RATIO (THE "SENIOR LEVERAGE RATIO") OF
(I) TOTAL SENIOR INDEBTEDNESS (INCLUDING THE LETTERS OF CREDIT) OF THE BORROWER
AND ITS CONSOLIDATED SUBSIDIARIES TO (II) EBITDA TO BE GREATER THAN 2.75 TO 1.00
ON A TRAILING TWELVE MONTH BASIS, BEGINNING WITH THE FISCAL QUARTER ENDING
JUNE 30, 2006, AND FOR EACH FISCAL QUARTER THEREAFTER.
THE SENIOR LEVERAGE
RATIO SHALL BE CALCULATED, IN EACH CASE, DETERMINED AS OF THE LAST DAY OF EACH
APPLICABLE FISCAL QUARTER OF THE BORROWER BASED UPON (A) FOR INDEBTEDNESS,
INDEBTEDNESS AS OF THE LAST DAY OF EACH SUCH FISCAL QUARTER; AND (B) FOR
66
EBITDA, THE ACTUAL AMOUNT FOR THE LAST TWELVE-MONTH PERIOD.
"SENIOR
INDEBTEDNESS" SHALL MEAN ALL INDEBTEDNESS OF BORROWER AND ITS SUBSIDIARIES OTHER
THAN THE SUBORDINATED DEBT.
(B)
MINIMUM CONSOLIDATED NET WORTH.
AFTER THE
COLLATERAL RELEASE DATE, THE BORROWER SHALL NOT PERMIT ITS CONSOLIDATED NET
WORTH AT ANY TIME TO BE LESS THAN THE SUM OF 85% OF ITS BASE NET WORTH AS OF THE
COLLATERAL RELEASE DATE, PLUS 50% OF BORROWER'S POSITIVE CONSOLIDATED NET INCOME
FOR EACH FISCAL YEAR THEREAFTER.
"BASE NET WORTH" SHALL MEAN BORROWER'S BOOK
NET WORTH AS OF THE COLLATERAL RELEASE DATE.
WITH LENDER'S WRITTEN APPROVAL,
CERTAIN NON CASH ITEMS MAY BE EXCLUDED FROM THIS NET WORTH TEST COMPUTATION.
(C)
MINIMUM EXCESS COLLATERAL AVAILABILITY.
PRIOR TO THE COLLATERAL RELEASE DATE, THE BORROWER AND ITS CONSOLIDATED
SUBSIDIARIES SHALL MAINTAIN AT ALL TIMES MINIMUM EXCESS AVAILABILITY UNDER THE
BORROWING BASE AMOUNT THROUGH JUNE 30, 2006, OF NOT LESS THAN $8,000,000, AND
THEREAFTER OF NOT LESS THAN $5,000,000.
(D)
FIXED CHARGE COVERAGE RATIO.
AFTER THE
COLLATERAL RELEASE DATE, THE BORROWER AND ITS CONSOLIDATED SUBSIDIARIES SHALL
NOT PERMIT THE RATIO ("FIXED CHARGE COVERAGE RATIO"), FOR ANY PERIOD, OF
(I) EBITDA, MINUS CAPITAL EXPENDITURES AND PATENT EXPENDITURES TO (II) THE SUM
OF CASH INTEREST EXPENSE, PLUS SCHEDULED PAYMENTS OF THE PRINCIPAL PORTION OF
ALL OTHER INDEBTEDNESS FOR BORROWED MONEY FOR SUCH PERIOD (EXCLUDING PAYMENTS ON
THE REVOLVING LOANS), PLUS DIVIDENDS AND DISTRIBUTIONS PAID FOR SUCH PERIOD, AND
TAXES PAID FOR SUCH PERIOD, AS MEASURED ON A TRAILING TWELVE MONTH BASIS, OF NOT
LESS THAN 1.20 TO 1.00 FOR EACH OF THE FISCAL QUARTERS THEREAFTER. FOR PURPOSES
OF THIS AGREEMENT, "PATENT EXPENDITURES" SHALL MEAN EXPENDITURES OF A PERSON
RELATING TO ITS OBTAINING, ACQUIRING AND DEFENDING PATENTS.
(E)
Maximum Total Leverage Ratio.
At all times,
after the Collateral Release Date, the Borrower and its consolidated
Subsidiaries shall not permit the ratio ("Total Leverage Ratio") of (i) total
Indebtedness (including Letters of Credit) to (ii) EBITDA, to be greater than
4.5 to 1.0 on a trailing twelve month basis for each fiscal quarter thereafter.
ARTICLE VIII:
DEFAULTS
8.1
DEFAULTS.
EACH OF THE FOLLOWING OCCURRENCES
SHALL CONSTITUTE A DEFAULT UNDER THIS AGREEMENT:
(A)
FAILURE TO MAKE PAYMENTS WHEN DUE.
THE
BORROWER SHALL (I) FAIL TO PAY WHEN DUE ANY OF THE OBLIGATIONS CONSISTING OF
PRINCIPAL WITH RESPECT TO THE LOANS OR REIMBURSEMENT OBLIGATIONS AND SUCH
FAILURE SHALL REMAIN UNREMEDIED FOR A PERIOD OF THREE (3) DAYS OR (II) SHALL