x) do all acts and things necessary, in theBank’s sole discretion, to fulfill the Borrower’s obligations under thisAgreement; (xi) endorse the name of the Borrower upon any item of payment orproceeds and

 

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deposit the same to the account of the Bank on account of theBorrower’s Obligations; (xii) endorse the name of the Borrower upon any chattelpaper, document, instrument, invoice, freight bill, bill of lading or similardocument or agreement relating to the Accounts, Inventory and SpecialCollateral; (xiii) use the Borrower’s stationery and sign the name of theBorrower to verifications of the Accounts and notices thereof to Account Debtors;and (xiv) use the information recorded on or contained in any data processingequipment and computer hardware and software relating to the Accounts,Inventory and Special Collateral to which the Borrower has access.

 

9.06         The Borrower agrees that in any sale ofCollateral consisting of securities, the Bank is hereby authorized to complywith any limitation or restriction in connection with such sale as Bank may beadvised by counsel is necessary or advisable in order to avoid any violation ofapplicable Law (including, without limitation, compliance with such proceduresas may restrict the number of prospective bidders and purchasers, require thatsuch prospective bidders and purchasers have certain qualifications, andrestrict such prospective bidders and purchasers to Persons who will representand agree that they are purchasing for their own account for investment and notwith a view to the distribution or resale of that portion of the Collateralconsisting of securities), or in order to obtain any required approval of thesale or of the purchaser by any governmental regulatory authority or official,and the Borrower further agrees that such compliance shall not result in suchsale being considered commercially unreasonable, nor shall the Bank be liableor accountable to the Borrower for any discount allowed by reason of the factthat Collateral was sold in compliance with any such limitation or restriction.

 

**ARTICLE X.**

**MISCELLANEOUS**

 

10.01       No failure or delay on the part of the Bankin exercising any right, power or remedy hereunder or under any other Documentsshall operate as a waiver thereof, nor shall any single or partial exercise ofany such right, power or remedy preclude any other or further exercise thereofor the exercise of any other right, power or remedy hereunder or under anyother Document.  The remedies hereinprovided and under any other Document are cumulative and not exclusive of anyremedies provided by law.

 

10.02       This Agreement and the other Documentsconstitute the entire agreement between the parties and there are no promisesexpressed or implied unless contained herein and therein.  No amendment, modification, termination orwaiver of any provision of the Documents nor consent to any departure by theBorrower therefrom shall in any event be effective unless the same shall be inwriting and signed by the Bank, and then such waiver or consent shall beeffective only for the specific purpose for which given, and shall not bedeemed a waiver of or consent to any other matter or to the same matter in adifferent instance.  No notice to ordemand on the Borrower in any case shall entitle the Borrower to any other orfurther notice or demand in similar or other circumstances.

 

10.03       The Borrower will pay any documentary,stamp or similar taxes payable in respect of the Documents or the Collateralgranted hereby or in connection herewith. The Borrower will, on demand, reimburse the Bank for the fees andexpenses of legal counsel for the Bank incurred by the Bank in connection withthe preparation of the Documents, and the negotiation and closing of thetransactions contemplated hereby.  TheBorrower will further, on demand, reimburse the Bank for all expenses,including the fees and expenses of legal counsel for the Bank, incurred by the Bankin connection with any amendment or modification of the Documents, theadministration of the Loans and the enforcement of the Documents and thecollection or attempted collection of the Obligations of the Borrower.

 

10.04       (A) For the purposes of any action or proceeding involving the Documents orany other agreement or document referred to therein, the Borrower herebyexpressly submits to the jurisdiction of all federal and state courts locatedin the State of Illinois and consents that any order, process, notice of motionor other application to or by any of said courts or a judge thereof may beserved within or without such court’s jurisdiction by registered mail or bypersonal service, provided a reasonable time for appearance is allowed.  The Borrower hereby irrevocably waives anyobjection that it may now or hereafter have to the laying of venue of any suit,action or proceeding arising out of or relating to this Agreement or any otherDocument brought in any federal or state court sitting in Cook County, State ofIllinois, and hereby further irrevocably waives any claim that any such suit,action or proceeding brought in any such court has been brought in aninconvenient forum.

