FIRST AMENDMENT OF LOAN AND SECURITY AGREEMENT
This Amendment of Loan and Security Agreement (this "Amendment") is made
as of August 7, 1995, by and between ADVANCED LOGIC RESEARCH, INC., a Delaware
corporation ("Borrower") and XXXXXX FINANCIAL, INC., a Delaware corporation
("Lender"). This Amendment is made with reference to that certain Loan and
Security Agreement dated as of June 16, 1993, by and between Borrower and
Lender (as amended from time to time, the "Loan and Security Agreement"). All
capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Loan and Security Agreement.
Whereas, Borrower and Lender entered into the Loan and Security
Agreement; and
Whereas, Borrower and Lender desire to amend certain terms of the Loan
and Security Agreement as set forth below;
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. AMENDMENT
1.1 Section 1 of the Loan and Security Agreement is amended by adding
the following new definitions of "Expiry Date", "First Amendment Date",
"Funding Date", "Interest Payment Date", "Interest Period", "Interest Rate
Determination Date", "LIBOR Rate", "LIBOR Rate Loans", "Notice of Borrowing",
"Notice of Conversion/Continuation" and "Prime Rate Loans", and inserting each
new definition into its appropriate alphabetical order.
"Expiry Date" means the earlier of (a) the termination of the Revolving
Loan Commitment pursuant to subsection 8.3 or (b) the Termination Date.
"First Amendment Date" means the effective date of that certain First
Amendment of Loan and Security Agreement by and between Borrower and
Lender.
"Funding Date" means the date of each funding of a Loan.
"Interest Payment Date" means, with respect to any LIBOR Rate Loan, the
last day of the applicable Interest Period for such Loan, and at
maturity, whether by acceleration or otherwise.
"Interest Period" means any interest period applicable to a Loan as
determined pursuant to subsection 2.2(B).
"Interest Rate Determination Date" means the date on which Lender
determines the interest rate applicable to any LIBOR Rate Loan pursuant
to subsection 2.2(A) which shall be the second Business Day prior to the
first day of the Interest Period applicable to such LIBOR Rate Loan.
"LIBOR Rate" means, for each Interest Period, a rate of interest equal
to:
(a) the rate of interest determined by Lender at which deposits
in U.S. Dollars for the relevant period are offered based on information
presented on the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on
the day which is two (2) Business Days prior to the first day of such Interest
Period; provided that if at least two such offered rates appear on the Reuters
Screen LIBOR Page in respect of such Interest Period, the arithmetic mean of
all such rates (as determined by Lender) will be the rate used; provided
further that if Reuters ceases to provide LIBOR quotations, such rate shall be
the average rate of interest determined by Lender at which deposits in Dollars
are offered for the relevant Interest Period by Bankers Trust Company, The
Chase Manhattan Bank, National Association and Chemical Bank (or their
respective successors) to banks with combined capital and surplus in excess of
$500,000,000 in the London interbank market as of 11:00 A.M. (London time) on
the applicable Interest Rate Determination Date, divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) or reserve
requirements in effect on the day which is two (2) Business Days prior
to the beginning of such Interest Period (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or
other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the
Federal Reserve System; (such rate to be adjusted to the nearest one
sixteenth of one percent (1/16 of 1%) or, if there is no nearest one
sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth
of one percent (1/16 of 1%).
"LIBOR Rate Loans" means Loans bearing interest at rates determined by
reference to the LIBOR Rate as provided in subsection 2.2(A)(2).
"Notice of Borrowing" means a notice substantially in the form of
Exhibit G.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit H.
"Prime Rate Loans" means Loans bearing interest at rates determined by
reference to the Prime Rate as provided in subsection 2.2(A)(1).
1.2 Subsection 2.1 of the Loan and Security Agreement is amended by
deleting subpart 2.1(A)(2) and subpart 2.1(C) and by substituting the
following new subparts 2.1(A)(2) and 2.1(C).
