Document:

Exhibit
10.01

 

THIRD
AMENDMENT

 

 

THIS THIRD AMENDMENT (“Amendment”), dated as of May 16, 2003
(the “Amendment Date”), is made between (i) INTRADO, INC., INTRADO
COMMUNICATIONS INC. and INTRADO COMMUNICATIONS OF VIRGINIA, INC. (individually
and collectively, “Borrower”); and (ii) GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (“Lender”);

 

WITNESSETH:

 

WHEREAS, pursuant to a certain Loan and Security Agreement, dated as of
July 31, 2001, made between Borrower and Lender (hereinafter, as amended to
date, called the “Loan Agreement”), Lender agreed to extend credit to
Borrower in accordance with, and subject to, the terms and conditions therein
contained; and

 

WHEREAS, Borrower has requested that Lender make an additional term
loan in the amount of Ten Million Dollars ($10,000,000) to Borrower under the
Loan Agreement, the proceeds of which will be used, to the extent of Six
Million Dollars ($6,000,000), to repay outstanding “Revolving Credit Advances”
(as that term is defined in the Loan Agreement) and, to the extent of the
balance, for working capital and other general corporate purposes; and

 

WHEREAS, subject to the terms and conditions hereof, Lender is willing
to make such accommodations to Borrower;

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and conditions herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, Borrower and Lender agree to amend the Loan Agreement as follows:

 

1.                                       Incorporation of Definitions. 
Capitalized terms used hereinbelow, but not expressly redefined
hereinbelow, shall have the meanings given to such terms in the Loan Agreement,
as amended hereby.

 

2.                                       Amendment to Section 1.1 of the Loan
Agreement.  Section 1.1 of the Loan Agreement is hereby
amended by adding therein immediately after subsection (f) thereof (which was
added pursuant to the Second Amendment) the following new subsection (g):

 

(g)                                 Second Term Loan. 
Effective upon satisfaction of the conditions precedent specified in
Section 8 of the Third Amendment and the conditions to Loans specified in
Sections 2.2(a), (b) and (c), Lender shall make a term loan to Borrower in the
principal amount of Ten Million Dollars ($10,000,000) (“Second Term Loan”).  Six Million Dollars ($6,000,000) of the
proceeds of the Second Term Loan will be used by Borrower to repay outstanding
Revolving Credit

 

 

Advances, and the remaining Four Million Dollars ($4,000,000) will be
used by Borrower for working capital and other general corporate purposes.  The Second Term Loan shall be evidenced by,
and be repayable in accordance with the terms of, a certain Second Term Note,
dated as of even date herewith, in the principal amount of Ten Million Dollars
($10,000,000) (“Second Term Note”), made by Borrower in favor of
Lender.  The principal amount of the
Second Term Note shall be repaid in consecutive quarterly principal
installments in the amount of Eight Hundred Thirty-Three Thousand Three Hundred
Thirty-Three Dollars ($833,333) each, due and payable on the first day of each
calendar quarter, commencing on July 1, 2003 and continuing on the first
day of each calendar quarter thereafter, i.e., on each October 1, January 1,
April 1 and July 1, through April 1, 2006 on which date the outstanding
principal balance of the Second Term Note shall be due and payable in
full.  Interest on the Second Term Loan
shall be payable at the rate and in the manner provided in Section 1.5.

 

3.                                       Amendments to Section 1.2 of the Loan
Agreement.

 

(a)                                  Section 1.2 of the Loan Agreement is hereby
amended by deleting in its entirety the last sentence of subsection (c) thereof
and substituting in lieu thereof the following sentence:

 

If Borrower exercises its right of termination and prepayment, Borrower
shall pay to Lender any applicable LIBOR funding breakage costs in accordance
with Section 1.5(f).

 

(b)                                 Section 1.2 of the Loan Agreement is hereby
further amended by adding immediately after subsection (c) thereof, the
following new subsection (d) :

 

(d)                                 In addition to its right to prepay the
Obligations in full pursuant to the preceding subsection (c), Borrower shall
have the right, at any time upon ten (10) days prior written notice given by
Borrower’s Agent to Lender, to prepay in whole or in part either or both of the
Term Loan and the Second Term Loan; provided, that (i) any
partial prepayments of the Term Loan or the Second Term Loan shall be applied
to the outstanding principal installments thereof in the inverse order of their
respective maturity dates and (ii) in the case of any prepayment in whole or in
part of the Second Term Loan, Borrower shall pay to Lender any applicable LIBOR
funding breakage costs in accordance with Section 1.5(f).

 

4.                                       Amendments to Section 1.5 of the Loan
Agreement.

 

(a)                                  Section 1.5 of the Loan Agreement (as
previously amended pursuant to the Second Amendment) is hereby further amended
by deleting subsection (a) thereof in its entirety and substituting in lieu
thereof the following revised subsection (a):

 

2

 

(a)                                  Borrower shall pay interest to Lender on the
aggregate outstanding Revolving Credit Advances at a floating rate equal to the
Index Rate plus one and one-half percent (1.5%) per annum (the
“Revolving Credit Rate”).  Borrower
shall pay interest to Lender on the outstanding principal amount of the Term
Loan at a floating rate equal to the Index Rate plus one and one-half
percent (1.5%) per annum (the “Term Loan Rate”).  Borrower shall pay interest to Lender on the outstanding
principal amount of the Second Term Loan at a floating rate equal to the Index
Rate plus one and one-half percent (1.5%) per annum or, at the election of
Borrower’s Agent pursuant to Section 1.5(e) below, at a fixed rate for the
applicable LIBOR Period equal to the applicable LIBOR Rate plus three
and three-fourths percent (3.75%) per annum (each of such rates, as applicable,
the “Second Term Loan Rate”).  All
computations of interest, and all calculations of the Letter of Credit Fee,
shall be made by Lender on the basis of a three hundred and sixty (360) day
year, in each case for the actual number of days occurring in the period for
which such interest or fee is payable. 
Each determination by Lender of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.  In no event will Lender charge interest at a
rate that exceeds the highest rate of interest permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem applicable.

