Document:

exv10wxay

 

Exhibit 10a

	 	 	 
		 	
    Master Revolving Note

     LIBOR Rate-Maturity Date-Optional
    Advances (Business and Commercial Loans Only)
    

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
	

	AMOUNT		NOTE DATE		MATURITY		TAX IDENTIFICATION NUMBER
	 	$5,000,000.00	 	 	 	July 25, 2003	 	 	 	July 30, 2005	 	 	 	75-1549797	 
	

On the Maturity
Date, as stated above, for value
received, the undersigned promise(s) to pay to the order of
Comerica Bank-Texas (“Bank”), at any office of the
Bank in the State of Texas, FIVE MILLION AND NO/100
DOLLARS (U.S.) (or that portion of it advanced by the Bank
and not repaid as later provided) with interest until maturity,
whether by acceleration or otherwise, or until Default, as later
defined, at a per annum rate equal to the lesser of (a) the
Maximum Rate, as later defined, or (b) the Stated Rate, as
later defined, and after that at a rate equal to the rate of
interest otherwise prevailing under this Note plus three percent
(3%) per annum (but in no event in excess of the Maximum Rate).
If on any day the Stated Rate shall exceed the Maximum Rate for
that day, the rate of interest applicable to this Note shall be
fixed at the Maximum Rate on that day and on each day thereafter
until the total amount of interest accrued on the unpaid
principal balance of this Note equals the total amount of
interest which would have accrued if there had been no Maximum
Rate. Interest rate changes will be effective for interest
computation purposes as and when the Maximum Rate or the Stated
Rate, as later defined, as applicable, changes. Subject to the
limitations hereinbelow set forth, interest shall be calculated
on the basis of a 360-day year for the actual number of days the
principal is outstanding. Accrued interest on this Note shall be
payable on the first LIBOR Business Day, as later defined, of
each calendar month, commencing with the first LIBOR Business
Day of the calendar month following the date of this Note and
with respect to interest accrued on any LIBOR Balance, as later
defined, on the last day of the applicable LIBOR Interest
Period, as later defined, until the Maturity Date (set forth
above) when all amounts outstanding under this Note shall be due
and payable in full. If any payment of principal or interest
under this Note shall be payable on a day other than a day on
which the Bank is open for business, this payment shall be
extended to the next succeeding business day and interest shall
be payable at the rate specified in this Note during this
extension. A late payment charge equal to a reasonable amount
not to exceed five percent (5%) of each late payment may be
charged on any payment not received by the Bank within ten (10)
calendar days after the payment due date, but acceptance of
payment of this charge shall not waive any Default under this
Note.

Subject to the provisions hereof, the undersigned
shall have the option (an “Interest Option”)
exercisable from time to time to designate a portion of the
unpaid principal balance of this Note to bear interest at a rate
determined with respect to the Prime Rate (such portion being
herein referred to as the “Prime Rate Balance”) and to
designate one or more portions of the unpaid principal balance
of this Note to bear interest at a rate determined with respect
to a LIBOR Based Rate (each such portion being herein referred
to as a “LIBOR Balance”).

The term “Maximum Rate” as used herein,
shall mean at the particular time in question the maximum
nonusurious rate of interest which, under applicable law, may
then be charged on this Note. If such maximum rate of interest
changes after the date hereof, the Maximum Rate shall be
automatically increased or decreased, as the case may be,
without notice to the undersigned from time to time as of the
effective date of each change in such maximum rate. For purposes
of determining the Maximum Rate under the law of the State of
Texas, the applicable interest rate ceiling shall be the
“weekly ceiling” from time to time in effect under
Chapter 303 of the Texas Finance Code, as amended.

The term “Stated Rate,” as used in this
Note, shall mean (a) with respect to the Prime Rate Balance
outstanding from time to time, a fluctuating per annum rate of
interest equal to the Prime Rate plus the Applicable Margin and
(b) with respect to each LIBOR Balance, a per annum rate of
interest equal to the LIBOR Based Rate for the LIBOR Interest
Period then in effect with respect to such LIBOR Balance plus
the Applicable Margin.

The term “Prime Rate,” as used herein,
shall mean that annual rate of interest which is equal to the
greater of the annual rate of interest designated by the Bank as
its Prime Rate which is changed by the Bank from time to time or
a variable per annum rate of interest determined from day to day
which equals the sum of 1% plus the average per annum rate of
interest on overnight Federal funds transactions with members of
Federal Reserve System arranged by Federal funds brokers
(“Overnight Transactions”) transacted on the
immediately preceding Business Day, as published by the Federal
Reserve Bank of New York, or, if such interest rate is not so
published for any Business Day, the average of the per annum
interest rate quotations for Overnight Transactions received by
the Bank (or, at its option, the Reference Bank) for such
Business Day from 3 Federal funds brokers of recognized
standing selected by the Bank (or, at its option, the Reference
Bank). The Bank’s Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually
charged by the Bank to any of its customers. The Bank may make
commercial loans at rates of interest at, above or below its
Prime Rate.

The term “Reference Bank” means
Comercia Bank, a Michigan banking corporation, its successors
and assigns.

The term “LIBOR-Based Rate”, as used
herein, shall mean, with respect to the applicable LIBOR
Interest Period and applicable LIBOR Balance (as defined above),
the quotient of the following (rounded upwards, if necessary, to
the nearest  1/16 of 1%): (a) the LIBOR Rate (as
defined below); divided by (b) a percentage (expressed as a
decimal) equal to 1.00 minus the maximum rate during such
interest period at which Bank or the Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office) is required to maintain reserves on
“Eurocurrency Liabilities” as defined in and pursuant
to Regulation D of the Board of Governors of the Federal
Reserve System or, if such regulation or designation is
modified, and as long as Bank or the Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office) is required to maintain reserves against a
category of liabilities which includes eurodollar deposits or
includes a category of assets which includes eurodollar loans,
the rate at which such reserves are required to be maintained on
such category.

The term “LIBOR Rate”, as used herein,
shall mean the per annum rate of interest determined on the
basis of the rate for deposits in United States Dollars for a
period equal to the relevant LIBOR Interest Period for such
LIBOR Balance, commencing on the first day of such LIBOR
Interest Period, appearing on Page BBAM of the Bloomberg
Financial Markets Information Service as of 10:00 a.m.
(Dallas, Texas time) (or soon thereafter as practical), two (2)
LIBOR Business Days prior to the first day of such LIBOR
Interest Period. In the event that such rate does not appear on
Page BBAM of the Bloomberg Financial Markets Information Service
(or otherwise on such Service), the LIBOR Rate shall be
determined by reference to such other publicly available service
for displaying eurodollar rates as may be agreed upon by Bank
and the undersigned, or, in the absence of such agreement, the
LIBOR Rate shall, instead, be the per annum rate equal to the
average (rounded upward, if necessary, to the nearest
one-sixteenth of one percent ( 1/16%)) of the rate at which
Bank is offered dollar deposits at or about 10:00 a.m.
(Dallas, Texas time) (or soon thereafter as practical), two (2)
LIBOR Business Days prior to the first day of such LIBOR
Interest Period in the interbank eurodollar market in an amount
comparable to the principal amount of the respective LIBOR
Balance which is to bear interest at such LIBOR Rate and for a
period equal to the relevant LIBOR Interest Period.

The term “LIBOR Interest Period”, as
used herein, shall mean, with respect to the applicable LIBOR
Balance, a period commencing on the date (which must be a LIBOR
Business Day) upon which, pursuant to an Interest Notice, as
later defined, the principal amount of such LIBOR Balance begins
to accrue interest at the applicable LIBOR-based Rate plus, if
applicable, the Applicable Margin (or, in the case of a rollover
to a successive LIBOR Interest Period, the last day of the
immediately preceding LIBOR Interest Period) and ending 30, 60,
90, 180 or 360 days after the commencement date (as
designated in the Interest Notice); provided, that: (i) any
LIBOR Interest Period which would otherwise end on a day which
is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day (unless such LIBOR Business Day
falls in another calendar month, in which case, such LIBOR
Interest Period shall end on the next preceding LIBOR Business
Day); and (ii) any LIBOR Interest Period which begins on a
day for which there is no numerically corresponding day in the
calendar month at the end of such LIBOR Interest Period shall
end on the last LIBOR Business Day of such last calendar month;
and (iii) no LIBOR Interest Period shall extend beyond the
Maturity Date.

The term “LIBOR Business Day”, as used
herein, shall mean any day other than a Saturday, Sunday or
holiday on which Bank is open for all or substantially all of
its domestic and international commercial banking business
(including dealings in foreign exchange) in Dallas, Texas, and,
if applicable day relates to the LIBOR-based Rate, any LIBOR
Interest Period, or any notice with respect to the LIBOR-based
Rate

1

 

or any LIBOR Interest Period, also a day on which
dealings in dollar deposits are also carried on in the London
interbank market and on which banks are open for business in
London.

The term “Applicable Margin,” as used
herein, shall mean 0% for the Prime Rate Balance and two percent
(2%) for each LIBOR Balance.

The term “Business Day” as used herein,
shall mean any day other than a Saturday, Sunday or holiday, on
which the Bank and the Reference Bank (and, if applicable, the
Reference Bank’s designated eurodollar lending office) are
open to carry on all or substantially all of their normal
commercial lending business.

The Interest Option shall be exercisable by the
undersigned subject to the other limitations in this Note on the
undersigned’s option to designate a portion of the unpaid
principal balance hereof as a LIBOR Balance and only in the
manner provided below:

    
(i)    Before 12:00 noon
at least 3 Business Days prior to the date the undersigned
has requested the Bank to make an advance upon this Note, the
undersigned shall have given the Bank written notice (any such
notice, an “Interest Notice”) each in form and content
satisfactory to Bank specifying the initial Interest Option(s)
and the respective initial amounts of the Prime Rate Balance and
LIBOR Balance designated by the undersigned for such advance. If
the required Interest Notice shall not have been timely received
by the Bank or fails to designate all or any portion of the
unpaid principal amount of the advance as either a Prime Rate
Balance or a LIBOR Balance in accordance with the terms and
provisions of this Note, the undersigned shall be deemed
conclusively to have designated such amounts to be a Prime Rate
Balance and to have given the Bank notice of such designation.

    
(ii)    At least three
(3) LIBOR Business Days prior to the termination of any
LIBOR Interest Period for a LIBOR Balance, the undersigned shall
give the Bank an Interest Notice specifying the Interest Option
which is to be applicable to such LIBOR Balance upon the
expiration of such LIBOR Interest Period. If the required
Interest Notice shall not have been timely received by the Bank,
the undersigned shall be deemed conclusively to have designated
such amount as a Prime Rate Balance immediately upon the
expiration of such LIBOR Interest Period and to have given the
Bank notice of such designation.

    
(iii)    The undersigned
shall have the right, exercisable on any Business Day subject to
the terms of this Note, to convert an eligible portion of the
Prime Rate Balance to a LIBOR Balance by giving the Bank an
Interest Notice of such designation at least three
(3) LIBOR Business Days prior to the effective date of such
exercise. Additionally, upon termination of any LIBOR Interest
Period, the undersigned shall have the right, on any Business
Day, to convert all or a portion of such principal amount from
the LIBOR Balance to a Prime Rate Balance by giving Bank an
Interest Notice of such selection at least three (3) LIBOR
Business Days prior to effective date of such exercise.

    
(iv)    There may be no more
than four (4) LIBOR Balances in effect at any time.

    
(v)    Each LIBOR Balance
must be, as of the first day of the applicable LIBOR Interest
Period, at least $100,000.00.

    
(vi)    No Default, or
condition or event which, with the giving of notice or the lapse
of time, or both, would constitute a Default, shall have
occurred and be continuing or exist.

    
(vii)    Each exercise of an
Interest Option to designate a LIBOR Balance to bear interest at
a Stated Rate which is based on the LIBOR Based Rate shall not
be revocable.