 

(B)           THE BORROWER HEREBY KNOWINGLY, VOLUNTARILYAND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHTIT MAY HAVE TO A TRIAL BY JURY OF ANY

 

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DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT, THE NOTE, ANYOTHER OF THE DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT REFERRED TO HEREIN ORTHEREIN AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTINGWITHOUT A JURY.

 

10.05       The Borrower agrees to indemnify the Bankfrom and against any and all liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses or disbursements of any kind ornature whatsoever (including, without limitation, fees and disbursements ofcounsel) which may be imposed on, incurred by, or asserted against the Bank inany litigation, proceeding or investigation instituted or conducted by anygovernmental agency or instrumentality or any other Person with respect to anyaspect of, or any transaction contemplated by, or referred to in, or any matterrelated to, this Agreement, whether or not the Bank is a party thereto, exceptto the extent that any of the foregoing arises out of the gross negligence orwillful misconduct of the Bank.

 

10.06       The Borrower acknowledges and agrees thatthis Agreement constitutes a commitment on the part of the Bank to makeadvances, incur obligations and otherwise to give value to the Borrower andthat all financing statements filed hereunder shall remain in full force andeffect until this Agreement shall have been terminated even if, at any time ortimes prior to such termination, no Loans or other Obligations shall beoutstanding hereunder.  Accordingly, theBorrower waives any rights which it may have under Section 9-404(1) of theUCC to demand the filing of termination statements with respect to the Collateral,and agrees that the Bank shall not be required to send such terminationstatements to the Borrower, or to file them with any filing office, unless anduntil this Agreement shall have been terminated and all Obligations of theBorrower shall have been paid in full in immediately available funds.

 

10.07       Any notices or consents required orpermitted by this Agreement shall be in writing and shall be delivered inperson or sent by certified mail, postage prepaid, return receipt requested, ordelivered by facsimile, or delivered by a nationally recognized overnightexpress delivery service, in any case addressed as follows, unless such addressis changed by written notice hereunder:

 
| (i)    |   | If to the Borrower: |   | Ebix, Inc., a Delaware corporation, f/k/a Ebix.com,  Inc. |
|--------|--------|---------------------|--------|-----------------------------------------------------------|
|   |   |                |   | 1900 E. Golf Road, Suite 1200                             |
|   |   |                |   | Schaumburg, Illinois  60173                          |
|   |   |                |   |                                                      |
| (ii)   |   | If to the Bank:     |   | LaSalle Bank, N.A., national banking association          |
|   |   |                |   | 135  S. LaSalle Street                                    |
|   |   |                |   | Chicago,  Illinois  60603                            |
|   |   |                |   | Attention:  William J. Robertson                          |

 

Any such notice or communication shall be deemedto have been given either at the time of personal delivery, or in the case ofovernight express delivery, as of the date delivery was first attempted, or inthe case of facsimile, upon receipt or in the case of certified mail, five (5)days after delivery to the United States Postal Service.

 

10.08       This Agreement may be executed in anynumber of counterparts and by the different parties hereto in separatecounterparts, each of which when so executed and delivered shall be deemed tobe an original and all of which taken together shall constitute but one and thesame instrument.

 

10.09       This Agreement shall become effective whenit shall have been executed by the Borrower and the Bank, and thereafter shallbe binding upon and inure to the benefit of the Borrower and the Bank and theirrespective successors and assigns, except that the Borrower shall not have theright to assign its rights hereunder or any interest herein without the priorwritten consent of the Bank.

 

10.10       This Agreement has been, and any otherDocuments will be, delivered and accepted in and shall be deemed to be,contracts made under and governed by the laws of the State of Illinois, and forall purposes shall be construed in accordance with the laws of said State.

 

10.11       Any provision of this Agreement which isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions

 

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hereof or affecting the validity or enforceability of such provision inany other jurisdiction; wherever possible, each provision of this Agreementshall be interpreted in such manner as to be effective and valid underapplicable Law.