 

(b)                                 Section 1.5 of the Loan Agreement (as
previously amended pursuant to the Second Amendment)is hereby further amended
by adding the following sentence at the end of subsection (b) thereof:

 

Interest shall be payable on the Second Term Loan (i) as to any portion
of the Second Term Loan which is an Index Rate Loan, (A) in arrears for the
preceding calendar month on the first day of each calendar month, (B) on the
maturity date of the Second Term Loan, and (C) if any interest accrues or
remains payable after the maturity date of the Second Term Loan, upon demand by
Lender and (ii) as to any portion of the Second Term Loan which is a LIBOR
Loan, (A) in arrears for the applicable LIBOR Period, on the last day of the
applicable LIBOR Period, (B) on the maturity date of the Second Term Loan and
(C) if any interest accrues or remains payable after the maturity date of the
Second Term Loan, upon demand by Lender.

 

(c)                                  Section 1.5 of the Loan Agreement (as
previously amended pursuant to the Second Amendment) is hereby further amended
by deleting subsection (c) thereof in its entirety and substituting in
lieu thereof the following revised subsection (c).

 

(c)                                  Effective upon the occurrence of any Event of
Default and for so long as any Event of Default shall be continuing, the
Revolving Credit Rate, the Letter of Credit Fee, the Term Loan Rate and the
applicable Second Term Loan Rate shall automatically be increased by two
percentage points (2%) per annum (such increased rate, the “Default Rate”), and
all outstanding Obligations, including unpaid interest and Letter of Credit
Fees, shall continue to accrue interest from the date of such Event of Default
at the Default Rate applicable to such Obligations.

 

3

 

(d)                                 Section 1.5 of the Loan Agreement (as
previously amended pursuant to the Second Amendment) is hereby further amended
by inserting after the words “Business Day” the second time they appear in
subsection (d) thereof the following parenthetical:

 

“(except as set forth in the definition of LIBOR Period)”

 

(e)                                  Section 1.5 of the Loan Agreement (as
previously amended pursuant to the Second Amendment) is hereby further amended
by adding immediately after subsection (d) thereof the following new
subsections (e), (f) and (g):

 

(e)                                  Subject to the conditions precedent set forth
in clauses (a), (b) and (c) of Section 2.2, Borrower’s Agent shall have the
option to (i) request that all or any portion of the Second Term Loan be made
as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Second
Term Loan from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to
an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance
with subsection 1.5(f) if such conversion is made prior to the expiration of
the LIBOR Period applicable thereto, or (iv) continue all or any portion of the
Second Term Loan as a LIBOR Loan upon the expiration of the applicable LIBOR
Period, and the succeeding LIBOR Period of that continued Loan shall commence
on the first day after the last day of the LIBOR Period of the Loan to be
continued.  Any Loan or group of Loans
under the Second Term Loan having the same proposed LIBOR Period to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum amount of
$1,000,000 and integral multiples of $500,000  in excess of such
amount.  Any such election must be made
by 12:00 noon (New York time) on the 3rd Business Day prior to (1) the
date of the funding of the Second Term Loan, to the extent that any portion thereof
is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with
respect to any LIBOR Loans to be continued as such, or (3) the date on
which Borrower’s Agent wishes to convert any Index Rate Loan to a LIBOR Loan
for a LIBOR Period designated by Borrower’s Agent in such election.  If no election is received with respect to a
LIBOR Loan by 12:00 noon (New York time) on the 3rd Business Day prior to the
end of the LIBOR Period with respect thereto (or if a Default has occurred and
is continuing or if the additional conditions precedent set forth in clauses
(a), (b) and (c) of Section 2.2 shall not have been satisfied), that LIBOR Loan
shall be converted to an Index Rate Loan at the end of its LIBOR Period.  Borrower’s Agent must make such election by
notice to Lender in writing, by telecopy or overnight courier.  In the case of any conversion or
continuation, such election must be made pursuant to a notice of
conversion/continuation in form and substance satisfactory to Lender.

 

(f)                                    To induce Lender to provide the LIBOR Rate
option with respect to the Second Term Loan on the terms provided herein, if
(i) any LIBOR Loans are repaid in whole or in part prior to the last day of any
applicable LIBOR Period (whether that repayment is made pursuant to any
provision of this Agreement or any other Loan Document or occurs as a result of
acceleration, by operation of

 

4

 

law or otherwise); (ii) Borrower shall default in payment when due of
the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall
refuse to accept any borrowing of or shall request a termination of, any
borrowing of, conversion into or continuation of, LIBOR Loans after Borrower’s
Agent has given notice requesting the same in accordance herewith; or (iv)
Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower’s
Agent has given a notice thereof in accordance herewith, then Borrower shall
indemnify and hold harmless Lender from and against all losses, costs and
expenses resulting from or arising from any of the foregoing.  Such indemnification shall include any loss
(including loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds
were obtained.  For the purpose of
calculating amounts payable to Lender under this subsection, Lender shall be
deemed to have actually funded the relevant LIBOR Loan through the purchase of
a deposit bearing interest at the LIBOR Rate in an amount equal to the amount
of that LIBOR Loan and having a maturity comparable to the relevant LIBOR
Period; provided that Lender may fund each of its LIBOR Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection.  This covenant shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder.  As promptly as practicable under the
circumstances, Lender shall provide Borrower’s Agent with its written
calculation of all amounts payable pursuant to this Section 1.5(f), and such
calculation shall be binding on the parties hereto unless Borrower’s Agent
shall object in writing within ten (10) Business Days of receipt thereof, specifying
the basis for such objection in detail.