Changes in the Stated Rate applicable to a Prime
Rate Balance or a LIBOR Balance shall become effective without
prior notice to the undersigned automatically as of the opening
of business on the date of each change in the Prime Rate or the
LIBOR Based Rate, as the case may be.

If the Bank or Reference Bank (or, if applicable,
the Reference Bank’s designated eurodollar lending office)
determines that deposits in U.S. dollars (in the applicable
amounts) are not being offered to prime banks in the interbank
eurodollar market selected by the Bank or Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office) for the applicable LIBOR Interest Period, or
that the rate at which such dollar deposits are being offered
will not adequately and fairly reflect the cost to the Bank or
Reference Bank (or, if applicable, the Reference Bank’s
designated eurodollar lending office) of making or maintaining a
LIBOR Balance for the applicable LIBOR Interest Period, the Bank
shall forthwith give notice thereof to the undersigned,
whereupon, until the Bank notifies the undersigned that such
circumstances no longer exist, the right of the undersigned to
select an Interest Option based upon a LIBOR Based Rate shall be
suspended, and the undersigned may only select Interest Options
based on the Prime Rate.

If the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Bank or Reference Bank (or, if applicable, its designated
eurodollar lending office) with any request or directive
(whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or
impractical for the Bank or Reference Bank (or, if applicable,
its designated eurodollar lending office) to make or maintain a
LIBOR Balance, the Bank shall so notify the undersigned and any
then-existing LIBOR Balance shall automatically convert to a
Prime Rate Balance either (i) on the last day of the
then-current LIBOR Interest Period applicable to such LIBOR
Balance, if the Bank and Reference Bank (and, if applicable, its
designated eurodollar lending office) may lawfully continue to
maintain and fund such LIBOR Balance to such day, or
(ii) immediately, if the Bank or Reference Bank (or, if
applicable, its designated eurodollar lending office) may not
lawfully continue to maintain such LIBOR Balance to such day.
Further, until the Bank notices the undersigned that such
conditions or circumstances no longer exist, the right of the
undersigned to select an Interest Option based on a LIBOR Based
Rate shall be suspended, and the undersigned may only select
Interest Options based on the Prime Rate.

If either (i) the adoption of any applicable
law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Bank or Reference Bank (or, if applicable, its designated
eurodollar lending office) with any request or directive
(whether or not having the force of law) of any such authority,
central bank or comparable agency shall subject the Bank or
Reference Bank (or, if applicable, its designated eurodollar
lending office) to any tax (including without limitation any
United States interest equalization or similar tax, however
named), duty or other charge with respect to any LIBOR Balance,
this Note or the Bank’s or the Reference Bank’s (or,
if applicable, its designated eurodollar lending office’s)
obligation to compute interest on the principal balance of this
Note at a rate based upon a LIBOR Based Rate, or shall change
the basis of taxation of payments to the Bank or the Reference
Bank (or, if applicable, its designated eurodollar lending
office) of the principal of or interest on any LIBOR Balance or
any other amounts due under this Note in respect of any LIBOR
Balance or the Bank’s or Reference Bank’s (or, if
applicable, its designated eurodollar lending office’s)
obligation to compute the interest on the balance of this Note
at a rate based upon a LIBOR Based Rate, or (ii) any
governmental authority, central bank or other comparable
authority shall at any time impose, modify or deem applicable
any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, the Bank or
Reference Bank (or, if applicable, its designated eurodollar
lending office), or shall impose on the Bank or Reference Bank
(or, if applicable, its designated eurodollar lending office) or
any relevant interbank eurodollar market or exchange any other
condition affecting any LIBOR Balance, this Note or the
Bank’s or Reference Bank’s (or, if applicable, its
designated eurodollar lending office’s) obligation to
compute the interest on the balance of this Note at a rate based
upon a LIBOR Based Rate; and the result of any of the foregoing
is to increase the cost to the Bank or Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office) of maintaining any LIBOR Balance, or to reduce
the amount of any sum received or receivable by the Bank or
Reference Bank (or, if applicable, the Reference Bank’s
designated eurodollar lending office) under or with respect to
this Note by an amount deemed by the Bank to be material, then
upon demand by the Bank, the undersigned shall pay to the Bank
such additional amount or amounts as will compensate the Bank
and the Reference Bank (and, if applicable, its designated
eurodollar lending office) for such increased cost or reduction.
The Bank will promptly notify the undersigned of any event of
which it has knowledge, occurring after the date hereof, which
will entitle the Bank or Reference Bank (or, if applicable, the
Reference Bank’s designated

2

 

eurodollar lending office) to compensation
pursuant to this paragraph. A certificate of the Bank claiming
compensation under this paragraph and setting forth the
additional amount or amounts to be paid hereunder shall be
conclusive in the absence of manifest error.

If any applicable law, treaty, rule, or
regulation (whether domestic or foreign) now or hereafter in
effect and whether presently applicable to the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending
office) or any change therein or any interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof or compliance by the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending
office) therewith or with any guidance, request or directive of
any such governmental authority, central bank or comparable
agency (whether or not having the force of law), including any
risk-based capital guidelines, affects or would affect the
amount of capital required or expected to be maintained by the
Bank or Reference Bank (or any corporation controlling the Bank
or Reference Bank), and the Bank determines that the amount of
such capital is increased by or based upon the existence of any
obligations of Bank hereunder or the maintaining of any LIBOR
Balance hereunder, and such increase has the effect of reducing
the rate of return on Bank’s or the Reference Bank’s
(or its controlling corporation’s) capital as a consequence
of such obligations or the maintaining of LIBOR Balances
hereunder to a level below that which the Bank or Reference Bank
(or such controlling corporation) could have achieved but for
such circumstances (taking into consideration its policies with
respect to capital adequacy), then the undersigned shall pay to
Bank, within fifteen (15) days of receipt by the
undersigned of written notice from the Bank demanding such
compensation, such additional amounts as are sufficient to
compensate the Bank or Reference Bank (or its controlling
corporation) for any increase in the amount of capital and
reduced rate of return which the Bank determines to be allocable
to the existence of any obligations of the Bank hereunder or
maintenance of any LIBOR Balances hereunder. A certificate of
Bank as to the amount of such compensation, prepared in good
faith and in reasonable detail by the Bank, which is submitted
by the Bank to the undersigned shall be conclusive and binding
for all purposes absent manifest error.

The undersigned may not repay any LIBOR Balance
or convert all or any portion of a LIBOR Balance to a Prime Rate
Balance prior to the expiration of the applicable LIBOR Interest
Period, unless (i) such repayment or conversion is
specifically required by the terms of this Note, (ii) the
Bank demands that such repayment or conversion be made, or
(iii) the Bank, in its sole discretion, consents to such
repayment or conversion. If for any reason, whether or not
consent shall have been given or demand shall have been made by
the Bank, any LIBOR Balance is repaid or converted prior to the
expiration of the corresponding LIBOR Interest Period, or any
Interest Option which designates a LIBOR Balance is revoked for
any reason whatsoever prior to the commencement of the
applicable LIBOR Interest Period or the undersigned fails for
any reason to borrow the full amount of any LIBOR Balance for
which the undersigned has exercised an Interest Option, or if
for any other reason whatsoever, the basis for determining the
Stated Rate shall be changed from a LIBOR Based Rate to the
Prime Rate prior to the expiration of the applicable LIBOR
Interest Period, or the undersigned shall fail to make any
payment of principal or interest upon this Note at any time that
the Stated Rate if based on a LIBOR Based Rate, then the
undersigned shall pay to the Bank on demand any amounts required
to compensate the Bank and Reference Bank (and, if applicable,
its designated eurodollar lending office) for any losses, costs
or expenses which any of them may incur as a result thereof,
including, without limitation, any loss, cost or expense
incurred in obtaining, liquidating, employing or redeploying
deposits from third parties. Amounts payable by the undersigned
to the Bank pursuant to this paragraph may include, without
limitation, amounts equal to the excess, if any of (a) the
amounts of interest which would have accrued on any amounts so
prepaid, refunded, converted or not so borrowed, from the
respective dates of prepayment, refund, conversion or failure to
borrow through the last day of the relevant LIBOR Interest
Periods at the applicable rates of interest for the applicable
LIBOR Balances, as provided under this Note, over (b) the
amounts of interest determined by the Bank or Reference Bank
(or, if applicable, its designated eurodollar lending office)
which would have accrued to the Bank or Reference Bank (or, if
applicable, its designated eurodollar lending office) on such
respective amounts by placing such amounts on deposit for
comparable periods with leading banks in the interbank
eurodollar market selected by the Bank or Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office). The calculation of any such amounts under this
paragraph shall be made as if the Bank or Reference Bank (or, if
applicable, the Reference Bank’s designated eurodollar
lending office) actually funded or committed to fund the
relevant LIBOR Balances hereunder through the purchase of
underlying deposits in amounts equal to the respective amounts
of the applicable LIBOR Balances and having terms comparable to
the applicable LIBOR Interest Periods; provided, however, that
the Bank may fund LIBOR Balances hereunder in any manner they
may elect in their sole discretion, and the foregoing
assumptions shall be utilized only for the purposes of
calculating amounts payable under this paragraph. Upon written
request by the undersigned, the Bank shall deliver to the
undersigned a certificate setting for the basis for determining
such losses, costs and expenses which certificate shall be
conclusive in the absence of manifest error.

For any LIBOR Balance, if the Bank or the
Reference Bank shall designate a eurodollar lending office which
maintains books separate from those of the Bank or the Reference
Bank, the Bank and the Reference Bank shall have the option of
maintaining and carrying such LIBOR Balance on the Books of such
eurodollar lending office.

The principal amount payable under this Note
shall be the sum of all advances made by the Bank to or at the
request of the undersigned, less principal payments actually
received by the Bank. The books and records of the Bank shall be
the best evidence of the principal amount and the unpaid
interest amount owing at any time under this Note and shall be
conclusive absent manifest error. No interest shall accrue under
this Note until the date of the first advance made by the Bank;
after that interest on all advances shall accrue and be computed
on the principal balance outstanding from time to time under
this Note until the same is paid in full. AT NO TIME SHALL
THE BANK BE UNDER ANY OBLIGATION TO MAKE ANY ADVANCES TO THE
UNDERSIGNED PURSUANT TO THIS NOTE (NOTWITHSTANDING ANYTHING
EXPRESSED OR IMPLIED IN THIS NOTE OR ELSEWHERE TO THE CONTRARY,
INCLUDING WITHOUT LIMIT IF THE BANK SUPPLIES THE UNDERSIGNED
WITH A BORROWING FORMULA) AND THE BANK, AT ANY TIME AND FROM
TIME TO TIME, WITHOUT NOTICE, AND IN ITS SOLE DISCRETION, MAY
REFUSE TO MAKE ADVANCES TO THE UNDERSIGNED WITHOUT INCURRING ANY
LIABILITY DUE TO THIS REFUSAL AND WITHOUT AFFECTING THE
UNDERSIGNED’S LIABILITY UNDER THIS NOTE FOR ANY AND ALL
AMOUNTS ADVANCED.