(2)"Borrowing Base" means, as of any date of
determination, an amount equal to the sum of (a) one hundred percent
(100%) of the amount of the Cash Collateral Fund at the time of any
borrowing; plus (b) the lesser of (i) eighty percent (80%) of Eligible
Accounts and (ii) the Dilution Advance Rate of Eligible Accounts, less
such reserves as Lender in its sole and reasonable discretion elects to
establish; plus (c) (i) up to fifty percent (50%) of Eligible Inventory
consisting of CPU components; DRAM components; SIMM components; hard
drives and finished goods, and (ii) up to twenty-five percent (25%) of
Eligible Inventory consisting of all other raw material stock, less such
reserves as Lender in its sole and reasonable discretion elects to
establish, provided that the amount determined pursuant to this clause
(c) shall at no time exceed $4,000,000. Prior to the initial borrowing
against the Eligible Inventory described in part (c), Borrower's
inventory shall be independently appraised by a third party appraisal
firm chosen by Lender, and Borrower agrees to cooperate fully with such
appraisal firm and to pay all reasonable costs of obtaining said
appraisal. Based upon the results of such independent appraisal, Lender
may unilaterally reduce the advance rates as set forth in subsection
2.1(A)(2)(C) above by notifying Borrower in writing.
(C)Borrowing Mechanics. Prime Rate Loans made on any Funding Date shall
be in an aggregate minimum amount of $500,000 and integral multiples of
$50,000 in excess of that amount. LIBOR Rate Loans made on any Funding
Date shall be in an aggregate minimum amount of $1,000,000 and integral
multiples of $100,000 in excess of that amount. When Borrower desires
to borrow under this subsection 2.1, it shall deliver to Lender a fully
and properly completed Notice of Borrowing no later than 11:00 A.M. (Los
Angeles time) at least (i) one Business Day in advance of the proposed
Funding Date in the case of a requested Prime Rate Loan and (ii) three
Business Days in advance of the proposed Funding Date in the case of a
requested LIBOR Rate Loan. Loans may be continued as or converted into
Prime Rate Loans and LIBOR Rate Loans in the manner provided in
subsection 2.2(E) on and after the date ten (10) days after the First
Amendment Date. In lieu of delivering the above described Notice of
Borrowing, Borrower may give Lender telephonic notice by the required
time of the proposed borrowing; provided that such notice shall be
promptly, and in any event within one Business Day, confirmed in writing
by delivery of a Notice of Borrowing to Lender. Lender shall not incur
any liability to Borrower for acting upon any telephonic notice that
Lender believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1(C). The
making of an advance pursuant to telephonic notice shall constitute a
Loan under this Agreement. Except as provided in subsection 2.8(D), a
Notice of Borrowing for a LIBOR Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable once given, and Borrower shall be bound to
make a borrowing in accordance therewith. Each such advance to Borrower
under the Revolving Loan shall, on the Funding Date, be deposited, in
immediately available funds, in such account as Borrower may from time
to time designate to Lender in writing.
1.3 The Loan and Security Agreement is amended by deleting Subsection
2.2 in its entirety and by substituting the following new Subsection 2.2.
2.2 Interest
(A) Rate of Interest. The Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations
become due to the date paid at a rate per annum determined by reference
to the Prime Rate or the LIBOR Rate. The applicable basis for
determining the rate of interest shall be selected by Borrower initially
at the time a Notice of Borrowing is given pursuant to subsection
2.1(C). The basis for determining the interest rate with respect to any
Loan may be changed from time to time pursuant to subsection 2.2(E). If
on any day a Loan is outstanding with respect to which notice,
specifying the basis for determining the rate of interest, has not been
delivered to Lender in accordance with the terms of this Agreement, then
for that day that Loan shall bear interest determined by reference to
the Prime Rate.
The Loans shall bear interest through maturity as follows:
(1) if a Prime Rate Loan, then at the sum of the Prime Rate
per annum; and
(2 if a LIBOR Rate Loan, then at the sum of the LIBOR
Rate plus two and three quarters percent (2.75%) per annum.
Notwithstanding the foregoing, at the election of Lender in its
sole discretion, after the occurrence of an Event of Default and for so
long as such Event of Default continues, the Loans and all other
Obligations shall bear interest until paid in full at a rate per annum
that is three percent (3.0%) in excess of the rate of interest otherwise
payable under this Agreement; provided that, in the case of LIBOR Rate
Loans, until the expiration of any then applicable Interest Period, all
such LIBOR Rate Loans shall bear interest payable upon demand at a rate
which is five and three quarters percent (5.75%) in excess of the LIBOR
Rate. Thereafter, upon the expiration of the Interest Period in effect
at the time any such increase in interest rate is effective, unless
otherwise permitted by the terms of subsection 2.8(I), such LIBOR Rate
Loans shall thereupon become Prime Rate Loans and thereafter bear
interest payable upon demand at a rate which is three percent (3.0%) per
annum in excess of the interest rate otherwise payable under this
Agreement for Prime Rate Loans.