 

(g)                                 Notwithstanding anything to the contrary
contained herein, if the introduction of or any change in any law or regulation
(or any change in the interpretation thereof) shall make it unlawful, or any
central bank or other governmental authority shall assert that it is unlawful,
for Lender to agree to make or to make or to continue to fund or maintain any
LIBOR Loan, then, unless Lender is able to make or to continue to fund or to
maintain such LIBOR Loan at another branch or office of Lender without, in
Lender’s opinion, adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by Lender to Borrower’s Agent,
(i) the obligation of Lender to agree to make or to make or to continue to
fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall
forthwith prepay in full all outstanding LIBOR Loans owing by Borrower to
Lender, together with interest accrued thereon, unless Borrower’s Agent, within
five (5) Business Days after the delivery of such notice and demand, converts
all LIBOR Loans into Index Rate Loans.

 

5.                                       Amendments to Section 2.2 of the Loan
Agreement.

 

(a)                                  Section 2.2 of the Loan Agreement is hereby
amended by inserting after the parenthetical in the introduction thereof (which
reads “(including the initial

 

5

 

Loans)”) the words “or to convert or continue all or any portion of the
Second Term Loan as a LIBOR Loan”.

 

(b)                                 Section 2.2 of the Loan Agreement is hereby
further amended by inserting after the word “Loan” in the first line thereof
the words “or the conversion or continuation of all or any portion of the
Second Term Loan into, or as, a LIBOR Loan, as the case may be”.

 

6.                                       Amendments to Defined Terms.  The
definitions set forth on Schedule A to the Loan Agreement are hereby
amended in the following respects:

 

(a)                                  The following definitions are hereby added to
Schedule A:

 

“Index Rate Loan” means the Second Term Loan or portion thereof
bearing interest by reference to the Index Rate.

 

“LIBOR
Business Day” means a Business Day on which banks in the city of London are
generally open for interbank or foreign exchange transactions.

 

“LIBOR
Loan” means the Second Term Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.

 

“LIBOR
Period” means, with respect to any LIBOR Loan, each period commencing on a
LIBOR Business Day selected by Borrower’s Agent pursuant to the Agreement and
ending one, two or three  months thereafter, as selected by
Borrower’s Agent’s irrevocable notice to Lender as set forth in Section 1.5(e); provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:

 

(a)                                  if any LIBOR Period would otherwise end on a day that is not
a LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be to
carry such LIBOR Period into another calendar month in which event such LIBOR
Period shall end on the immediately preceding LIBOR Business Day;

 

(b)                                 any LIBOR Period that would otherwise extend beyond the
maturity date of the Second Term Loan shall end two (2) LIBOR Business Days
prior to such date;

 

(c)                                  any LIBOR Period that begins on the last LIBOR Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Period) shall
end on the last LIBOR Business Day of a calendar month;

 

(d)                                 Borrower’s Agent shall select LIBOR Periods so as not to
require a payment or prepayment of any LIBOR Loan during a LIBOR Period for
such Loan; and

 

6

 

(e)                                  Borrower’s Agent shall select LIBOR Periods so that there
shall be no more than five (5) separate LIBOR Loans in existence at any one
time.

 

“LIBOR
Rate” means, for each LIBOR Period, a rate of interest determined by Lender
equal to:

 

(a)                                  the offered rate for deposits in United States Dollars for
the applicable LIBOR Period that appears on Telerate Page 3750 as of
11:00 a.m. (London time) on the second full LIBOR Business Day next
preceding the first day of such LIBOR Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be used);
divided by

 

(b)                                 a number equal
to 1.0 minus the aggregate (but without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on the day that is two
(2) LIBOR Business Days prior to the beginning of such LIBOR Period (including
basic, supplemental, marginal and emergency reserves under any regulations of
the Federal Reserve Board or other Governmental Authority having jurisdiction
with respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Federal Reserve Board that are required to be maintained by a member bank
of the Federal Reserve System.

 

If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Lender and
Borrower’s Agent.

 

“Third Amendment” shall mean the Third Amendment to Loan and Security
Agreement, dated as of May 15, 2003, between Borrower and Lender.

 

“Second Term Loan” shall have the meaning assigned to it in Section
1.1(g).

 

“Second Term Loan Rate” shall have the meaning assigned to it in
Section 1.5(a).

 

“Second Term Note” shall have the meaning assigned to it in Section
1.1(g).

 

(b)                                 The definition of “Loans” set forth on
Schedule A is hereby deleted in its entirety and the following revised
definition of “Loans” is hereby substituted in lieu thereof:

 

“Loans” shall mean, collectively, (a) the Revolving Credit Loan
including the Letter of Credit Obligations, (b) the Term Loan and (c) the
Second Term Loan, or, as the context shall require, any Index Rate Loan or
LIBOR Loan made thereunder.  “Loan”
shall mean any of such loans, as the context shall require.

 

(c)                                  The definition of “Business Day” set forth on
Schedule A is hereby amended by adding at the end of such definition (before
the period) the following phrase:

 

7

 

“and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day”

 

(d)                                 The definition of “Notes” set forth on
Schedule A is hereby deleted in its entirety and the following revised
definition of “Notes” is hereby substituted in lieu thereof:

 

“Notes” shall mean, collectively, the Revolving Credit Note, the Term
Note and the Second Term Note.  “Note”
shall mean any of such notes, as the context shall require.

 

7.                                       Amendments to Financial Covenants. 
First Amended Schedule G to the Loan Agreement (Financial Covenants)
(which replaced Schedule G to the Loan Agreement pursuant to the First
Amendment to the Loan Agreement dated as of July 1, 2002) shall be deleted in
its entirety, and the Second Amended Schedule G annexed hereto shall be
substituted in its place.