This Note and any other indebtedness and
liabilities of any kind of the undersigned (or any of them) to
the Bank, and any and all modifications, renewals or extensions
of it, whether joint or several, contingent or absolute, now
existing or later arising, and however evidenced and whether
incurred voluntarily or involuntarily, known or unknown, or
originally payable to the Bank or to a third party and
subsequently acquired by Bank including, without limitation, any
late charges; loan fees or charges; overdraft indebtedness;
costs incurred by Bank in establishing, determining, continuing
or defending the validity or priority of any security interest,
pledge or other lien or in pursuing any of its rights or
remedies under any loan document (or otherwise) or in connection
with any proceeding involving the Bank as a result of any
financial accommodation to the undersigned (or any of them); and
reasonable costs and expenses of attorneys and paralegals,
whether inside or outside counsel is used, and whether any suit
or other action is instituted, and to court costs if suit or
action is instituted, and whether any such fees, costs or
expenses are incurred at the trial court level or on appeal, in
bankruptcy, in administrative proceedings, in probate
proceedings or otherwise (collectively
“Indebtedness”), are secured by and the Bank is
granted a security interest in and lien upon all items deposited
in any account of any of the undersigned with the Bank and by
all proceeds of these items (cash or otherwise), all account
balances of any of the undersigned from time to time with the
Bank, by all property of any of the undersigned from time to
time in the possession of the Bank and by any other collateral,
rights and properties described in each and every deed of trust,
mortgage, security agreement, pledge, assignment and other
security or collateral agreement which has been, or will at any
time(s) later be, executed by any (or all) of the undersigned to
or for the benefit of the Bank (collectively
“Collateral”). Notwithstanding the above, (i) to
the extent that any portion of the Indebtedness is a consumer
loan, that portion shall not be secured by any deed of trust,
mortgage on or other security interest in any of the
undersigned’s principal dwelling or in any of the
undersigned’s real property which is not a purchase money
security interest as to that portion, unless expressly provided
to the contrary in another place, or (ii) if the
undersigned (or any of them) has (have) given or give(s) Bank a
deed of trust or mortgage covering California real property,
that deed of trust or mortgage shall not secure this Note or any
other indebtedness of the undersigned (or any of them), unless
expressly provided to the contrary in another place, or
(iii) if the undersigned (or any of them) has (have) given
or give(s) the Bank a deed of trust or mortgage covering real
property which, under Texas law, constitutes the homestead of
such person, that deed of trust or mortgage shall not secure
this Note or any other indebtedness of the undersigned (or any
of them) unless expressly provided to the contrary in another
place.

If an Event of Default as defined in that certain
Credit Agreement dated as of the evendate herewith between the
undersigned and the Bank occurs or if the undersigned (or any of
them) or any guarantor under a guaranty of all or part of the
Indebtedness (“guarantor”) (a) fail(s) to pay any
of the Indebtedness when due, by maturity, acceleration or
otherwise, or fail(s) to pay any Indebtedness owing on a demand
basis

3

 

upon demand; or (b) fail(s) to comply with
any of the terms or provisions of any agreement between the
undersigned (or any of them) or any such guarantor and the Bank;
or (c) become(s) insolvent or the subject of a voluntary or
involuntary proceeding in bankruptcy, or a reorganization,
arrangement or creditor composition proceeding, (if a business
entity) cease(s) doing business as a going concern, (if a
natural person) die(s) or become(s) incompetent, (if a
partnership) dissolve(s) or any general partner of it dies,
becomes incompetent or becomes the subject of a bankruptcy
proceeding or (if a corporation or a limited liability company)
is the subject of a dissolution, merger or consolidation; or
(d) if any warranty or representation made by any of the
undersigned or any guarantor in connection with this Note or any
of the Indebtedness shall be discovered to be untrue or
incomplete; or (e) if there is any termination, notice of
termination, or breach of any guaranty, pledge, collateral
assignment or subordination agreement relating to all or any
part of the Indebtedness; or (f) if there is any failure by
any of the undersigned or any guarantor to pay when due any of
its indebtedness (other than to the Bank) or in the observance
or performance of any term, covenant or condition in any
document evidencing, securing or relating to such indebtedness;
or (g) if the Bank deems itself insecure believing that the
prospect of payment of this Note or any of the Indebtedness is
impaired or shall fear deterioration, removal or waste of any of
the Collateral; or (h) if there is filed or issued a levy
or writ of attachment or garnishment or other like judicial
process upon the undersigned (or any of them) or any guarantor
or any of the Collateral, including without limit, any accounts
of the undersigned (or any of them) or any guarantor with the
Bank, then the Bank, upon the occurrence of any of these events
(each a “Default”), may at its option and without
prior notice to the undersigned (or any of them), declare any or
all of the Indebtedness to be immediately due and payable
(notwithstanding any provisions contained in the evidence of it
to the contrary), cease advancing money or extending credit to
or for the benefit of the undersigned under this Note or any
other agreement between the undersigned and the Bank, but
without affecting Bank’s rights and security interests in
any Collateral or the Indebtedness, sell or liquidate all or any
portion of the Collateral, set off against the Indebtedness any
amounts owing by the Bank to the undersigned (or any of them),
charge interest at the default rate provided in the document
evidencing the relevant Indebtedness and exercise any one or
more of the rights and remedies granted to the Bank by any
agreement with the undersigned (or any of them) or given to it
under applicable law. In addition, if this Note is secured by a
deed of trust or mortgage covering real property, then the
trustor or mortgagor shall not mortgage or pledge the mortgaged
premises as security for any other indebtedness or obligations.
This Note, together with all other indebtedness secured by said
deed of trust or mortgage, shall become due and payable
immediately, without notice, at the option of the Bank,
(i) if said trustor or mortgagor shall mortgage or pledge
the mortgaged premises for any other indebtedness or obligations
or shall convey, assign or transfer the mortgaged premises by
deed, installment sale contract instrument, or (ii) if the
title to the mortgaged premises shall become vested in any other
person or party in any manner whatsoever, or (iii) if there
is any disposition (through one or more transactions) of legal
or beneficial title to a controlling interest of said trustor or
mortgagor. All payments under this Note shall be in immediately
available United States funds, without setoff or counterclaim.

If this Note is signed by two or more parties
(whether by all as makers or by one or more as an accommodation
party or otherwise), the obligations and undertakings under this
Note shall be that of all and any two or more jointly and also
of each severally. This Note shall bind the undersigned, and the
undersigned’s respective heirs, personal representatives,
successors and assigns.

The undersigned waive(s) presentment, demand,
protest, notice of dishonor, notice of demand or intent to
demand, notice of acceleration or intent to accelerate, and all
other notices and agree(s) that no extension or indulgence to
the undersigned (or any of them) or release, substitution or
nonenforcement of any security, or release or substitution of
any of the undersigned, any guarantor or any other party,
whether with or without notice, shall affect the obligations of
any of the undersigned. The undersigned waive(s) all defenses or
right to discharge available under Section 3.605 of the
Texas Uniform Commercial Code and waive(s) all other suretyship
defenses or right to discharge. The undersigned agree(s) that
the Bank has the right to sell, assign, or grant participations
or any interest in, any or all of the Indebtedness, and that, in
connection with this right, but without limiting its ability to
make other disclosures to the full extent allowable, the Bank
may disclose all documents and information which the Bank now or
later has relating to the undersigned or the Indebtedness. The
undersigned agree(s) that the Bank may provide information
relating to this Note or the Indebtedness or relating to the
undersigned to the Bank’s parent, affiliates, subsidiaries
and service providers.

The undersigned agree(s) to reimburse the holder
or owner of this Note upon demand for any and all costs and
expenses (including without limit, court costs, legal expenses
and reasonable attorneys’ fees, whether inside or outside
counsel is used, and whether or not suit is instituted and, if
suit is instituted, whether at the trial court level, appellate
level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in collecting or attempting to collect this
Note or incurred in any other matter or proceeding relating to
this Note.

The undersigned acknowledge(s) and agree(s) that
there are no contrary agreements, oral or written, establishing
a term of this Note and agree(s) that the terms and conditions
of this Note may not be amended, waived or modified except in a
writing signed by an officer of the Bank expressly stating that
the writing constitutes an amendment, waiver or modification of
the terms of this Note. As used in this Note, the word
“undersigned” means, individually and collectively,
each maker, accommodation party, indorser and other party
signing this Note in a similar capacity. If any provision of
this Note is unenforceable in whole or part for any reason, the
remaining provisions shall continue to be effective.
Chapter 346 of the Texas Finance Code (and as the same may
be incorporated by reference in other Texas statutes) shall not
apply to the Indebtedness evidenced by this Note. THIS NOTE
IS MADE IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLE.

This Note and all other documents, instruments
and agreements evidencing, governing, securing, guaranteeing or
otherwise relating to or executed pursuant to or in connection
with this Note or the Indebtedness evidenced hereby (whether
executed and delivered prior to, concurrently with or subsequent
to this Note), as such documents may have been or may hereafter
be amended from time to time (the “Loan Documents”)
are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision
hereof or of any of the other Loan Documents or the application
thereof to any person or circumstance shall, for any reason and
to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or
circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be
enforced to the greatest extent permitted by law. It is
expressly stipulated and agreed to be the intent of the holder
hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable
on the indebtedness evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under this Note or under
any of the other Loan Documents, or contracted for, charged,
taken, reserved or received with respect to the indebtedness
evidenced by this Note, or if Bank’s exercise of the option
to accelerate the maturity of this Note, or if any prepayment by
the undersigned or prepayment agreement results (or would, if
complied with, result) in the undersigned having paid,
contracted for or being charged for any interest in excess of
that permitted by law, then it is the express intent of the
undersigned and Bank that this Note and the other Loan Documents
shall be limited to the extent necessary to prevent such result
and all excess amounts theretofore collected by Bank shall be
credited on the principal balance of this Note or, if fully
paid, upon such other Indebtedness as shall then remaining
outstanding (or, if this Note and all other Indebtedness have
been paid in full, refunded to the undersigned), and the
provisions of this Note and the other Loan Documents shall
immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder or
thereunder. All sums paid, or agreed to be paid, by the
undersigned for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of the
undersigned to Bank under this Note or arising under or pursuant
to the other Loan Documents shall, to the maximum extent
permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until
payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling
from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. To the extent
federal law permits Bank to contract for, charge or receive a
greater amount of interest, Bank will rely on federal law
instead of the Texas Finance Code for the purpose of determining
the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Bank may, at its
option and from time to time, implement any other method of
computing the Maximum Rate under the Texas Finance Code or under
other applicable law, by giving notice, if required, to the
undersigned as provided by applicable law now or hereafter in
effect. Notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents, it is not the
intention of Bank to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to
collect unearned interest at the time of such acceleration.

THE UNDERSIGNED AND THE BANK, BY ACCEPTANCE OF
THIS NOTE, ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL

4

 

     
BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN
THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT
OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE
INDEBTEDNESS.

THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY
SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE)
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

		
	 	
    BORROWER:
    
	 
	 	
    INTERPHASE CORPORATION,
    
	 	
    a Texas corporation
    

			
	 	By: 	
    /s/ STEVE KOVAC
    

		
	 	
    

	 	
    Steve Kovac, Chief Financial Officer
    

	 	 	 	 	 	 	 
	
    
    2901 Dallas Parkway
    

    	 	
    Plano
    	 	
    Texas
    	 	
    75093
    
	

	
    
    STREET ADDRESS
    

    	 	
    CITY
    	 	
    STATE
    	 	
    ZIP CODE
    

	 	 	 	 	 	 	 	 	 
	

	
    FOR BANK USE ONLY	 	
    CCAR#
    
	

	
    LOAN OFFICER INITIALS

    RLR
    	 	
    LOAN GROUP NAME

    MIDDLE MARKET NORTH
    	 	
    OBLIGOR NAME

    INTERPHASE CORPORATION, A TEXAS CORPORATION
    
	

	
    LOAN OFFICER ID. NO.

    43527
    	 	
    LOAN GROUP NO.

    90029
    	 	
    OBLIGOR NO.
    	 	
    NOTE NO.
    	 	