 

10.12       All covenants, agreements, representationsand warranties made by the Borrower herein and any and all certificates andinstruments delivered by the Borrower in connection herewith shall,notwithstanding any investigation by the Bank, be deemed material and relied onby the Bank and shall survive the execution and delivery to the Bank of thisAgreement, the Notes, the other Documents, and any extension or renewalthereof.

 

10.13       This Agreement shall secure and govern theterms of any amendments, extensions or renewals to the Note and the Documents.

 

10.14       From time to time, the Borrower willexecute and deliver to Bank such additional documents and will provide suchadditional information as the Bank may reasonably require to carry out theterms of this Agreement and be informed of the Borrower’s status and affairs.

 

10.15       All Exhibits and Schedules attached to thisAgreement shall be deemed incorporated herein by this reference.

 

10.16       Whenever under the terms of this Agreement,the time for performance of a covenant or condition falls upon a day which isnot a Business Day, such time for performance shall be extended to the nextBusiness Day.  Unless otherwise stated,all references herein to “days” shall mean calendar days.

 

10.17       This Agreement and the other Documentssupersede all prior negotiations, understandings and agreements of the partieshereto and thereto in respect of the transactions contemplated hereby,including without limitation those expressed in any commitment or proposalletter.

 

 

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties have hereuntocaused this Agreement to be executed by their respective officers thereuntoduly authorized, as of the date first above written.

 

 
|   |        | **BORROWER:**                                                  |
|--------|-------------|----------------------------------------------------------------|
|   |        |                                                           |
|   |        | **EBIX, INC., A DELAWARE  CORPORATION, F/K/A  EBIX.COM, INC.** |
|   |        |                                                           |
|   |        |                                                           |
|   | By:         | /s/ R. J. Baum                                                 |
|   |        |
|   | Print Name: |                                                           | R. J. BAUM |
|   |        |
|   | Title:      |                                                           | CFO |
|   |        |
|   |        |
|   |        | **BANK:**                                                      |
|   |        |                                                           |
|   |        | **LaSALLE BANK, N.A.**                                         |
|   |        |                                                           |
|   | By:         | /s/ Wm Robertson                                               |
|   |        |
|   | Print Name: |                                                           | WM ROBERTSON |
|   |        |
|   | Title:      |                                                           | S.V.P. |
|        |             |                                                                |  |  |  |

 

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Schedule Index

 
| Schedule 4.03(a)- |   | State  of Incorporation or Organization              |
|------------------------|--------|------------------------------------------------------|
| Schedule 4.03(b)- |   | Addresses  of Borrower’s Other Locations        |
| Schedule 4.03(c)- |   | Trade  Names, Prior Legal Names, etc.                |
| Schedule 4.03(d)- |   | Patents,  Trademarks, Copyrights                     |
| Schedule 4.03(e)- |   | Borrower’s  Instruments, Deposit Accounts, etc. |
| Schedule 4.03(f)- |   | Collateral  Not Located in the United States         |
| Schedule 4.03(g)- |   | Collateral  Located with Third Parties               |
| Schedule 4.03(h)- |   | Collateral  Subject to Certificates of Title         |
| Schedule 5.13     |   | Stock Owned by Borrower                              |

 

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**SCHEDULE 4.03(a)**

 

**STATE OF INCORPORATION OR ORGANIZATION**

 
| **Information Required**                                              |   | **Company** |   |
|-----------------------------------------------------------------------|--------|-------------|--------|
|                                                                  |   |        |   |
| Exact  Legal Name                                                     |   |        |   |
|                                                                  |   |        |   |
| State  of Organization                                                |   |        |   |
|                                                                  |   |        |   |
| Type  of Organization                                                 |   |        |   |
|                                                                  |   |        |   |
| Organizational  I.D. Number                                           |   |        |   |
|                                                                  |   |        |   |
| Place  of Business (or, if more than one, the Chief Executive Office) |   |        |   |

 

[ALL SCHEDULES TO BE COMPLETED FOR EACH DEBTOR]

 

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**SCHEDULE 4.03(b)**

 

**ADDRESSES OF BORROWER’SOTHER LOCATIONS**

 

26

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**SCHEDULE 4.03(c)**

 