 

8.                                       Conditions Precedent.  The
amendments set forth herein shall not become effective unless and until (a)
Borrower shall have executed and delivered to Lender a Second Term Note in the
form of Exhibit A to this Amendment, (b) Borrower shall have delivered
to Lender resolutions of its board of directors, certified by the Secretary or
an assistant Secretary of Borrower to be true, correct and complete authorizing
Borrower’s execution and delivery of, and performance under, this Amendment and
(c) Borrower shall have paid to Lender a closing fee in the amount of One
Hundred Thousand Dollars ($100,000), which fee shall be fully-earned upon
Lender’s funding of the Second Term Loan.

 

9.                                       Effect of Amendment. 
This Amendment shall become effective as of the date of satisfaction of
the conditions precedent set forth in Section 8 hereof.  Except as set forth expressly herein, all
terms of the Loan Agreement, as amended hereby, and the Loan Documents, shall
be and remain in full force and effect and shall constitute the legal, valid,
binding and enforceable obligations of Borrower to Lender.  To the extent any terms and conditions in
any of the Loan Documents shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby.  In any event, this Amendment
and the documents executed in connection therewith shall not, individually or
collectively, constitute in any way a novation.

 

10.                                 Inducement Representations.  To
induce Lender to enter into this Amendment, Borrower hereby (a) restates and
renews each and every representation and warranty heretofore made by it under,
or in connection with the execution and delivery of, the Loan Agreement; (b)
restates, ratifies and reaffirms each and every term and condition set forth in
the Loan Agreement, as amended hereby, and in the Loan Documents, effective as
of the date hereof; (c) certifies that, as of the date hereof, after giving
effect hereto, no Event of Default or Default exists; (d) acknowledges and
agrees that, as of the date hereof, there exists no right of offset, defense,
counterclaim or objection in its favor as against Lender with respect to the payment
or performance of its Obligations; (e) acknowledges and agrees that Lender’s
Lien in the Collateral continues in full force and effect as security for all
of the Obligations, including, without limitation, all of the Obligations of
Borrower under and in respect of the Revolving Credit

 

8

 

Loans, the Term Loan and the Second Term Loan and (f) releases
Lender from any and all liability for any action taken (or omitted to be taken)
by Lender in connection with the Loan Agreement or pursuant thereto through the
date of this Amendment.

 

11.                                 Governing Law. 
This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York, without regard to the principles thereof
regarding conflicts of laws.

 

12.                                 Costs and Expenses. 
Borrower agrees to pay upon request all costs and expenses of Lender in
connection with the preparation, execution, delivery and enforcement of this
Amendment and all other Loan Documents executed in connection herewith, the
closing hereof, and any other transactions contemplated hereby, including the
reasonable fees and out-of-pocket expenses of Lender’s legal counsel.

 

13.                                 Entire Agreement. 
This Amendment constitutes the entire agreement between Borrower and Lender
relative to the subject matter hereof, and supersedes and replaces any
understanding or agreement, oral or written, in conflict therewith.

 

9

 

IN WITNESS WHEREOF, Borrower and Lender have set their hands, effective
as of the Amendment Date.

 

	
   

  	
  “BORROWER”

  
	
   

  
	
   

  	
  INTRADO, INC.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  INTRADO COMMUNICATIONS INC.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  INTRADO COMMUNICATIONS OF

  VIRGINIA, INC.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
													

 

10

 

	
   

  	
  “LENDER”

  
	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						

 

11

 

EXHIBIT A

 

SECOND TERM NOTE

 

 

	
  $10,000,000

  	
   

  	
  May 15, 2003

  

 

For value received, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, jointly and severally (“Borrower”),
hereby promises to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, as successor by merger to General Electric Capital
Corporation, a New York corporation (“Lender”), Ten Million Dollars
($10,000,000), together with interest on the unpaid balance of such amount from
the date of the funding of the Second Term Loan.  This Note is the Second Term Note issued under the Loan and
Security Agreement between Borrower and Lender, dated as of July 31, 2001 (said
agreement, as the same may have been and may be further amended, restated or
supplemented from time to time, being herein called the “Agreement”) to which a
reference is made for a statement of all of the terms and conditions of the
Loan evidenced hereby.  Capitalized
terms not defined in this Note shall have the respective meanings assigned to
them in the Agreement.  This Note is
secured by the Agreement, the other Loan Documents and the Collateral, and is
entitled to the benefit of the rights and security provided thereby.

 

Interest on the outstanding principal balance under this
Note is payable at the Second Term Loan Rate, or, under the circumstances contemplated
by the Agreement, at the Default Rate, in immediately available United States
Dollars at the times and in the manner specified in the Agreement.  The outstanding principal under this Note
shall be payable at the times and in the manner provided in the Agreement.
Payments received by Lender shall be applied against principal and interest as
provided for in the Agreement.

 

To the fullest extent permitted by applicable law,
Borrower waives:  (a) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all of the Obligations, the Loan
Documents or this Note; (b) all rights to notice and a hearing prior to
Lender’s taking possession or control of, or to Lender’s replevin, attachment
or levy upon, the Collateral or any bond or security that might be required by
any court prior to allowing Lender to exercise any of its remedies; and (c) the
benefit of all valuation, appraisal and exemption laws.

 

Borrower acknowledges that this Note is executed as part
of a commercial transaction and that the proceeds of this Note will  be used solely for the purposes specified in
the Agreement and not for any personal purpose.

 

Upon the occurrence of any one or more of the Events of
Default specified in the Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all
as provided therein.

 

Borrower agrees to pay to Lender all Fees and expenses
described in the Agreement.

 

 

BORROWER ACKNOWLEDGES THAT BORROWER HAS WAIVED THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ON THIS NOTE. THIS NOTE IS
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

	
   

  	
  INTRADO INC.