    AMOUNT

    $5,000,000.00
    
	

5

 

CREDIT AGREEMENT

THIS CREDIT AGREEMENT is made and delivered to be
effective as of July 25, 2003, by and between
INTERPHASE CORPORATION, a Texas corporation (herein
referred to with all successors, assigns and/or personal
representatives as the “Borrower”), and COMERICA
BANK-TEXAS (herein referred to with its successors and assigns
as the “Bank”). For and in consideration of the mutual
promises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Bank agree as follows:

 

		
	SECTION 1.	
    DEFINITIONS

1.1    Defined Terms.
The following terms, as used in this Agreement, shall have the
meanings set forth below. The singular number shall be deemed to
include the plural, the masculine gender shall include the
feminine and neuter genders, and vice versa.

		
	 	
    “Affiliate”
    shall mean, when used with respect to any Person, any other
    Person which, directly or indirectly, controls or is controlled
    by or is under common control with such Person. For purposes of
    this definition, “control” (including, with
    correlative meanings, the terms “controlled by” and
    “under common control with”), with respect to any
    Person, shall mean possession, directly or indirectly, of the
    power to direct or cause the direction of the management and
    policies of such Person, whether through the ownership of voting
    securities, by contract or otherwise.
    
	 
	 	
    “Agreement”
    shall mean this Credit Agreement, including all addenda,
    exhibits and schedules now or hereafter made a part hereof, as
    the same may be amended from time to time.
    
	 
	 	
    “Applicable Interest
    Rate” shall mean, with respect to
    the Indebtedness from time to time outstanding under any
    promissory note or other Loan Document evidencing the
    Indebtedness, the rate or rates provided in such note as the
    applicable interest rate.
    
	 
	 	
    “Collateral”
    shall mean all property, assets and rights in which a Lien or other
    encumbrance in favor of or for the benefit of Bank is or has
    been granted or arises or has arisen, or may hereafter be
    granted or arise, under or in connection with any Loan Document,
    or otherwise, to secure the payment or performance of any
    portion of the Indebtedness.
    
	 
	 	
    “Debt”
    shall mean, as of any applicable date of determination thereof,
    all liabilities of a Person that should be classified as
    liabilities in accordance with GAAP. In the case of Borrower,
    the term “Debt” shall include, without limitation, the
    Indebtedness.
    
	 
	 	
    “Default”
    shall mean, any condition or event which, with the giving of
    notice or the passage of time, or both, would constitute an
    Event of Default.
    
	 
	 	
    “Environmental
    Law(s)” shall mean all laws,
    codes, ordinances, rules, regulations, orders, decrees and
    directives issued by any federal, state, foreign or other
    governmental or quasi governmental authority or body (or any
    agency, instrumentality or political subdivision thereof)
    pertaining to Hazardous Materials or otherwise intended to
    regulate or improve health, safety or the environment,
    including, without limitation, any hazardous materials or
    wastes, toxic substances, flammable, explosive or radioactive
    materials, asbestos, and/or other similar materials; any
    so-called “superfund” or “superlien” law,
    pertaining to Hazardous Materials on or about any of the
    Collateral, or any other property at any time owned, leased or
    otherwise used by any Loan Party, or any portion thereof,
    including, without limitation, those relating to soil, surface,
    subsurface ground water conditions and the condition of the
    ambient air; and any other federal, state, foreign or local
    statute, law, ordinance, code, rule, regulation, order or decree
    regulating, relating to, or imposing liability or standards of
    conduct concerning, any hazardous, toxic, radioactive, flammable
    or dangerous waste, substance or material, as now or at anytime
    hereafter in effect.
    
	 
	 	
    “ERISA”
    shall mean the Employee Retirement Income Security Act of 1974,
    as amended, or any successor act or code.
    
	 
	 	
    “Event of
    Default” shall mean any of those
    conditions or events listed in Section 6.1 of this
    Agreement.
    
	 
	 	
    “GAAP”
    shall mean generally accepted accounting principles consistently
    applied.
    
	 
	 	
    “Governmental
    Authority” shall mean the United
    States, each state, each county, each city, and each other
    political subdivision in which all or any portion of the
    Collateral is located, and each other political subdivision,
    agency, or instrumentality exercising jurisdiction over Bank,
    any Loan Party, any of the Indebtedness or any Collateral.
    
	 
	 	
    “Governmental
    Requirements” shall mean all
    laws, ordinances, rules, and regulations of any Governmental
    Authority applicable to any Loan Party, any of the Indebtedness
    or any Collateral.
    
	 
	 	
    “Guarantor(s)”
    shall mean, as the context dictates, any Person(s) (other than
    the Borrower) who shall, at any time, guarantee or otherwise be
    or become obligated for the repayment of all or any part of the
    Indebtedness.
    
	 
	 	
    “Hazardous
    Material” shall mean and include
    any hazardous, toxic or dangerous waste, substance or material
    defined as such in, or for purposes of, any Environmental Law(s).
    
	 
	 	
    “Indebtedness”
    shall mean all obligations and liabilities of any Loan Party to
    Bank under any Loan Document, together with all other
    indebtedness, obligations and liabilities whatsoever of Borrower
    to Bank, whether matured or unmatured, liquidated or
    unliquidated, direct or indirect, absolute or contingent, joint
    or several, due or to become due, now existing or hereafter
    arising, voluntary or involuntary, known or unknown, or
    originally payable to Bank or to a third party and subsequently
    acquired by Bank including, without limitation, any: late
    charges; loan fees or charges; overdraft indebtedness; costs
    incurred by Bank in establishing, determining, continuing or
    defending the validity or priority of any Lien or in pursuing
    any of its rights or remedies under any Loan Document or in
    connection with any proceeding involving Bank as a result of any
    financial accommodation to Borrower; debts, obligations and
    liabilities for which Borrower would otherwise be liable to the
    Bank were it not for the invalidity and or enforceability of
    them by reason of any bankruptcy, insolvency or other law or for
    any other reason; and reasonable costs and expenses of attorneys
    and paralegals, whether any suit or other action is instituted,
    and to court costs if suit or action is instituted, and whether
    any such fees, costs or expenses are incurred at the trial court
    level or on appeal, in bankruptcy, in administrative
    proceedings, in probate proceedings or otherwise; provided,
    however, that the term Indebtedness shall not include any
    consumer loan to the extent treatment of such loan as part of
    the Indebtedness would violate any Governmental Requirement.
    
	 
	 	
    “Letter of
    Credit” shall mean a letter of
    credit issued by the Bank for the account of and/or upon the
    application of the Borrower in accordance with this Agreement,
    as such Letter of Credit may be amended, supplemented, extended
    or confirmed from time to time.
    
	 
	 	
    “Letter of Credit
    Liabilities” shall mean, at any
    time and in respect of all Letters of Credit, the sum of
    (a) the aggregate amount available to be drawn under all
    such Letters of Credit plus (b) the aggregate unpaid amount
    of all Reimbursement Obligations then due and payable in respect
    of previous drawings under such Letters of Credit.
    

1

 

		
	 	
    “Lien”
    shall mean any valid and enforceable interest in any property,
    whether real, personal or mixed, securing an indebtedness,
    obligation or liability owed to or claimed by any Person other
    than the owner of such property, whether such indebtedness is
    based on the common law or any statute or contract and
    including, but not limited to, a security interest, pledge,
    mortgage, assignment, conditional sale, trust receipt, lease,
    consignment or bailment for security purposes.
    
	 
	 	
    “Loan
    Documents” shall mean
    collectively, this Agreement, any promissory notes evidencing
    Indebtedness, any approved subordination agreement, any
    reimbursement agreement or other documentation executed in
    connection with any Letter of Credit, and any other documents,
    instruments or agreements evidencing, governing, securing,
    guaranteeing or otherwise relating to or executed pursuant to or
    in connection with any of the Indebtedness or any Loan Document
    (whether executed and delivered prior to, concurrently with or
    subsequent to this Agreement), as such documents may have been
    or may hereafter be amended from time to time.
    
	 
	 	
    “Loan
    Party” shall mean Borrower, each
    of its Subsidiaries (whether or not a party to any Loan
    Document) and each other Person who or which shall be liable for
    the payment or performance of all or any portion of the
    Indebtedness or who or which shall own any property that is
    subject to (or purported to be subject to) a Lien which secures
    all or any portion of the Indebtedness.
    
	 
	 	
    “Material Adverse
    Effect” shall mean any act,
    event, condition or circumstance which could materially and
    adversely affect the business, operations, condition (financial
    or otherwise), performance or assets of any Loan Party, the
    ability of any Loan Party to perform its obligations under any
    Loan Document to which it is a party or by which it is bound or
    the enforceability of any Loan Document.
    
	 
	 	
    “Maximum Legal
    Rate” shall mean the maximum rate
    of nonusurious interest per annum permitted to be paid by
    Borrower or, if applicable, another Loan Party or received by
    Bank with respect to the applicable portion of the Indebtedness
    from time to time under applicable state or federal law as now
    or as may be hereafter in effect, including
    Chapter 1 D of Title 79 Vernon’s Texas Civil
    Statutes (and as the same may be incorporated by reference in
    other Texas statutes), but otherwise without limitation, that
    rate based upon the “weekly ceiling rate” (as defined
    in §303 of the Texas Finance Code).
    
	 
	 	
    “PBGC”
    shall mean the Pension Benefit Guaranty Corporation, or any
    Person succeeding to the present powers and functions of the
    Pension Benefit Guaranty Corporation.
    
	 
	 	
    “Pension
    Plan(s)” shall mean any and all
    employee benefit pension plans of Borrower and/or any of its
    Subsidiaries in effect from time to time, as such term is
    defined in ERISA.
    
	 
	 	
    “Permitted
    Encumbrances” shall mean:
    (a) Liens in favor of the Bank; (b) Liens for taxes,
    assessments or other governmental charges which are not yet due
    and payable, incurred in the ordinary course of business and for
    which no interest, late charge or penalty is attaching or which
    are being contested in good faith by appropriate proceedings
    and, if requested by Bank, bonded in an amount and manner
    satisfactory to Bank; (c) Liens, not delinquent, arising in
    the ordinary course of business and created by statute in
    connection with worker’s compensation, unemployment
    insurance, social security and similar statutory obligations;
    and (d) Liens of mechanics, materialmen, carriers,
    warehousemen or other like statutory or common law Liens
    securing obligations incurred in good faith in the ordinary
    course of business without violation of any Loan Document that
    are not yet due and payable.
    
	 
	 	
    “Person”
    or “person” shall
    mean any individual, corporation, partnership, joint venture,
    limited liability company, association, trust, unincorporated
    association, joint stock company, government, municipality,
    political subdivision or agency, or other entity.
    
	 
	 	
    “Reimbursement
    Obligations” shall mean, at any
    time and in respect of all Letters of Credit, the aggregate
    obligations of the Borrower, then outstanding or which may
    thereafter arise, to reimburse the Bank for any amount paid or
    incurred by the Bank in respect of any and all drawings under
    such Letters of Credit, together with any and all other
    Indebtedness, obligations and liabilities of any Loan Party to
    Bank related to such Letters of Credit arising under this
    Agreement, any Letter of Credit application or any other Loan
    Document.
    
	 
	 	
    “Revolving Credit Maturity
    Date” shall mean July 30,
    2005 or such earlier date on which the entire unpaid principal
    amount of all Revolving Loans becomes due and payable whether by
    the lapse of time, demand for payment, acceleration or
    otherwise; provided, however, if any such date is not a business
    day, then the Revolving Credit Maturity Date shall be the next
    succeeding business day.
    
	 
	 	
    “Revolving Credit Maximum
    Amount” shall mean the lesser of
    (a) $5,000,000.00, or (b) the maximum amount permitted
    by an advance formula agreement, if applicable.
    
	 
	 	
    “Revolving Credit
    Note” shall mean the Revolving
    Credit Note dated July 25, 2003 in the maximum original
    principal amount of $5,000,000.00 made by Borrower payable to
    the order of the Bank, as the same may be renewed, extended,
    modified, increased or restated from time to time.
    
	 
	 	
    “Revolving
    Loan” shall mean an advance made,
    or to be made, under the revolving credit facility to or for the
    credit of Borrower by the Bank pursuant to this Agreement.
    