(B) Interest Periods. In connection with each LIBOR Rate Loan,
Borrower shall elect an interest period (each an "Interest Period") to
be applicable to such Loan, which Interest Period shall be either a one,
two or three month period provided that:
(1) the initial Interest Period for any Loan shall
commence on the Funding Date of such Loan;
(2) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(3) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(4) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to part (5) below, end on the last Business Day
of a calendar month;
(5) no Interest Period shall extend beyond the Expiry
Date;
(6) no Interest Period may extend beyond a date on which
Borrower is required to make a scheduled payment of principal of the
Loans unless the sum of (a) the aggregate principal amount of Loans that
are Prime Rate Loans or that have Interest Periods expiring on or before
such date and (b) the available, unused Revolving Loan Commitment equals
or exceeds the principal amount required to be paid on the Loans on such
date;
(7) the Interest Period for a Loan that is converted
pursuant to subsection 2.2(E) shall commence on the date of such
conversion and shall expire on the date on which the Interest Period for
the Loans so converted expires; and
(8) there shall be no more than two (2) Interest
Periods relating to LIBOR Rate Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans
and all other Obligations shall be computed on the daily principal
balance on the basis of a 360-day year for the actual number of days
elapsed in the period during which it accrues. In computing interest on
any Loan, the date of funding of the Loan or the first day of an
Interest Period applicable to such Loan or, with respect to a Prime Rate
Loan being converted from a LIBOR Rate Loan, the date of conversion of
such LIBOR Rate Loan to such Prime Rate Loan shall be included and the
date of payment of such Loan or the expiration date of an Interest
Period applicable to such Loan, or with respect to a Prime Rate Loan
being converted to a LIBOR Rate Loan, the date of conversion of such
Prime Rate Loan to such LIBOR Rate Loan, shall be excluded; provided
that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan. Interest on the Prime Rate Loans
and all other Obligations other than LIBOR Rate Loans shall be payable
to Lender monthly in arrears on the first day of the month following the
First Amendment Date and the first day of each month thereafter, on the
date of any prepayment of Loans and at maturity, whether by acceleration
or otherwise. Interest on LIBOR Rate Loans shall be payable to Lender
on the last day of the applicable Interest Period for such Loan, and at
maturity, whether by acceleration or otherwise.
(D) Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrower shall
not be required to pay, and Lender shall not be permitted to collect,
any amount of interest in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is
provided for or determined by a court of competent jurisdiction to have
been provided for in this Agreement or in any of the other Loan
Documents, then in such event: (1) the provisions of this subsection
shall govern and control; (2) neither Borrower nor any other Loan Party
shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option,
(a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum
amount permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed
from time to time under applicable law (the "Maximum Rate"), and this
Agreement and the other Loan Documents shall be deemed to have been and
shall be, reformed and modified to reflect such reduction; and (5)
neither Borrower nor any other Loan Party shall have any action against
Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of
time interest on any Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter
such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall remain at the Maximum Rate
until Lender shall have received the amount of interest that Lender
would have received during such period on such Obligations had the rate
of interest not been limited to the Maximum Rate during such period.
(E) Conversion or Continuation. Subject to the provisions of
subsection 2.8 and the limitation on the number of Interest Periods
contained in subsection 2.2(B)(8), Borrower shall have the option to (1)
convert at any time all or any part of outstanding Loans equal to
$1,000,000 and integral multiples of $100,000 in excess of that amount
from Loans bearing interest at a rate determined by reference to one
basis to Loans bearing interest at a rate determined by reference to an
alternative basis, or (2) upon the expiration of any Interest Period
applicable to a LIBOR Rate Loan, to continue all or any portion of such
Loan equal to $1,000,000 and integral multiples of $100,000 in excess of
that amount as a LIBOR Rate Loan and the succeeding Interest Period(s)
of such continued Loan shall commence on the last day of the Interest
Period of the Loan to be continued; provided that LIBOR Rate Loans may
only be converted into Loans bearing interest determined by reference to
an alternative basis on the expiration date of an Interest Period
applicable thereto; and provided, further, that no outstanding Loan may
be continued as, or be converted into, a LIBOR Rate Loan when any Event
of Default or Default has occurred and is continuing; and provided,
further, that no Loan may be converted into a LIBOR Rate Loan until ten
(10) days after the First Amendment Date.