  
	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  INTRADO COMMUNICATIONS INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  INTRADO COMMUNICATIONS OF

  VIRGINIA
  INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

2

 

SECOND AMENDED SCHEDULE G

(“SCHEDULE G”, BELOW)

 

FINANCIAL COVENANTS

 

 

As used in this Agreement (including this Schedule G), the following
terms shall have the following meanings:

 

“Adjusted
EBITDA” shall mean, for any period, EBITDA less capitalized software
development costs for such period, each determined for Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.

 

“Adjusted Tangible Net Worth” shall mean, at any date, Tangible
Net Worth, plus deferred revenues at such date, all as determined for
Borrower and its Subsidiaries on a consolidated basis, in accordance with GAAP.

 

“Adjusted Current Liabilities” shall mean the sum of (i) total
current liabilities of Borrower and its Subsidiaries on a consolidated basis,
determined in accordance with GAAP (excluding, however, therefrom any
“non-current” part of the liabilities associated with inventory purchased from
Lucent Public Safety System), plus (ii) without duplication, the
aggregate amount of all outstanding Revolving Credit Loans and Letter of Credit
Obligations; excluding, however, any current liabilities associated with
(i) standby letters of credit, and (ii) deferred revenue.

 

“EBITDA” shall mean, for any period, the Net Income (Loss) of
Borrower and its Subsidiaries on a consolidated basis for such period, plus
interest expense, income tax expense, amortization expense, depreciation
expense and extraordinary losses and minus extraordinary gains, in each
case, of Borrower and its Subsidiaries on a consolidated basis for such period
determined in accordance with GAAP to the extent included in the determination
of such Net Income (Loss).

 

“Fixed Charge Coverage Ratio” shall mean, for any period of four
(4) consecutive Fiscal Quarters, the ratio of the following for Borrower and
its Subsidiaries on a consolidated basis, determined in accordance with
GAAP:  (a) EBITDA for such period less,
without duplication, (i) capitalized software development costs and (ii)
Capital Expenditures for such period which are not financed through the
incurrence of any Indebtedness (excluding the Revolving Credit Loan) or through
the issuance of Stock, to (b) the sum of (i) interest expense paid
or accrued in respect of any Indebtedness during such period, plus (ii)
taxes to the extent accrued or otherwise payable with respect to such period plus
(iii) regularly scheduled payments of principal paid or that were required to
be paid on Funded Debt (excluding the Revolving Credit Loan) during such
period.

 

“Funded Debt” shall mean, for Borrower and its Subsidiaries, on
a consolidated basis, all

 

3

 

Indebtedness which by the terms of the agreement governing or
instrument evidencing such Indebtedness matures more than one (1) year from, or
is directly or indirectly renewable or extendible at the option of such Persons
under a revolving credit or similar agreement obligating the lender or lenders
to extend credit over a period of more than one year from, the date of creation
thereof, including current maturities of long-term debt, revolving credit, and
short-term debt extendible beyond one year at the option of such Persons.

 

“Net Income (Loss)” shall mean for any period, the aggregate net
income (or loss) after taxes for such period, determined for Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.

 

“Tangible Net Worth” shall mean, at any date, with respect to
Borrower and its Subsidiaries, on a consolidated basis, all as determined in
accordance with GAAP, total shareholders’ equity less the amount of all
intangible assets.

 

1.               Fixed
Charge Coverage Ratio.  Borrower
shall maintain a Fixed Charge Coverage Ratio of not less than (a) 1.00:1
for the Fiscal Quarter ending March 31, 2003, (b) 1.10:1 for the Fiscal
Quarters ending June 30, 2003, and September 30, 2003, and (c) 1.20:1.00 for
the Fiscal Quarter ending December 31, 2003, and each Fiscal Quarter ending
thereafter.

 

2.               Leverage
Ratio.  At no time shall total
Indebtedness of Borrower and its Subsidiaries, on a consolidated basis, exceed
the greater of (i) Adjusted Tangible Net Worth, or (ii) two (2) times
trailing twelve (12) months’ Adjusted EBITDA of Borrower and such
Subsidiaries.

 

3.               Quick
Ratio.  At no time shall the ratio
of:  (i) the sum of all cash, cash
equivalents and accounts receivable of Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, to (ii) Adjusted
Current Liabilities, be less than 1.0:1.

 

AGREED:

 

INTRADO, INC., as Borrower’s Agent

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

4Exhibit
10.65

 

FIRST AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

This
First Amendment to Loan and Security Agreement is entered into as of June 25,
2003 (the “Amendment”), by and among COMERICA BANK - CALIFORNIA (“Bank”), MEDIA
ARTS GROUP, INC. (“Media Arts”), and THOMAS KINKADE STORES, INC. (“Kinkade
Stores”) (each of Media Arts and Kinkade Stores are individually referred to
herein as, a “Borrower” and collectively, the “Borrowers”).