	 
	 	
    “Subordinated
    Debt” shall mean any Debt of
    Borrower (other than the Indebtedness) which has been
    subordinated to the Indebtedness pursuant to a subordination
    agreement in form and content satisfactory to the Bank.
    
	 
	 	
    “Subsidiary”
    shall mean as to any particular parent entity, any corporation,
    partnership, limited liability company or other entity (whether
    now existing or hereafter organized or acquired) in which more
    than fifty percent (50%) of the outstanding equity ownership
    interests having voting rights as of any applicable date of
    determination, shall be owned directly, or indirectly through
    one or more Subsidiaries, by such parent entity.
    
	 
	 	
    “UCC”
    shall mean the Uniform Commercial Code as adopted and in force
    in the State of Texas, as amended.
    

		
	1.2	
    Accounting Terms.
    All accounting terms not specifically defined in this Agreement
    shall be determined and construed in accordance with GAAP.
    

SECTION 2.    FUNDING
LOANS, PAYMENTS, RECOVERIES AND COLLECTIONS

		
	2.1	
    Funding Loans.
    Subject to the terms, conditions and procedures of this
    Agreement and each other Loan Document and to the satisfaction
    of all conditions precedent to the making and funding of any
    loan as set forth in any Loan Document, Bank shall make the
    proceeds of any such loan available to Borrower on the
    disbursement date agreed upon by Bank and Borrower by depositing
    such proceeds into an account maintained by Borrower with Bank
    or as otherwise agreed to in writing by Borrower and Bank.
    
	 
	2.2	
    Revolving Loans.
    Subject to the terms and conditions of the Loan Documents and to
    the satisfaction of all conditions precedent to the making and
    funding of any loan as set forth in any Loan Document, the Bank
    agrees to make Revolving Loans to Borrower
    

2

 

		
	 	
    at any time and from time to time from the
    effective date hereof until (but not including) the Revolving
    Credit Maturity Date. The proceeds of Revolving Loans shall be
    used solely for any purpose and other working capital needs of
    Borrower.
    
	 
	 	
    Except as hereinafter provided, Borrower may
    request a Revolving Loan by submitting to Bank a request for
    advance by an authorized officer or other representative of
    Borrower, subject to the following: (a) each such request
    for advance shall include, without limitation, the proposed
    amount of such revolving loan and the proposed disbursement
    date, which date must be a business day; (b) each such
    request for advance shall be communicated to Bank by 4 p.m.
    (Dallas, Texas Time) on the proposed disbursement date;
    (c) a request for advance, once communicated to Bank, shall
    not be revocable by Borrower; and (d) each request for
    advance, once communicated to Bank, shall constitute a
    representation, warranty and certification by Borrower as of the
    date thereof that: (i) both before and after the making of
    such Revolving Loan, the obligations set forth in the Loan
    Documents are and shall be valid, binding and enforceable
    obligations of each Loan Party, as applicable; (ii) all
    terms and conditions precedent to the making of such Revolving
    Loan have been satisfied, and shall remain satisfied through the
    date of such Revolving Loan; (iii) the making of such
    Revolving Loan will not cause the aggregate outstanding
    principal amount of all Revolving Loans plus the Letter of
    Credit Liabilities, if applicable, to exceed the Revolving
    Credit Maximum Amount; (iv) no Default or Event of Default
    shall have occurred or be in existence, and none will exist or
    arise upon the making of such Revolving Loan; (v) the
    representations and warranties contained in the Loan Documents
    are true and correct in all material respects and shall be true
    and correct in all material respects as of the making of such
    Revolving Loan; and (vi) the request for advance will not
    violate the terms or conditions of any contract, indenture,
    agreement or other borrowing of any Loan Party.
    
	 
	 	
    Bank may elect (but without any obligation to do
    so) to make a Revolving Loan upon the telephonic or facsimile
    request of Borrower, provided that Borrower has first executed
    and delivered to Bank a telephone notice authorization in form
    and content satisfactory to Bank. If any such Revolving Loan
    based upon a telephonic or facsimile request is made by
    Borrower, Bank may require Borrower to confirm said telephonic
    or facsimile request in writing by delivering to Bank, on or
    before 11:00 a.m. (Dallas, Texas time) on the next business
    day following the disbursement date of such Revolving Loan, a
    duly executed written request for advance, and all other
    provisions of this Section 2.2 shall be applicable
    with respect to such Revolving Loan. In addition, Borrower may
    authorize the Bank to automatically make revolving loans
    pursuant to such other written agreements as may be entered into
    by Bank and Borrower.
    
	 
	 	
    Notwithstanding anything contained in this
    Agreement to the contrary, the aggregate principal amount of all
    Revolving Loans at any time outstanding plus the Letter of
    Credit Liabilities, if applicable, and any amounts owed by
    Borrower to Bank under Borrower’s foreign exchange
    authority, shall not exceed the Revolving Credit Maximum Amount.
    If said limitations are exceeded at anytime, Borrower shall
    immediately, without demand by Bank, pay to Bank an amount not
    less than such excess, or, if Bank, in its sole discretion,
    shall so agree, Borrower shall provide Bank cash collateral in
    an amount not less than such excess, and Borrower hereby pledges
    and grants to Bank a security interest in such cash collateral
    so provided to Bank. Unless otherwise expressly provided in a
    Loan Document, all sums payable by Borrower to Bank under or
    pursuant to any Loan Document, whether principal, interest, or
    otherwise, shall be paid, when due, directly to Bank at any
    office of Bank located in the State of Texas in immediately
    available United States funds, and without setoff, deduction or
    counterclaim. Bank may, in its discretion, charge any and all
    deposit or other accounts (including, without limitation, any
    account evidenced by a certificate of deposit or time deposit)
    of Borrower maintained with Bank for all or any part of any
    Indebtedness then due and payable; provided, however, that such
    authorization shall not affect Borrower’s obligations to
    pay all indebtedness, when due, whether or not any such account
    balances maintained by Borrower with Bank are insufficient to
    pay any amounts then due.
    
	 
	 	
    Borrower shall pay to Bank an unused commitment
    fee in an amount equal to the product of (a) .25%
    multiplied by (b) the difference between (i) the
    maximum face amount of the Revolving Credit Note and
    (ii) the average daily aggregate principal balance of all
    Revolving Loans outstanding during each of Borrower’s
    fiscal quarters. Such fee shall be computed and shall be payable
    quarterly in arrears as of the end of each of Borrower’s
    fiscal quarters. Bank shall invoice Borrower for such fees,
    which invoice shall be due and payable within fifteen
    (15) days after receipt.
    
	 
	 	
    The provisions of Chapter 346 of the Texas
    Finance Code are specifically declared by the parties not to be
    applicable to any of the Loan Documents or the transactions
    contemplated thereby.
    
	 
	2.3	
    Letters of
Credit. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank shall, upon
request from Borrower from time to time prior to the Revolving
Credit Maturity Date, issue one or more Letters of Credit. The
Letter of Credit Liabilities shall not exceed $500,000.00; and
the sum of (a) the outstanding principal balance of all
Revolving Loans plus (b) the Letter of Credit
Liabilities shall not exceed the Revolving Credit Maximum
Amount. Letters of Credit may be issued solely as commercial
letters of credit related to trade financing. Each Letter of
Credit issued pursuant to this Agreement shall be in a minimum
amount of $1,000.00. No Letter of Credit shall have a stated
expiration date later than the Revolving Credit Maturity Date.

		
	 	
    Borrower shall give the Bank written notice
    requesting each issuance of a Letter of Credit hereunder not
    less than five business days prior to the requested issuance
    date and shall furnish such additional information regarding
    such transaction as Bank may request. The issuance by Bank of
    each Letter of Credit shall, in addition to the conditions
    precedent set forth elsewhere in this Agreement, be subject to
    the conditions precedent that (i) such Letter of Credit
    shall be in form and substance satisfactory to Bank,
    (ii) Borrower shall have executed and delivered such
    applications and other instruments and agreements relating to
    such Letter of Credit as Bank shall have requested and are not
    inconsistent with the terms of this Agreement (iii) each of
    the statements in Section 2.2(d) above are true as
    of the date of issuance of such Letter of Credit with respect to
    issuance of such Letter of Credit (as opposed to making a
    Revolving Loan), and the submission of an application for
    issuance of a Letter of Credit shall constitute a
    representation, warranty and certification of Borrower to that
    effect, and (iv) no Letter of Credit may be issued if after
    giving effect thereto, the sum of the aggregate outstanding
    principal balance of all Revolving Loans plus the Letter of
    Credit Liabilities would exceed the Revolving Credit Maximum
    Amount. With respect to the issuance or renewal of each Letter
    of Credit, Borrower shall pay to Bank such letter of credit fees
    and other expenses customarily charged by Bank in connection
    with the issuance or renewals of letters of credit.
    
	 
	 	
    Borrower shall be irrevocably and unconditionally
    obligated forthwith to reimburse Bank for any amount paid by
    Bank upon any drawing under any Letter of Credit, without
    presentment, demand, protest or other formalities of any kind,
    all of which are hereby waived. Unless Borrower shall elect to
    otherwise satisfy such Reimbursement Obligation, such
    reimbursement shall, subject to satisfaction of any conditions
    provided herein for the making of Revolving Loans and to the
    Revolving Credit Maximum Amount, automatically be made by
    advancing to Borrower a Revolving Loan in the amount of such
    Reimbursement Obligation.
    

2.4    Intentionally omitted

2.5    Intentionally omitted

		
	 
	2.6	
    Maximum Interest
Rate. At no time shall any Applicable Interest Rate or
default rate in respect of any Indebtedness hereunder, exceed
the Maximum Legal Rate. In the event that any interest is
charged or otherwise received by Bank in excess of the Maximum
Legal Rate, Borrower hereby acknowledges and agrees that any
such excess interest shall be the result of an accidental and
bona fide error, and any such excess shall be deemed to have
been payment of principal, and not of interest, and shall be
applied, first, to reduce the principal Indebtedness then
outstanding, second, any remaining excess, if any, shall be
applied to reduce any other Indebtedness, and third, any
remaining excess, if any, shall be returned to Borrower.
Notwithstanding the

3

 

		
		
    foregoing or anything to the contrary contained
    in this Agreement or any other Loan Document, but subject to all
    limitations contained in this Section, if at anytime any
    Applicable Interest Rate or default rate or other rate of
    interest applicable to any portion of the Indebtedness is
    computed on the basis of the Maximum Legal Rate, any subsequent
    reduction in the Applicable Interest Rate, default rate or such
    other rate of interest shall not reduce such interest rate
    thereafter payable below the Maximum Legal Rate until the
    aggregate amount of interest accrued equals the total amount of
    interest that would have accrued if interest had, at all times,
    been computed solely on the basis of the Applicable Interest
    Rate, default rate or such other interest rate. This Section
    shall control all agreements between the Borrower and the Bank.
    