**TRADE NAMES, PRIOR LEGAL NAMES,ETC.**

 

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**SCHEDULE 4.03(d)**

 

**PATENTS**

 
| **Patent/Serial No.** |   | **Country** |   | **Co. Name  Held In** |   | **Issue Date** |
|-----------------------|--------|-------------|--------|-----------------------|--------|----------------|
|                  |   |        |   |                  |   |           |
|                  |   |        |   |                  |   |           |
|                  |   |        |   |                  |   |           |
|                  |   |        |   |                  |   |           |

 

**TRADEMARKS**

 
| **Trademark Name** |   | **Registration/Serial  No.** |   | **Country** |   | **Co. Name  Held In.** |   | **Issue Date** |
|--------------------|--------|------------------------------|--------|-------------|--------|------------------------|--------|----------------|
|               |   |                         |   |        |   |                   |   |           |
|               |   |                         |   |        |   |                   |   |           |
|               |   |                         |   |        |   |                   |   |           |
|               |   |                         |   |        |   |                   |   |           |

 

**COPYRIGHTS**

 
| **Copyright Name** |   | **Country** |   | **Co. Name  Held In.** |   | **Issue Date** |
|--------------------|--------|-------------|--------|------------------------|--------|----------------|
|               |   |        |   |                   |   |           |
|               |   |        |   |                   |   |           |
|               |   |        |   |                   |   |           |
|               |   |        |   |                   |   |           |

 

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**SCHEDULE 4.03(e)**

 
| Instruments:              |
|---------------------------|
|                      |
| Deposit  Accounts:        |
|                      |
| Investment  Property:     |
|                      |
| Letter-of-Credit  Rights: |
|                      |
| Chattel  Paper:           |
|                      |
| Documents:                |
|                      |
| Commercial  Tort Claims:  |

 

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**SCHEDULE 4.03(f)**

 

**COLLATERAL NOT LOCATED INTHE UNITED STATES**

 

30

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**SCHEDULE 4.03(g)**

 

**COLLATERALLOCATED WITH THIRD PARTIES**

 

31

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**SCHEDULE 4.03(h)**

 

**COLLATERAL SUBJECT TO CERTIFICATEOF TITLE**

 

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**SCHEDULE 5.13**

 

**STOCK OWNEDBY BORROWER**

 

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**PLEDGEAGREEMENT**

**(DEPOSITACCOUNT)**

 

**THIS PLEDGE AGREEMENT** (the “Pledge Agreement”) is made and datedthis 21ST day of April, 2004, by and among **EBIX, INC**., a Delaware corporation f/k/a **EBIX.COM, INC**. (the “Borrower”), and **LaSALLE BANK NATIONAL ASSOCATION**, anational banking association (“Borrower”).

 

**RECITALS**

 

**WHEREAS**, Bank has agreed to extend credit to Borrower from time to time on theterms and subject to the conditions set forth in that certain **Amended and Restated Loan And Security Agreement**and the documents, instruments, and agreements ancillary thereto, as amended,extended or replaced from time to time, (collectively, the “Loan Agreement”);and

 

**WHEREAS**, to induce Bank to extend such credit, and as a condition of Bankentering into the Loan Agreement, Borrower has agreed to pledge and to grant toBank a security interest in and lien upon certain property of Borrowerdescribed more particularly herein.

 

**NOW, THEREFORE**, in consideration of the above Recitals and for other good andvaluable consideration, the receipt and adequacy of which are herebyacknowledged, the parties hereto hereby agree as follows:

 

**1**.             **Terms and Definitions****. **Capitalizedterms not otherwise defined herein have the same meanings as in the LoanAgreement.

 

**2.****            ****Pledge****.**  Borrower hereby pledges, assigns and grantsto Bank a security interest in the property described in Paragraph 2 below(collectively and severally, the “Collateral”) to secure payment andperformance of the Obligations.

 

**3.****            ****Collateral****.**  The Collateral shall consist of all right,title and interest of Borrower in and to, whether now existing or hereafteracquired, deposit account no.                ******maintained byBorrower with Bank (together with all substitution, additional, and replacementaccounts, the “Account”), all interest, earnings and accruals thereon, allcertificates and instruments evidencing the Account, and all proceeds of theforegoing.