 

RECITALS

 

Borrowers
and Bank are parties to that certain Loan and Security Agreement dated as of
April 15, 2002, as amended from time to time (the “Agreement”).  The parties desire to amend the Agreement in
accordance with the terms of this Amendment.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       Certain
defined terms in Section 1.1 of the Agreement are hereby added or amended
to read as follows:

 

‘“Borrowing Base” means
an amount equal to the sum of:

 

(a)                                  seventy
percent (70%) of Eligible Accounts before or after the Target Covenant
Compliance Period and seventy-five percent (75%) of Eligible Accounts during
any Target Covenant Compliance Period, in each case as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by Borrowers,
plus

 

(b)                                 the
aggregate amount of cash which is the subject of a control agreement entered
into for the benefit of Bank and which has been pledged to Bank by Borrowers
(and which are subject to a “hold”) on terms acceptable to Bank (i)
specifically to support Advances on the Revolving Line in the event the aggregate
Credit Extensions exceed the Borrowing Base and (ii) to support Borrowers’
obligations in respect of Letters of Credit; plus

 

(c)                                  the
aggregate amount of the advance rate (which advance rates shall be determined
by Bank in Bank’s sole discretion based on Bank policy and the risk class of
investments maintained by Borrowers with Comerica Securities, Inc.) permitted
by Bank and Comerica Securities, Inc. on cash, funds and/or investments
invested by Borrowers with Comerica Securities, Inc., which are the subject of
control agreement(s) and pledge agreement(s) (and which are subject to a
“hold”) entered into for the benefit of Bank; minus

 

(e)                                  in
each case, any current amounts due and owing to Thomas Kinkade or any
Affiliates of Thomas Kinkade by Borrowers under the License Agreement or
otherwise; and minus

 

(f)                                    in
each case, inventory and/or Accounts arising from the published or unpublished
works, derivative works, sketches, drawings, writings, paintings, art-based
home decorative accessories, collectibles, canvas and paper lithographs, vases,
trays, mugs, picture frames, ornaments and other artworks and gift products
based on the works of the Excluded Artists.’

 

‘“Responsible Officer”
means each of the Chief Executive Officer, Chief Financial Officer, and the
President of each Borrower.’

 

1

 

‘“Revolving Line” means a
credit extension of up to Ten Million Dollars ($10,000,000), provided that
“Revolving Line” shall mean a credit extension of up to Fifteen Million Dollars
($15,000,000) during any Target Covenant Compliance Period.’

 

‘“Revolving Maturity
Date” means July 1, 2004.’

 

‘“Target Covenants” means
Borrowers’ compliance, on a consolidated basis, with each of the following
financial covenants and Slow Payment Account Reduction requirements (applicable
to measurement dates occurring after the closing date of that certain First
Amendment to Loan and Security Agreement is entered into as of June 25, 2003):

 

(a)                                  Minimum
Quarterly Profitability.  Borrowers’
Operating Income (as defined below) shall be greater than (i) One Dollar
($1.00) by the end of each fiscal quarter ending on March 31 and June 30 of
each fiscal year; and (ii) Three Million Dollars ($3,000,000) by the end of
each fiscal quarter ending on September 30 and December 31 of each fiscal
year.  In addition to the foregoing,
Borrowers shall show a Net Income (as defined below) of greater than (A) One
Dollar ($1.00) by the end of each fiscal quarter ending on March 31 and June 30
of each fiscal year, and (B) One Million Five Hundred Thousand Dollars
($1,500,000) by the end of each fiscal quarter ending on September 30 and
December 31 of each fiscal year.  As
used herein, “Operating Income” and “Net Income” means Borrowers’ operating
income and net income, respectively, each determined in accordance with GAAP.

 

(b)                                 Quick
Ratio.  Borrowers shall maintain, as
of the last day of each fiscal quarter, a ratio of Quick Assets to Current
Liabilities plus, to the extent not already included therein, all
Indebtedness (including without limitation any Contingent Obligations) owing
from Borrowers to Bank of at least 3.00 to 1.00.

 

(c)                                  Tangible
Net Worth.  Borrowers shall
maintain, as of the last day of each fiscal quarter, a Tangible Net Worth of
greater than Sixty-Eight Million Dollars ($68,000,000).

 

(d)                                 Total
Liabilities-Tangible Net Worth. 
Borrower shall maintain, as of the last day of each fiscal quarter, a
ratio of Total Liabilities to Tangible Net Worth of not more than 0.50 to 1.00.

 

(e)                                  Slow
Payment Account Reductions. 
Borrowers’ Accounts with respect to an account debtor, ten percent (10%)
of whose Accounts the account debtor has failed to pay within sixty (60) days
of the due date, and Accounts relating to notes receivable resulting from
receivable repayment plans, shall constitute less than ten percent (10%) of
Borrowers’ total accounts receivable (including notes receivable resulting from
receivable repayment plans, if any).’

 

2.                                       The
number “$2,900,000” set forth in the defined term “Permitted Indebtedness” in
Section 1.1 of the Agreement is hereby amended and replaced in its entirety to
read “$1,500,000”.

 

3.                                       The
words “each of” are hereby added following the words “Borrowers’ compliance
with” and “Borrower must comply with” in the defined term “Target Covenant
Compliance Period” in Section 1.1 of the Agreement.

 

4.                                       Section
2.1(b)(i) of the Agreement is hereby amended and restated in its entirety to
read as follows:

 

“(b)                           Letters
of Credit.

 

(i)                                     Subject
to the terms and conditions of this Agreement, Bank agrees to issue or cause to
be issued letters of credit for the account of Borrowers (each, a “Letter of
Credit”

 

2

 

and collectively, the “Letters of Credit”) in an
aggregate outstanding face amount not to exceed the lesser of the Revolving
Line or the Borrowing Base minus, in each case, the aggregate amount of
the outstanding Advances and the FX Reserve at any time, provided that the
aggregate face amount of all outstanding Letters of Credit shall not exceed Five
Million Dollars ($5,000,000).  All
Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank’s form
of standard application and letter of credit agreement (the “Application”),
which Borrower agrees to execute, including Bank’s standard fee equal to the
greater of (i) 1.50% per annum of the face amount of each Letter of Credit,
which shall be prorated for any Letter of Credit issued for a partial year on
the date of issuance, and (ii) Six Hundred Dollars ($600) for each Letter of
Credit, provided that commercial Letters of Credit shall include any additional
standard Bank fees applicable to commercial Letters of Credit.  On any drawn but unreimbursed Letter of
Credit, the unreimbursed amount shall be deemed an Advance under Section
2.1(a).  Each standby Letter of Credit
will have an expiration date not later than twelve (12) months from the date of
issuance (but in no event later than the Revolving Maturity Date), and each
commercial Letter of Credit will have an expiration date not later than ninety
(90) days from the date of issuance (but in no event later than the Revolving
Maturity Date).  Prior to the Revolving
Maturity Date, Borrower shall secure in cash all obligations under any
outstanding Letters of Credit on terms acceptable to Bank in the event that the
Bank does not extend the Revolving Maturity Date in Bank’s sole discretion.”