	 
	2.7	
    Receipt of Payments by
    Bank. Any payment by Borrower of any
    of the indebtedness made by mail will be deemed tendered and
    received by Bank only upon actual receipt thereof by Bank at the
    address designated for such payment, whether or not Bank has
    authorized payment by mail or in any other manner, and such
    payment shall not be deemed to have been made in a timely manner
    unless actually received by Bank on or before the date due for
    such payment, time being of the essence. Borrower expressly
    assumes all risks of loss or liability resulting from
    non-delivery or delay of delivery of any item of payment
    transmitted by mail or in any other manner. Acceptance by Bank
    of any payment in an amount less than the amount then due shall
    be deemed an acceptance on account only, and any failure to pay
    the entire amount then due shall constitute and continue to be
    an Event of Default. Prior to the occurrence of any Default,
    Borrower shall have the right to direct the application of any
    and all payments made to Bank hereunder to the Indebtedness
    evidenced by the respective notes evidencing the Indebtedness.
    Borrower waives the right to direct the application of any and
    all payments received by Bank hereunder at any time or times
    after the occurrence and during the continuance of any Default.
    Borrower further agrees that after the occurrence and during the
    continuance of any Default, or prior to the occurrence of any
    Default if Borrower has failed to direct such application, Bank
    shall have the continuing exclusive right to apply and to
    reapply any and all payments received by Bank at any time or
    times, whether as voluntary payments, proceeds from any
    Collateral, offsets, or otherwise, against the Indebtedness in
    such order and in such manner as Bank may, in its sole
    discretion, deem advisable, notwithstanding any entry by Bank
    upon any of its books and records. Borrower hereby expressly
    agrees that, to the extent that Bank receives any payment or
    benefit of or otherwise upon any of the indebtedness, and such
    payment or benefit, or any part thereof, is subsequently
    invalidated, declared to be fraudulent or preferential, set
    aside, or required to be repaid to a trustee, receiver, or any
    other Person under any bankruptcy act, state or federal law,
    common law, equitable cause or otherwise, then to the extent of
    such payment or benefit, the Indebtedness, or part thereof,
    intended to be satisfied shall be revived and continued in full
    force and effect as if such payment or benefit had not been made
    or received by Bank, and, further, any such repayment by Bank
    shall be added to and be deemed to be additional Indebtedness.
    
	 
	2.8	
    Conditions Precedent to Loans and Letters of
    Credit. The obligation of the Bank to
    issue any Letter of Credit, if applicable, or to make any loan
    under or pursuant to this Agreement shall be subject to the
    following conditions precedent:
    

			
	 	a.	
    Borrower shall have executed and delivered to
    Bank, or caused to have been executed and delivered to Bank, all
    such instruments, agreements, certificates, opinions, financial
    statements, appraisals, evidence of title, evidence of
    insurance, environmental audits, and other information and other
    documents as the Bank shall require, and all of the foregoing
    shall be in form and content acceptable to Bank and all
    instruments and agreements shall be in full force and effect and
    binding and enforceable obligations of Borrower and, to the
    extent that it is a party thereto or otherwise bound thereby, of
    each other Person who may be a party thereto or bound thereby
    including without limitation: (i) evidence of existence,
    good standing, qualification to conduct business and authority
    for each Loan Party and signatory on behalf of each Loan Party;
    (ii) all notes, guaranties, security agreements, mortgages,
    deeds of trust, pledge agreements, assignments, financing
    statements and other documents requested by Bank to evidence the
    Indebtedness or to create, protect or perfect Liens upon the
    Collateral required by Bank as security for the indebtedness and
    to accord Bank a perfected security position in the Collateral,
    subject only to Permitted Encumbrances; (iii) a guaranty
    agreement from each Guarantor required by Bank; (iv) such
    other documents or agreements of security, assurances of Loan
    Document validity, legality and enforceability, and appropriate
    assurances of validity, perfection and priority of Lien as Bank
    may request, and Bank shall have received proof that appropriate
    security agreements, financing statements, mortgages, deeds of
    trust, collateral and other documents covering the Collateral
    shall have been executed and delivered by the appropriate
    Persons and recorded or filed in such jurisdictions and such
    other steps shall have been taken as necessary to perfect and
    protect, subject only to Permitted Encumbrances, the Liens
    granted thereby.
    
	 
	 	b.	
    All actions, proceedings, instruments and
    documents required to carry out the borrowings and transactions
    contemplated by this Agreement or any other Loan Document or
    incidental thereto, and all other related legal matters, shall
    have been satisfactory to and approved by Bank.
    
	 
	 	c.	
    Each Loan Party shall have performed and complied
    with all agreements and conditions contained in the Loan
    Documents applicable to it and which are then in effect.
    
	 
	 	d.	
    Each of the representations and warranties of
    each Loan Party under any Loan Document shall be true and
    correct in all material respects as if made on each loan
    disbursement date.
    
	 
	 	e.	
    No Default or Event of Default shall have
    occurred and be continuing; there shall have been no material
    adverse change in the condition (financial or otherwise),
    properties, business, or operations of any Loan Party since the
    date of the financial statements most recently delivered to Bank
    prior to the date of this Agreement; and no provision of law,
    any order of any Governmental Authority, or any regulation, rule
    or interpretation thereof, shall have had any Material Adverse
    Effect on the validity or enforceability of any Loan Document.
    

SECTION 3.     REPRESENTATIONS
AND WARRANTIES

Borrower represents and warrants, and such
representations and warranties shall be deemed to be continuing
representations and warranties during the entire life of this
Agreement, and so long as Bank shall have any commitment or
obligation to make any loans or issue any Letters of Credit, if
applicable and so long as any Indebtedness remains unpaid and
outstanding under any Loan Document, as follows:

		
	3.1	
    Authority. Each Loan
    Party and, if applicable, each of its partners and members who
    is not a natural Person is duly organized, validly existing and
    in good standing under the laws of the jurisdiction of its
    organization and is duly qualified and authorized to do business
    in each other jurisdiction in which the character of its assets
    or the nature of its business makes such qualification necessary.
    
	 
	3.2	
    Due Authorization.
    Each Loan Party has all requisite
    power and authority to execute, deliver and perform its
    obligations under each Loan Document to which it is a party or
    is otherwise bound, all of which have been duly authorized by
    all necessary action, and are not in contravention of law or the
    terms of any Loan Party’s organizational or other governing
    documents.
    
	 
	3.3	
    Title to Property.
    Each Loan Party has good title to all property and assets
    purported to be owned by it, including those assets identified
    on the financial statements most recently delivered to Bank.
    
	 
	3.4	
    Encumbrances. There
    are no security interests or other Liens or encumbrances on, and
    no financing statements on file with respect to, any of the
    property or assets of any Loan Party, except for Permitted
    Encumbrances.
    

4

 

		
	3.5 	
    Subsidiaries.
    Borrower has no Subsidiaries except those specifically disclosed
    in the Defined Terms.
    
	 
	3.6 	
    Taxes. Each Loan
    Party has filed, on or before their respective due dates, all
    federal, state, local and foreign tax returns which are required
    to be filed, or has obtained extensions for filing such tax
    returns, and is not delinquent in filing such returns in
    accordance with such extensions, and has paid all taxes which
    have become due pursuant to those returns or pursuant to any
    assessments received by any such party, as the case may be, to
    the extent such taxes have become due, except to the extent such
    tax payments are being actively and diligently contested in good
    faith by appropriate proceedings, and if requested by Bank, have
    been bonded or reserved in an amount and manner satisfactory to
    Bank.
    
	 
	3.7 	
    No-Defaults. There
    exists no default (or event which, with the giving of notice or
    passage of time, or both, would result in a default) under the
    provisions of any instrument or agreement evidencing, governing,
    securing or otherwise relating to any Debt of any Loan Party or
    pertaining to any of the Permitted Encumbrances.
    
	 
	3.8 	
    Enforceability of Agreement and Loan
    Documents. Each Loan Document has been
    duly executed and delivered by duly authorized officer(s) or
    other representative(s) of each Loan Party and constitutes the
    valid and binding obligation of each Loan Party, enforceable in
    accordance with its terms, except to the extent that enforcement
    thereof may be limited by applicable bankruptcy, reorganization,
    insolvency, moratorium or similar laws affecting the enforcement
    of creditors’ rights generally at the time in effect.
    
	 
	3.9 	
    Non-contravention.
    The execution, delivery and performance by each Loan Party of
    the Loan Documents to which such Loan Party is a party or
    otherwise bound, are not in contravention of the terms of any
    indenture, agreement or undertaking to which any such Loan Party
    is a party or by which it is bound, except to the extent that
    such terms have been waived or that failure to comply with any
    such terms would not have a Material Adverse Effect.
    

		
	3.10 	
    Actions, Suits, Litigation or
    Proceedings. There are no actions,
    suits, litigation or proceedings, at law or in equity, and no
    proceedings before any arbitrator or by or before any
    Governmental Authority, pending, or, to the best knowledge of
    Borrower, threatened against or affecting any Loan Party, which,
    if adversely determined, could materially impair the right of
    any Loan Party to carry on its business substantially as now
    conducted or could have a Material Adverse Effect. No Loan Party
    is under investigation by, or is operating under any
    restrictions imposed by, any Governmental Authority.
    
	 
	3.11 	
    Compliance with
    Laws. Each Loan Party has complied
    with all Governmental Requirements, including, without
    limitation, Environmental Laws, to the extent that failure to so
    comply could have a Material Adverse Effect.
    
	 
	3.12 	
    Consents, Approvals and Filings,
    Etc. Except as have been previously
    obtained or as otherwise expressly provided in this Agreement,
    no authorization, consent, approval, license, qualification or
    formal exemption from, or any filing, declaration or
    registration with, any Governmental Authority and no material
    authorization, consent or approval from any other Person, is
    required in connection with the execution, delivery and
    performance by any Loan Party of any Loan Document to which it
    is a party. All such authorizations, consents, approvals,
    licenses, qualifications, exemptions, filing, declarations and
    registrations which have previously been obtained or made, as
    the case may be, are in full force and effect and are not the
    subject of any attack, or to the knowledge of borrower, any
    threatened attack, in any material respect, by appeal, direct
    proceeding or otherwise.
    
	 
	3.13 	
    Environmental
    Representations. No Loan Party has
    used Hazardous Materials on, in, under or otherwise affecting
    any real or personal property now or at any time owned, occupied
    or operated by such Person or upon which such Person has a place
    of business which, in any manner, violates any Environmental
    Law, to the extent any such violation could result in a Material
    Adverse Effect, and to the best of Borrower’s knowledge, no
    prior or current owner, occupant or operator of any of such
    property does or has used any Hazardous Materials on or
    affecting such property in any manner which violates any
    Environmental Law to the extent that any such violation could
    result in a Material Adverse Effect. No Loan party has received
    any notice of any violation of any Environmental Law, and to the
    best knowledge of the Borrower, there have been no actions
    commenced or threatened by any Person against any such property
    or against any Loan Party for non-compliance with any
    Environmental Law which could result in a Material Adverse
    Effect.
    
	 
	3.14 	
    Accuracy of
    Information. All financial statements
    previously furnished to Bank have been prepared in accordance
    with GAAP and fairly present the financial condition of Borrower
    and, as applicable, the consolidated financial condition of
    Borrower and such other Person(s) as such financial statements
    purport to present, and the results of their respective
    operations as of the dates and for the periods covered thereby;
    and since the date(s) of said financial statements, there has
    been no material adverse change in the financial condition of
    Borrower or any other Person covered by such financial
    statements. Each Loan Party is solvent, able to pay its debts as
    they mature, has capital sufficient to carry on its business and
    has assets the fair market value of which exceed its
    liabilities, and no Loan Party will be rendered insolvent,
    under-capitalized or unable to pay debts generally as they
    become due by the execution or performance of any Loan Document
    to which it is a party or by which it is otherwise bound.
    

SECTION 4.    AFFIRMATIVE
COVENANTS

Borrower covenants and agrees that, until all
instruments and agreements evidencing each and every loan,
Letter of Credit and other financial accommodation by the Bank
to the Borrower or any Loan Party are fully discharged and
terminated, and thereafter, so long as any Indebtedness remains
outstanding, it will, and, as applicable, it will cause each
Loan Party within its control or under common control to:

		
	4.1 	
    Preservation of Existence,
    Etc. Preserve and maintain its
    existence and preserve and maintain such of its rights,
    licenses, and privileges as are material to the business and
    operations conducted by it; qualify and remain qualified to do
    business in each jurisdiction in which such qualification is
    material to its business and operations or ownership of its
    properties, continue to conduct and operate its business
    substantially as conducted and operated during the present and
    preceding calendar year; at all times maintain, preserve and
    protect all of its franchises and trade names and preserve all
    the remainder of its property and keep the same in good repair,
    working order and condition; and from time to time make, or
    cause to be made, all needed and proper repairs, renewals,
    replacements, betterments and improvements thereto.
    