 

**4.****            ****Obligations****.**  The Obligations secured by this PledgeAgreement shall consist of any and all debts, obligations, and liabilities ofBorrower to Bank arising out of or related to the Loan Agreement (whetherprincipal, interest, fees or otherwise, whether now existing or hereafterarising, whether voluntary or involuntary, whether or not jointly owed withothers, whether direct or indirect, absolute or contingent, contractual ortortious, liquidated or unliquidated, arising by operation of law or otherwise,whether or not from time to time decreased or extinguished and later increased,created or incurred and whether or not extended, modified, rearranged,restructured, refinanced, or replaced, including without limitation,modifications to interest rates or other payment terms of such debts,obligations, or liabilities).

 

**5.****            ****Representations and Warranties****.** Borrower hereby represents and warrants that: (a) except for thesecurity interest granted hereunder, Borrower (i) is and will at all timescontinue to be the direct and beneficial owner of the Collateral, (ii) holdsthe same free and clear of all liens except the lien created by this PledgeAgreement and those permitted by the Loan Agreement; and (iii) will not disposeof or make any assignment, pledge, hypothecation or transfer of, or create orpermit to exist any security

 

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interest in or other lien on, the Collateral, other than in accordancewith the terms of this Pledge Agreement or the Loan Agreement; (b) Borrower (i)has the power and authority to pledge the Collateral in the manner hereby doneor contemplated and (ii) will defend its title or interest thereto or thereinagainst any and all liens (other than the liens created by this PledgeAgreement or by the Loan Agreement), however arising, of all personswhomsoever; (c) no consent of any other person (including stockholders orcreditors of Borrower) and no consent or approval of any governmental authorityor any securities exchange was or is necessary to the validity orenforceability of the pledge effected hereby, except such consents as have beenobtained and are in full force and effect; and (d) by virtue of the executionand delivery by Borrower of this Pledge Agreement Bank will have a firstpriority perfected security interest in the Collateral perfected by control.

 

**6.****            ****Covenants**. Borrower agrees (a) not to make or permit to be made any withdrawalsor transfers from the Account; and (b) not to close or terminate the Account.

 

**7.****            ****Default****. **A default under this Pledge Agreement shallbe deemed to exist upon the occurrence of (i) Borrower’s breach of any of theterms of this Pledge Agreement; or (ii) an Event of Default under the LoanAgreement (an “Event of Default”).

 

**8.****            ****Remedies**.

 

**a.**             Upon the occurrence of an Event of Default,Bank may, without notice to or demand on Borrower and in addition to all rightsand remedies available to Bank under the Loan Agreement with respect to theObligations, at law, in equity or otherwise, do any one or more of thefollowing:

 

(1)           Withdraw or cause to be withdrawn all amounts on deposit in the Accountand close the Account or otherwise foreclose or otherwise enforce Bank’ssecurity interest in any manner permitted by law or provided for in this PledgeAgreement.

 

(2)           Recover from Borrower all costs and expenses, including, withoutlimitation, reasonable attorneys’ fees (including the allocated cost ofinternal counsel), incurred or paid by Bank in exercising any right, power orremedy provided by this Pledge Agreement.

 

**b.**             Any deficiency with respect to theObligations which exists after the disposition or liquidation of the Collateralshall be a continuing liability of Borrower to Bank and shall be immediatelypaid by Borrower to Bank.

 

**9.****            ****Cumulative Rights****. **The rights,powers, and remedies of Bank under this Pledge Agreement shall be in additionto all rights, powers, and remedies given to Bank by virtue of any statute orrule of law, the Loan Agreement or any other agreement, all of which rights,powers, and remedies shall be cumulative and may be exercised successively orconcurrently without impairing Bank’s security interest in the Collateral.

 

**10.****         ****Setoff**.  Borrower agrees that Bank mayexercise its rights of setoff with respect to the Obligations in the samemanner as if the Obligations were unsecured.