 

5.                                       The
words “the Minimum Account Balance requirements set forth in Section 6.9 hereof”
in Section 4.4 of the Agreement are hereby deleted.

 

6.                                       Section
6.3(d) of the Agreement is hereby amended and replaced in its entirety to read
as follows:

 

“(d) promptly upon
receipt of notice thereof, a report of any legal actions pending or threatened
in writing against Borrower or any Subsidiary and any legal actions initiated
by Borrower or any Subsidiary that could result in damages or costs to Borrower
or any Subsidiary of Five Hundred Thousand Dollars ($500,000) or more;”

 

7.                                       The
second paragraph in Section 6.3 of the Agreement is hereby amended and replaced
in its entirety to read as follows:

 

“Borrower shall deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable and accounts payable, each in form and
substance acceptable to Bank, within twenty (20) days after the last day of
each month; provided, however, that at any time during which the
aggregate Credit Extensions are greater than or equal to $500,000, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together
with aged listings of accounts receivable, each in form and substance acceptable
to Bank, within one (1) day after the last day of each week.”

 

8.                                       The
fourth paragraph in Section 6.3 of the Agreement is hereby amended and replaced
in its entirety to read as follows:

 

“Bank shall have a right
from time to time hereafter to audit Borrower’s Accounts and appraise
Collateral at Borrower’s expense, provided that such audits will be conducted
no more often than every six (6) months unless an Event of Default has occurred
and is continuing.”

 

9.                                       Section
6.7 of the Agreement is hereby is hereby amended and replaced in its entirety
to read as follows:

 

“6.7                           Accounts
and Banking Relationships.  Borrower
shall maintain and shall cause each of its Subsidiaries to maintain its primary
depository, operating and investment accounts with Bank and/or Comerica
Securities, Inc., including a minimum of forty percent (40%) of the

 

3

 

aggregate amount of all of Borrower’s cash and
investments.  Borrower may open and
maintain depository, operating and investment accounts with a Person other than
Bank and/or Comerica Securities, Inc. provided that as a condition precedent to
the inclusion in the Borrowing Base of any amounts held in any depository,
operating and investment accounts that are opened and/or maintained with a
Person other than Bank and/or Comerica Securities, Inc. any such accounts shall
be subject to the terms of a control agreement executed by Borrower and such
Person for the benefit of Bank which agreement shall be acceptable to Bank in
Bank’s sole discretion.  Borrower may
open and maintain that certain payroll account number
                                       
with Bank of America provided that the aggregate amount maintained in that
account shall not exceed $500,000 at any time. 
The value of Borrower’s cash and investments maintained in such accounts
with Persons other than Bank or Comerica Securities, Inc. shall not exceed
sixty percent (60%) of the aggregate amount of all of Borrower’s cash and
investments.”

 

10.                                 Paragraphs
(i), (ii) and (iii) of Section 6.8 of the Agreement is hereby are hereby
amended and replaced in their entirety (applicable to measurement dates
occurring after the closing date of that certain First Amendment to Loan and
Security Agreement is entered into as of June 25, 2003) to read as follows:

 

“(i)                                     Maximum
Operating Losses and Minimum Operating Income.  Borrowers’ Cumulative Operating Losses (as defined below) shall
be less than Eleven Million Five Hundred Thousand Dollars ($11,500,000) for the
six months ending June 30 of each fiscal year. 
In addition to the foregoing, Borrowers shall have an Operating Income
(as defined below) of greater than (a) One Dollar ($1.00) by the end of each
fiscal quarter ending September 30 and December 31 of each fiscal year; and (B)
One Dollar ($1.00) by the end of each fiscal year.  As used herein, “Cumulative Operating Losses” means the sum of
Borrowers’ monthly operating losses (including all deductions from revenue,
determined in accordance with GAAP), measured from January 1 of each fiscal
year through the applicable date of measurement.  As used herein, “Operating Income” means Borrowers’ operating
income determined in accordance with GAAP.”

 

(ii)                                        Quick
Ratio.  Borrowers shall maintain, as
of the last day of each fiscal quarter, a Quick Ratio of at least 1.80 to
1.00.  As used herein, “Quick Ratio”
means ratio of Quick Assets to Current Liabilities plus, to the extent
not already included therein, all Indebtedness (including without limitation
any Contingent Obligations) owing from Borrower to Bank.

 

(iii)                                     Tangible
Net Worth.  Borrowers shall
maintain, as of the last day of each fiscal quarter, a Tangible Net Worth of
greater than Fifty-Seven Million Dollars ($57,000,000) (the “Initial Minimum
Tangible Net Worth”).  The Initial Minimum
Tangible Net Worth of Borrowers shall be increased by an amount equal to forty
percent (40%) of Borrowers’ net income in each fiscal quarter (but shall not be
reduced by the amount of any net losses).”

 

11.                                 Section
6.9 of the Agreement is hereby is hereby deleted in its entirety.

 

12.                                 The
Exhibit D (Compliance Certificate) attached to the Agreement is hereby
amended and replaced in its entirety with the Exhibit D (Compliance
Certificate) attached hereto, which is hereby incorporated therein by this
reference.

 

13.                                 The
Annex A attached to the Compliance Certificate is hereby amended and
replaced in its entirety with the Annex A to the Compliance
Certificate attached hereto, which is hereby incorporated therein by this
reference.