Borrower shall deliver a fully and properly completed Notice of
Conversion/Continuation to Lender no later than 11:00 A.M. (Los Angeles
time) at least three (3) Business Days in advance of the proposed
conversion/continuation date. In lieu of delivering the above-described
Notice of Conversion/Continuation, Borrower may give Lender telephonic
notice by the required time of any proposed conversion/continuation
under this subsection 2.2(E); provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Lender on or before the proposed
conversion/continuation date.
Lender shall not incur any liability to Borrower in acting upon
any telephonic notice referred to above that Lender believes in good
faith to have been given by a duly authorized officer or other person
authorized to act on behalf of Borrower or for otherwise acting in good
faith under this subsection 2.2(E).
Except as provided in subsection 2.8(D), a Notice of
Conversion/Continuation for conversion to, or continuation of, a LIBOR
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
once given, Borrower shall be bound to convert or continue in accordance
therewith and Lender shall have no liability for acting in accordance
with Borrower's instructions contained therein.
1.4 The Loan and Security Agreement is amended by deleting Subsection
2.3 in its entirety and by substituting the following new Subsection 2.3.
2.3 Fees
(A) Unused Line Fee. From and after the Closing Date, Borrower
shall pay to Lender a fee in an amount equal to the Revolving Loan
Commitment less the average daily balance of the Revolving Loan during
the preceding month multiplied by (i) three-quarters of one percent
(.75%) per annum for all periods through April 30, 1996 and (ii) one
half of one percent (.50%) for all periods on and after May 1, 1996,
such fee to be calculated on the basis of a 360-day year for the actual
number of days elapsed and to be payable monthly in arrears on the first
day of the month following the Closing Date and on the first day of each
month thereafter.
(B) Prepayment Fees. If Borrower voluntarily prepays the
Obligations in full prior to June 21, 1996 and the Credit Facility and
Lender's Commitments thereunder are terminated, Borrower shall pay to
Lender, as compensation for the costs of being prepared to make funds
available to Borrower under this Agreement an amount determined by
multiplying one-half of one percent (.50%) by the amount of the
Revolving Loan Commitment.
(C) Monthly Administration Fee. During each month (or any part
thereof) that Borrower has an outstanding Loan under the Revolving Loan
Commitment (a "Borrowing Month"), Borrower shall pay to Lender, as
compensation for Lender's costs of administering the Loan, a fee of
$2,000 to be payable monthly in arrears on the first day of the month
following any Borrowing Month.
1.5 The Loan and Security Agreement is amended by adding the following
new subparts (D) and (E) to subsection 2.4.
(D) Voluntary Prepayments and Repayments. Borrower may, upon at
least two (2) Business Days prior notice to Lender, repay LIBOR Rate
Loans in whole at any time or from time to time in part; provided that
(1) concurrently with such payment Borrower pays any fees due under
subsection 2.3(B), (2) LIBOR Rate Loans may be prepaid or repaid only on
the last day of the applicable Interest Periods therefor unless Borrower
concurrently with such payment pays all amounts due under subsection
2.8(E) and (3) each partial prepayment under a Libor Rate Loan shall be
in the minimum principal of $1,000,000 and integral multiples of
$100,000 in excess of that amount. After notice of prepayment is given,
the amount specified to be prepaid in such notice shall become due and
payable on the prepayment date.
(E) Application of Prepayments and Repayments. All prepayments
and repayments shall include payment of accrued interest on the
principal amount so prepaid and repaid and shall be applied to the
payment of interest before application to principal. Any prepayment
under this Section 2.4 shall be applied first to Prime Rate Loans to the
full extent thereof before application to LIBOR Rate Loans, in the order
determined by Lender.
1.6 The Loan and Security Agreement is amended by deleting Subsection
2.5 in its entirety and by substituting the following new Subsection 2.5.
2.5 Term of this Agreement. This Agreement shall be effective until
the date that is three (3) years from the First Amendment Date. The
Commitments shall (unless earlier terminated) terminate on the
Termination Date. In addition, this Agreement may be terminated as set
forth in Section 8.3 hereof. Upon termination in accordance with
Section 8.3 or on the Termination Date, all Obligations shall become
immediately due and payable without notice or demand. Notwithstanding
any termination, until all Obligations have been fully paid and
satisfied, Lender shall be entitled to retain security interests in and
liens upon all Collateral, and even after payment of all Obligations
hereunder, Borrower's obligation to indemnify Lender in accordance with
the terms hereof shall continue and Lender shall retain such security as
is necessary in its reasonable discretion to cover any claims or
indemnified Liabilities that are identifiable at the time of termination
of this Agreement.