	 
	4.2 	
    Keeping of Books; Audits of Collateral;
    Fees. Keep proper books of record and
    account in which full and correct entries shall be made of all
    of its financial transactions and its assets and businesses so
    as to permit the presentation of financial statements prepared
    in accordance with GAAP; and permit Bank, or its
    representatives, at reasonable times and intervals, at
    Borrower’s cost and expense, to examine its books and
    records and to discuss its financial matters with its officers,
    employees and independent certified public accountants; and
    permit Bank from time to time to audit Borrower’s accounts,
    inventory, or other Collateral, provided that such audits will
    be conducted upon reasonable notice. Borrower agrees to
    reimburse Bank, on demand, for customary and reasonable fees and
    costs incurred by Bank for such audits, and for each appraisal
    of Collateral and financial analysis and examination of Borrower
    performed from time to time by its agents.
    
	 
	4.3 	
    Reporting
    Requirements. Furnish to Bank, or
    cause to be furnished to Bank, the following:
    

		
	  a. 	
    as soon as possible, and in any event within
    three (3) calendar days after becoming aware of the occurrence
    or existence of each Default or Event of Default hereunder or
    any material adverse change in the financial condition of any
    Loan Party, a written statement of the chief financial officer
    of Borrower (or in his or her absence, a responsible senior
    officer
    

5

 

			
	 		
    of Borrower), setting forth details of such
    Default, Event of Default or change, and the action which
    Borrower has taken, or has caused to be taken, or proposes to
    take, or to cause to be taken, with respect thereto;
    
	 
	 	b.	
    as soon as available, and in any event within 120
    days after and as of the end of each fiscal year of Borrower,
    audited financial statements of Borrower and such other of the
    Loan Parties as may be required by the Bank, consolidated, as
    applicable, including a balance sheet, income statement,
    statement of profit and loss, surplus reconciliation statement
    and statement of cash flows, for and as of such fiscal year then
    ending and including such other comments and financial details
    as are usually included in similar reports. Such financial
    statements shall be prepared in accordance with GAAP by
    independent certified public accountants of recognized standing
    selected by Borrower and approved by Bank and containing
    unqualified opinions as to the fairness of the statements
    therein contained;
    

			
	 	c.	
    as soon as available, and in any event,
    simultaneously with the financial statements to be delivered to
    Borrower in accordance with section 4.3(b) above, a copy of
    Borrower’s Form 10-K Annual Report filed with the
    Securities and Exchange Commission;
    

			
	 	d.	
    as soon as available, and in any event within
    45 days after and as of the end of each calender month,
    including the last such reporting period of each of
    Borrower’s fiscal years, compiled financial statements of
    Borrower and such of the other Loan Parties as may be required
    by the Bank, consolidated, as applicable, for and as of such
    reporting period, including a balance sheet, income statement,
    statement of profit and loss, surplus reconciliation statement
    and statement of cash flows for and as of such reporting period
    then ending and for and as of that portion of the fiscal year
    then ending, in each case, prepared and certified by the chief
    financial officer of Borrower (or in his or her absence, a
    responsible senior officer of Borrower) and, as applicable, each
    other Loan Party as to consistency with prior financial reports
    and accounting periods, accuracy and fairness of presentation;
    

			
	 	e.	
    as soon as available, and in any event,
    simultaneously with the financial statements to be delivered to
    Borrower in accordance with section 4.3(d) above, a copy of
    Borrower’s Form 10-Q Quarterly Report filed with the
    Securities and Exchange Commission;
    

			
	 	f.	
    as soon as available, and in any event,
    simultaneously with the financial statements to be delivered to
    Bank in accordance with section 4.3(d) above;
    

			
	 	g.	
    simultaneously with each request for a Revolving
    Loan, a Borrowing Base Certificate (in the form of the attached
    Exhibit “A”), each dated as of the end of such
    month or year, as the case may be;
    

			
	 	4.4	
    Intentionally omitted.
    

		
	4.5	
    Further Assurances; Financing
    Statements. Furnish Bank, at
    Borrower’s cost and expense, upon Bank’s request and
    in form satisfactory to Bank (and execute and deliver or cause
    to be executed and delivered), such additional pledges,
    assignments, mortgages, Lien instruments or other security
    instruments, consents, acknowledgements, subordinations and
    financing statements covering any or all of the Collateral
    required by Bank to secure any Indebtedness together with such
    other documents or instruments as Bank may require to effectuate
    more fully the purposes of any Loan Document.
    
	 
	4.6	
    Insurance. Maintain
    insurance coverage by insurers acceptable to Bank on its
    physical assets and against other business risks in such amounts
    and of such types as are customarily carried by companies
    similar in size and nature or as may otherwise by required by
    Bank, and in the event of acquisition of additional property,
    real or personal, or of the incurrence of additional risks of
    any nature, increase such insurance coverage in such manner and
    to such extent as prudent business judgment and present practice
    would dictate; and in the case of all policies covering property
    subject to any Loan Document or property in which the Bank shall
    have a Lien of any kind whatsoever, other than those policies
    protecting against casualty liabilities to strangers, all such
    insurance policies shall provide that the loss payable
    thereunder shall be payable to Borrower (or other Person
    providing Collateral) and Bank, with mortgagee’s clauses in
    favor of and satisfactory to Bank for all such policies, and
    such policies shall also provide that they may not be canceled
    or changed without thirty (30) days’ prior written
    notice to Bank. Upon the request of Bank, all of said policies,
    or copies thereof, including all endorsements thereon and those
    required hereunder, shall be deposited with Bank.
    
	 
	4.7	
    Compliance with
    ERISA. In the event that any Loan
    Party or any of its Subsidiaries maintain(s) or establish(es) a
    Pension Plan subject to ERISA, (a) comply in all material
    respects with all requirements imposed by ERISA as presently in
    effect or hereafter promulgated, including, but not limited to,
    the minimum funding requirements thereof; (b) promptly notify
    Bank upon the occurrence of a “reportable event” or
    “prohibited transaction” within the meaning of ERISA,
    or that the PBGC or any Loan Party has instituted or will
    institute proceedings to terminate any Pension Plan, together
    with a copy of any proposed notice of such event which may be
    required to be filed with the PBGC; and (c) furnish to Bank (or
    cause the plan administrator to furnish Bank) a copy of the
    annual return (including all schedules and attachments) for each
    Pension Plan covered by ERISA, and filed with the Internal
    Revenue Service by any Loan Party not later than ten
    (10) days after such report has been so filed.
    
	 
	4.8	
    Environmental
    Covenants. Comply with all applicable
    Environmental Laws, and maintain all permits, licenses and
    approvals required under applicable Environmental Laws, where
    the failure to do so could have a Material Adverse Effect.
    Promptly notify Bank, in writing, as soon as Borrower becomes
    aware of any condition or circumstance which makes any of the
    environmental representations or warranties set forth in this
    Agreement incomplete, incorrect or inaccurate in any material
    respect as of any date; and promptly provide to Bank,
    immediately upon receipt thereof, copies of any material
    correspondence, notice, pleading, citation, indictment,
    complaint, order, decree, or other document from any source
    asserting or alleging a violation of any Environmental Law by
    any Loan Party, or of any circumstance or condition which
    requires or may require, a financial contribution by any Loan
    Party, or a clean-up, removal, remedial action or other response
    by or on behalf of any Loan Party, under applicable
    Environmental Law, or which seeks damages or civil, criminal or
    punitive penalties from any Loan Party or any violation or
    alleged violation of any Environmental Law. Borrower hereby
    agrees to indemnify, defend and hold Bank, and any of
    Bank’s past, present and future officers, directors,
    shareholders, employees, representatives and consultants,
    harmless from any and all claims, losses, damages, suits,
    penalties, costs, liabilities, obligations and expenses
    (including, without limitation, reasonable legal expenses and
    attorneys’ fees, whether inside or outside counsel is used)
    incurred or arising out of any claim, loss or damage of any
    property, injuries to or death of any persons, contamination of
    or adverse effects on the environment, or other violation of any
    applicable Environmental Law, in any case, caused by any Loan
    Party or in any way related to any property owned or operated by
    any Loan Party or due to any acts of any Loan Party or any of
    its officers, directors, shareholders, employees, consultants
    and/or representatives INCLUDING ANY CLAIMS, LOSSES, DAMAGES,
    SUITS, PENALTIES, COSTS, LIABILITIES, OBLIGATIONS OR EXPENSES,
    RESULTING FROM BANK’S OWN NEGLIGENCE; provided however,
    that the foregoing indemnification shall not be applicable, and
    Borrower shall not be liable for any such claims, losses,
    damages, suits, penalties, costs, liabilities, obligations or
    expenses, to the extent (but only to the extent) the same arise
    or result from any gross negligence or willful misconduct of
    Bank or any of its agents or employees.
    

 

		
	SECTION 5.   NEGATIVE COVENANTS	

Borrower covenants and agrees that, until all
instruments and agreements evidencing each and every loan,
Letter of Credit and other financial accommodation by the Bank
to the Borrower or any Loan Party are fully discharged and
terminated, and thereafter, so long as

6

 

any Indebtedness remains outstanding, it will
not, and it will not allow any Loan Party within its control or
under common control to, without the prior written consent of
the Bank:

		
	5.1	
    Capital Structure; Business Objects or
    Purpose; Mergers; Asset Disposition;
    Acquisitions. Purchase, acquire or
    redeem any of its equity ownership interests; or enter into any
    reorganization or recapitalization; or reclassify its equity
    ownership interests; or make any material change in its capital
    structure or general business objects or purpose; or change its
    name, or enter into any merger or consolidation, unless Borrower
    is the surviving entity thereunder.
    
	 
	5.2	
    Subordinate
    Indebtedness. Subordinate any
    indebtedness due to it from any Person to indebtedness of other
    creditors of such Person.
    

SECTION 6.    EVENTS OF
DEFAULT

		
	6.1	
    Events of Default.
    The occurrence or existence of any of the following conditions
    or events shall constitute an “Event of Default”
    hereunder: (a) non-payment of any principal, interest or
    other sums due upon the Indebtedness at such time the same
    becomes due or, if applicable, upon expiration of the grace
    period, if any; (b) default in the observance or
    performance of any of the other conditions, covenants or
    agreements of any Loan Party set forth in this Agreement or any
    other Loan Document; (c) any representation or warranty
    made by any Loan Party in any Loan Document shall be untrue or
    incorrect in any material respect; (d) any default or event
    of default, as the case may be, shall occur under any other Loan
    Document and shall continue beyond the applicable grace period,
    if any; and (e) any change in the management, ownership or
    control of Borrower, whether by reason of incapacity, death,
    resignation, termination or otherwise which, in Bank’s sole
    judgment, could become a Material Adverse Effect;
    
	 
	6.2	
    Remedies Upon Event of
    Default. Upon the occurrence and at
    any time during the existence or continuance of any Event of
    Default, but without impairing or otherwise limiting the
    Bank’s right to demand payment of all or any portion of the
    indebtedness which is payable on demand, at Bank’s option,
    Bank may give notice to Borrower declaring all or any portion of
    the Indebtedness remaining unpaid and outstanding, whether under
    the notes evidencing the Indebtedness or otherwise, to be due
    and payable in full without presentation, demand, protest,
    notice of dishonor, notice of intent to accelerate, notice of
    acceleration or other notice of any kind, all of which are
    hereby expressly waived, whereupon all such Indebtedness shall
    immediately become due and payable. Furthermore, upon the
    occurrence of a Default or Event of Default and at any time
    during the existence or continuance of any Default or Event of
    Default, but without impairing or otherwise limiting the right
    of Bank, if reserved under any Loan Document, to make or
    withhold financial accommodations at its discretion, to the
    extent not yet disbursed, any commitment by Bank to make any
    further loans or, if applicable, issue any further Letters of
    Credit shall automatically terminate. The foregoing rights and
    remedies are in addition to any other rights, remedies and
    privileges Bank may otherwise have or which may be available to
    it, whether under this Agreement, any other Loan Document, by
    law, or otherwise.
    