 

**11.****         ****Waiver**.  Any waiver, forbearance orfailure or delay by Bank in exercising any right, power, or remedy shall notpreclude the further exercise thereof, and every right, power, or remedy ofBank shall continue in full force and effect until such right, power or remedyis specifically waived in a writing executed by Bank. Borrower waives any rightto require Bank to proceed against any person or to exhaust any Collateral orto pursue any remedy in Bank’s power.

 

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**12.****         ****Binding Upon Successors****. **All rights ofBank under this Pledge Agreement shall inure to the benefit of its successorsand assigns, and all obligations of Borrower shall bind its heirs, executors,administrators, successors, and assigns.

 

**13.****         ****Entire Agreement; Severability****. **This PledgeAgreement contains the entire agreement between Bank and Borrower with regardsto the Collateral. If any of the provisions of this Pledge Agreement shall beheld invalid or unenforceable, this Pledge Agreement shall be construed as ifnot containing those provisions and the rights and obligations of the partieshereto shall be construed and enforced accordingly.

 

**14.****         ****References**.  The singular includes theplural. If more than one Borrower executes this Pledge Agreement, the termBorrower shall be deemed to refer to each of the undersigned Borrowers as wellas to all of them, and their obligations and agreements hereunder shall bejoint and several.

 

**15.****         ****Choice of Law****. **This Pledge Agreement shall be construed inaccordance with and governed by the laws of Illinois, without giving effect tochoice of law rules.

 

**16.****         ****Amendment****. **This Pledge Agreement may not be amended ormodified except in writing signed by each of the parties hereto.

 

**17.**          **Addresses for Notices****. **All demands,notices, and other communications to Borrower or Bank provided for hereundershall be in writing mailed, delivered, or sent by facsimile, addressed or sentto it to the address or facsimile number, as the case may be, of Borrower orBank set forth below:

 
| (i)    | If  to the Borrower: | Ebix,  Inc., a Delaware corporation, |
|--------|----------------------|--------------------------------------|
|   |                 | f/k/a  Ebix.com, Inc.                |
|   |                 | 1900  E. Golf Road, Suite 1200       |
|   |                 | Schaumburg,  Illinois  60173    |
|   |                 | Attn:                                |   |   |
|   |                 | Telephone:                           |   |   |
|   |                 | Facsimile:                           |   |   |
|   |                 |                                 |
| (ii)   | If  to the Bank:     | LaSalle  Bank, N.A.,                 |
|   |                 | a  national banking association      |
|   |                 | 135  S. LaSalle Street               |
|   |                 | Chicago,  Illinois  60603       |
|   |                 | Attention:  William J. Robertson     |
|   |                 | Telephone:                           |   |   |
|   |                 | Facsimile:                           |   |   |
|        |                      |                                      |  |  |  |  |  |

 

Allsuch demands, notices, and other communications shall, when mailed or sent byfacsimile, be effective when deposited in the mails, delivered or so sent, as thecase may be, addressed as aforesaid.

 

**18.****         ****Execution in Counterparts****. **This PledgeAgreement may be executed in counterparts each of which when so executed shallbe deemed to be an original and all of which when taken together shallconstitute one and the same agreement

 

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INWITNESS WHEREOF, the parties have hereunto caused this Agreement to be executedby their respective officers thereunto duly authorized, as of the date firstabove written.

 

 
|   |         | **BORROWER:**                                                 |
|--------|--------------|---------------------------------------------------------------|
|   |         |
|   |         | **EBIX, INC., A DELAWARE CORPORATION,  F/K/A EBIX.COM, INC.** |
|   |         |
|   |         |
|   | By:          | /s/ R. J. Baum                                                |
|   |         |
|   | Print  Name: |                                                          | R. J. BAUM |
|   |         |
|   | Title:       |                                                          | CFO |
|   |         |
|   |         |
|   |         | **BANK:**                                                     |
|   |         |
|   |         | **LaSALLE BANK, N.A.**                                        |
|   |         |
|   |         |
|   | By:          | /s/ Wm Robertson                                              |
|   |         |
|   | Print  Name: |                                                          | WM ROBERTSON |
|   |         |
|   | Title:       |                                                          | S.V.P. |
|        |              |                                                               |  |  |

 

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