 

14.                                 Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the Agreement.  The
Agreement, as amended hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and confirmed in
all respects.  Except as expressly set
forth herein, the execution, delivery, and performance of this Amendment shall
not operate as a waiver of, or as an amendment of, any right, power, or remedy
of Bank under the Agreement, as in effect prior to the date hereof.  Borrowers ratify and reaffirm the continuing
effectiveness of all promissory notes, guaranties, security agreements,
mortgages, deeds of

 

4

 

trust,
environmental agreements, and all other instruments, documents and agreements
entered into in connection with the Agreement.

 

15.                                 Borrowers
represents and warrant that the representations and warranties contained in the
Agreement are true and correct as of the date of this Amendment, and that no
Event of Default has occurred and is continuing.

 

16.                                 This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

17.                                 As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

(a)                                  this
Amendment, duly executed by the Borrowers;

 

(b)                                 an
amount equal to any Bank Expenses incurred through the date of this Amendment;
and

 

(c)                                  such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.

 

[Remainder of page intentionally
left blank.]

 

5

 

IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

	
   

  	
   

  	
  MEDIA ARTS
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Herbert D.
  Montgomery

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Exec. V.P. &
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Herbert D.
  Montgomery

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THOMAS KINKADE
  STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Herbert D.
  Montgomery

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Exec. V.P. &
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Herbert D.
  Montgomery

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COMERICA BANK -
  CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kathy
  Rosner-Galitz

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  First Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Kathy
  Rosner-Galitz

  	
   

  
							

 

6

 

EXHIBIT
D

 

COMPLIANCE
CERTIFICATE

 

TO:                            COMERICA
BANK-CALIFORNIA

 

FROM:         MEDIA ARTS GROUP, INC.
and THOMAS KINKADE STORES, INC.

 

The
undersigned authorized officer hereby certifies on behalf of MEDIA ARTS GROUP,
INC. and THOMAS KINKADE STORES, INC. that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrowers and Bank (the
“Agreement”), (i) Borrowers are in complete compliance for the period
ending                               
with all required covenants except as noted below and (ii) all
representations and warranties of Borrowers stated in the Agreement are true
and correct as of the date hereof. 
Attached herewith are the required documents supporting the above
certification.  The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

Please
indicate compliance status by circling Yes/No under “Complies” column.

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly
  financial statements

  	
   

  	
  Quarterly within
  30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA
  Audited)

  	
   

  	
  FYE within 120
  days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10-K and 10-Q

  	
   

  	
  When filed with
  S.E.C.

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R & A/P
  Agings, Borrowing Base Cert.

  	
   

  	
  Monthly within
  20 days (Weekly within 1 day if aggregate Credit Extensions are greater than
  or equal to $500,000)

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R and
  Collateral Audit

  	
   

  	
  Initial and
  Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  IP Report

  	
   

  	
  Quarterly within
  30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Total amount of
  Borrowers’ cash and investments

  	
   

  	
  Amount: 
  $           

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  (a) Total amount of Borrowers’ cash and investments
  maintained with Bank and/or Comerica Securities, Inc. 

  	
   

  	
  Amount: 
  $           
  (Minimum 40%)

  	
   

  	
  Yes  

  	
   

  	
  No  

  
	
  (b) Total amount of Borrowers’ cash and investments
  maintained with Persons other than Bank and/or Comerica Securities, Inc.

  	
   

  	
  Amount: 
  $             (Maximum 60%)

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial
  Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a
  Quarterly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Quick Ratio

  	
   

  	
  1.80:1.00 *A

  	
   

  	
           :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Maximum Total
  Liabilities to TNW

  	
   

  	
  0.75 :1.00  *B

  	
   

  	
           :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Tangible Net Worth

  	
   

  	
  $57,000,000  *C

  	
   

  	
  $               

  	
   

  	
  Yes

  	
   

  	
  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maximum
  Cumulative Operating Losses

  	
   

  	
  Less than
  $11,500,000 for six months ending June 30 of each fiscal year  *D

  	
   

  	
  $               

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Minimum
  Operating Income

  	
   

  	
  At least $1.00
  for each Q3 and Q4 of each fiscal year *E
  

  	
   

  	
  $               

  	
   

  	
  Yes

  	
   

  	
  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  At least $1.00
  for each fiscal year end

  	
   

  	
  $               

  	
   

  	
  Yes

  	
   

  	
  No

  

 

1

 

*  See Annex A attached hereto.

 

Comments Regarding Exceptions:  See Attached.

 

	
   

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
  SIGNATURE           (Chief
  Executive Officer/Chief Financial Officer)

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  TITLE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance
  Status

  	
   

  	
  Yes

  	
  No

  
	
   

  	
   

  	
   

  
	
  DATE

  
											

 

2

 

ANNEX A

 

 

A.                                   Target
Covenant for Quick Ratio is 3.0 to 1.00.

 

B.                                     The
Target Covenant for Total Liabilities to TNW is 0.50 to 1.00.

 

C.                                     The
initial stated Tangible Net Worth of $57,000,000 shall be increased by an
amount equal to forty percent (40%) of Borrowers’ net income in each fiscal
quarter (but shall not be reduced by the amount of any net losses).  The Target Covenant for Tangible Net Worth
is $68,000,000.

 

D.                                    The
Target Covenant for Operating Income is an amount greater than $1.00 for each
of Q1 and Q2 of each fiscal year and an amount greater than $3,000,000 for each
of Q3 and Q4 of each fiscal year.

 

E.                                      The
Target Covenant for Net Income is an amount greater than $1.00 for each of Q1
and Q2 of each fiscal year and an amount greater than $1,500,000 for each of Q3
and Q4 of each fiscal year.

 

3

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