	 
	6.3	
    Waiver Defaults. No
    Default or Event of Default shall be waived by Bank except in a
    written instrument specifying the scope and terms of such waiver
    and signed by an authorized officer of Bank, and such waiver and
    shall be effective only for the specific time(s) and purpose(s)
    given. No single or partial exercise of any right, power or
    privilege hereunder, or any delay in the exercise thereof, shall
    preclude other or further exercise of Bank’s rights. No
    waiver of any Default or Event of Default shall extend to any
    other or further Default or Event of Default. No forbearance on
    the part of Bank in enforcing any of Bank’s rights or
    remedies under any Loan Document shall constitute a waiver of
    any of its rights or remedies. Borrower expressly agrees that
    this Section may not be waived or modified by Bank by course of
    performance, estoppel or otherwise.
    
	 
	6.4	
    Discretionary Credit and Credit Payable Upon
    Demand. TO THE EXTENT THAT ANY OF THE
    INDEBTEDNESS SHALL, AT ANYTIME, BE PAYABLE UPON DEMAND, NOTHING
    CONTAINED IN THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, SHALL
    BE CONSTRUED TO PREVENT BANK FROM MAKING DEMAND, WITHOUT NOTICE
    AND WITH OR WITHOUT REASON, FOR IMMEDIATE PAYMENT OF ALL OR ANY
    PART OF SUCH INDEBTEDNESS AT ANY TIME OR TIMES, WHETHER OR NOT A
    DEFAULT OR EVENT OF DEFAULT HAS OCCURRED OR EXISTS. IN THE EVENT
    THAT SUCH DEMAND IS MADE UPON ANY PORTION OF THE INDEBTEDNESS,
    THE BANK, AT ITS ELECTION, MAY TERMINATE ANY COMMITMENT TO MAKE
    ANY FURTHER LOANS OR, IF APPLICABLE, ISSUE ANY FURTHER LETTERS
    OF CREDIT UNDER THIS AGREEMENT OR OTHERWISE. FURTHERMORE, TO THE
    EXTENT ANY LOAN DOCUMENT AUTHORIZES THE BANK, AT ITS DISCRETION,
    TO MAKE OR TO DECLINE TO MAKE FINANCIAL ACCOMMODATIONS TO THE
    BORROWER, NOTHING CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN
    DOCUMENT SHALL BE CONSTRUED TO LIMIT OR IMPAIR SUCH DISCRETION
    OR TO COMMIT OR OTHERWISE OBLIGATE THE BANK TO MAKE ANY SUCH
    FINANCIAL ACCOMMODATION.
    

SECTION
7.    MISCELLANEOUS

		
	7.1	
    Governing Law. Each
    Loan Document shall be deemed to have been delivered in and
    shall be governed by and construed and enforced in accordance
    with the laws of the State of Texas, except to the extent that
    the UCC, other personal property law or real property law of
    another jurisdiction where Collateral is located is applicable,
    and except to the extent expressed to the contrary in any Loan
    Document.
    
	 
	7.2	
    Costs and Expenses.
    Borrower shall pay Bank, on demand, all costs and expenses,
    including, without limitation, reasonable attorneys’ fees
    and legal expenses (whether inside or outside counsel is used),
    incurred by Bank in perfecting, revising, protecting or
    enforcing any of its rights or remedies against any Loan Party
    or any Collateral, or otherwise incurred by Bank in connection
    with any Default or Event of Default or the enforcement of the
    Loan Documents or the Indebtedness. Following Bank’s demand
    upon Borrower for the payment of any such costs and expenses,
    and until the same are paid in full, the unpaid amount of such
    costs and expenses shall constitute Indebtedness and shall bear
    interest at the highest default rate of interest provided in any
    Loan Document.
    
	 
	7.3	
    Successors and Assigns;
    Participation. This Agreement shall be
    binding upon and shall inure to the benefit of Borrower and Bank
    and their respective successors and assigns. The foregoing shall
    not authorize any assignment or transfer by Borrower of any of
    its respective rights, duties or obligations hereunder, such
    assignments or transfers being expressly prohibited. Bank,
    however, may freely assign, whether by assignment, participation
    or otherwise, its rights and obligations hereunder, and is
    hereby authorized to disclose to any such assignee or
    participant (or proposed assignee or participant) any financial
    or other information in its knowledge or possession regarding
    any Loan Party or the Indebtedness.
    
	 
	7.4	
    Reliance on and Survival of Various
    Provisions. All terms, covenants,
    agreements, representations and warranties of any Loan Party
    made in any Loan Document, or in any certificate, report,
    financial statement or other document furnished by or on behalf
    of any Loan Party in connection with any Loan Document, shall be
    deemed to have been relied upon by Bank, notwithstanding any
    investigation heretofore or hereafter made by Bank or on
    Bank’s behalf, and those covenants and agreements of
    Borrower set forth in Section 4.8 hereof (together
    with any other indemnities of Borrower contained elsewhere in
    any Loan Document) shall survive the termination of this
    Agreement and the repayment in full of the Indebtedness.
    
	 
	7.5	
    Complete Agreement;
    Conflicts. This Agreement, the other
    Loan Documents, and any commitment letter previously issued by
    Bank with respect thereto (provided that in the event of any
    inconsistency or conflict between this Agreement and the other
    Loan
    

7

 

		
	 	
    Documents, on one hand, and such commitment
letter, on the other hand, this Agreement and the Loan Documents
shall control), contain the entire agreement of the parties
thereto and supercede all prior agreements and understandings
related to the subject matter hereof, and none of the parties
shall be bound by anything not expressed in writing. In the
event that, and to the extent that, any of the terms, conditions
or provisions of any of the other Loan Documents are
inconsistent with or in conflict with any of the terms,
conditions or provisions of this Agreement, the applicable
terms, conditions and provisions of this Agreement shall govern
and control. Any amendments or modifications hereto shall be in
writing signed by all parties.

	 
	7.6 	
    Counterparts. This
    Agreement may be executed in any number of counterparts and by
    different parties on separate counterparts, each of which, when
    executed and delivered, shall be deemed to be an original, and
    all of which, when taken together, shall constitute but one and
    the same agreement.
    
	 
	7.7 	
    WAIVER OF JURY TRIAL.
    BANK AND BORROWER EACH ACKNOWLEDGE
    THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT
    THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING
    HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE,
    KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EITHER
    OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
    OR ARISING OUT OF ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
    CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY COURSE OF CONDUCT,
    DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF
    EITHER OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE
    BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR
    BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF
    THEM.
	 
	7.8 	
    ORAL AGREEMENTS
    INEFFECTIVE. THIS AGREEMENT AND
    THE OTHER “LOAN AGREEMENTS” (AS DEFINED IN
    SECTION 26.02(A)(2) OF THE TEXAS BUSINESS &
    COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN
    THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN
    AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
    CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
    PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
    PARTIES.
    

WITNESS the due execution hereof as of the day
and year first above written.

	 	 	 
	BANK:		BORROWER:
	
    
    COMERICA BANK-TEXAS
    

    	 	
    INTERPHASE CORPORATION,
    
	 	 	
    a Texas corporation
    
	 
	
    
    By: /s/ T. MARTIN BROWN

    
T. Martin Brown, Senior Vice President

    Texas Division
    

    	 	
    By: /s/ STEVE KOVAC

    
Steve Kovac, Chief Financial Officer
    

8<PAGE>
                                                                   EXHIBIT 10.31

                                 SECOND ALLONGE

         That certain Promissory Note (the "Note") in the maximum principal
amount of $90,000,000.00 issued by TELECOMUNICACIONES DE PUERTO RICO, INC.
("Borrower"), a corporation organized under the laws of the Commonwealth of
Puerto Rico to the order of BANCO POPULAR DE PUERTO RICO on May 16, 2002 (as
amended and reduced to the maximum principal amount of $50,000,000.00 by an
allonge dated December 31, 2002) which as of the date hereof there is no
outstanding principal balance nor accrued interest thereon, is hereby further
amended and modified as of the date hereof, as follows:

The first paragraph of the Note is hereby further amended to read in its
entirety as follows:

         "FOR VALUE RECEIVED, the undersigned, TELECOMUNICACIONES DE PUERTO
         RICO, INC., a Puerto Rico corporation (the "Borrower"), HEREBY PROMISES
         TO PAY to the order of BANCO POPULAR DE PUERTO RICO (the "Lender") for
         the account of its Applicable Lending Office on the Termination Date
         (each as defined in the Credit Agreement referred to below) the
         principal sum of U.S. $40,000,000.00 or, if less, the aggregate amount
         of the Revolving Credit Advances made by the Lender to the Borrower
         pursuant to the Revolving Credit Agreement dated as of May 16, 2002, as
         amended by that certain First Amendment, dated June 30, 2003 (the
         "First Amendment") among the Borrower, Puerto Rico Telephone Company,
         Inc., as Guarantor, the Lender and certain other lenders parties
         thereto, and Banco Popular de Puerto Rico ("BPPR"), as administrative
         agent (in such capacity, the "Administrative Agent") for the Lender and
         such other lenders (as it may further be amended or modified from time
         to time, the "Credit Agreement"; the terms defined therein being used
         herein as therein defined), outstanding on the Termination Date."

All other terms of the Note shall continue in full force and effect.

It is hereby understood and agreed by each of the parties hereto that this
Second Allonge is not intended to cause an extinctive novation of the terms and
conditions of, and the obligations under, the Credit Agreement and the Note, but
is exclusively intended to reflect a further reduction in the Commitment from
$50,000,000.00 to $40,000,000.00 and the execution and delivery of the First
Amendment, and shall not affect any of the obligations of Borrower under the
Credit Agreement or under the Note (as amended hereby), all of which obligations
shall continue in full force and effect as if originally incurred by Borrower as
herein set forth. Capitalized terms not otherwise defined herein shall have the
meanings given to such terms in the Note.

                  [Remainder of Page Intentionally Left Blank]

<PAGE>

Executed in San Juan, Puerto Rico, on June 30, 2003.

                 TELECOMUNICACIONES DE PUERTO RICO, INC.,
                 as Borrower

                        By:  __________________________________________
                             Walter Forwood
                             Vice President and Chief Financial Officer

                        BANCO POPULAR DE PUERTO RICO,
                        as Lender

                        By:  __________________________________________
                             Hector A. Becemberg
                             Assistant Vice President

                        BANCO POPULAR DE PUERTO RICO,
                        as Administrative Agent

                        By:  __________________________________________
                             Hector A. Becemberg
                             Assistant Vice President

ACKNOWLEDGED:
PUERTO RICO TELEPHONE COMPANY, INC., as Guarantor

By:  ____________________________
     Walter Forwood
     Vice President and Chief Financial Officer

Affidavit No. ____

         Subscribed before me in San Juan, Puerto Rico, on June 30, 2003, by the
following persons, who I personally know: (i) Walter Forwood, of legal age,
married, a business person, and a resident of Guaynabo, Puerto Rico , in his
capacity as Vice President and Chief Financial Officer of Telecomunicaciones de
Puerto Rico, Inc., and of Puerto Rico Telephone Company, Inc.; and (ii) Hector
A. Becemberg, of legal age, married, a banker, and a resident of San Juan,
Puerto Rico, in his capacity as Vice President of Banco Popular de Puerto Rico.

                              ________________________________________
                                          Notary Public

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]