1.7 The Loan and Security Agreement is amended by adding to Section 2
the following new subsection 2.8.
2.8 Special Provisions Governing LIBOR Rate Loans
Notwithstanding any other provision of this Agreement, the
following provisions shall govern with respect to LIBOR Rate Loans as to
the matters covered:
(A) Determination of Interest Rate. As soon as practicable
after 11:00 A.M. (Los Angeles time) on each Interest Rate Determination
Date, Lender shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest
rate that shall apply to the LIBOR Rate Loans for which an interest rate
is then being determined for the applicable Interest Period and shall
promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower. In the event that Lender shall have determined
(which determination shall be final and conclusive and binding upon all
parties hereto), on any Interest Rate Determination Date with respect to
any LIBOR Rate Loans, that by reason of circumstances affecting the
interbank Eurodollar market, adequate and fair means do not exist for
determining the interest rate applicable to such Loans on the basis
provided for in the definition of LIBOR Rate, Lender shall on such date
give notice (by telecopy or by telephone confirmed in writing) to
Borrower of such determination, whereupon (1) no Loans may be made as,
or converted into, LIBOR Rate Loans until such time as Lender notifies
Borrower that the circumstances giving rise to such notice no longer
exist and (2) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to the Loans in
respect of which such determination was made shall be deemed to be
modified by Borrower and the LIBOR Rate Loans then being requested shall
be made or continued by Lender as Prime Rate Loans.
(B) Substituted Rate of Borrowing. If Lender shall have
determined (which determination shall be final and conclusive and
binding upon all parties), with respect to any LIBOR Rate Loan and any
pending Interest Period that by reason of (a) any change after the date
hereof in any applicable law or governmental rule, regulation or order
(or any interpretation thereof and including the introduction of any new
law or governmental rule, regulation or order) or (b) other
circumstances affecting Lender or the LIBOR market or the position of
Lender in such market (such as for example, but not limited to, official
reserve requirements required by Regulation D to the extent not given
effect in the LIBOR rate), the LIBOR Rate shall not represent the
effective pricing to Lender for Dollar deposits of comparable amounts
for the relevant period, then, and in any such event, Lender shall
promptly (and in any event as soon as possible after being notified of a
borrowing, conversion or continuation) give notice (by telephone
confirmed in writing) to Borrower of such determination. Thereafter,
Borrower shall pay to Lender, upon written demand therefor, such
additional amounts in the form of an increased rate of, or a different
method of calculating, interest or otherwise as Lender in its sole
discretion shall determine. A certificate as to additional amounts owed
Lender, showing in reasonable detail the basis for the calculation
thereof, submitted in good faith to Borrower by Lender shall, absent
manifest error, be final and conclusive and binding upon all of the
parties hereto.
(C) Required Termination and Prepayment. If on any date
Lender shall have reasonably determined (which determination shall be
final and conclusive and binding upon all parties) that the making or
continuation of its LIBOR Rate Loans has become unlawful or impossible
by compliance by Lender in good faith with any law, governmental rule,
regulation or order (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful), then, and in any
such event, Lender shall promptly give notice (by telephone confirmed in
writing) to Borrower of that determination. Subject to the prior
withdrawal of a Notice of Borrowing or a Notice of
Conversion/Continuation or prepayment of the LIBOR Rate Loans of Lender
as contemplated by the following subsection 2.8(D), the obligation of
Lender to make or maintain its LIBOR Rate Loans during any such period
shall be terminated at the earlier of the termination of the Interest
Period then in effect or when required by law and Borrower shall no
later than the termination of the Interest Period in effect at the time
any such determination pursuant to this subsection 2.8(C) is made or,
earlier, when required by law, repay or prepay the LIBOR Rate Loans of
Lender, together with all interest accrued thereon.
(D Options of Borrower. In lieu of paying Lender such
additional moneys as are required by subsection 2.8(B) or the prepayment
of Lender required by subsection 2.8(C), Borrower may exercise any one
of the following options:
(1) If the determination by Lender relates only to LIBOR
Rate Loans then being requested by Borrower pursuant to a Notice of
Borrowing or a Notice of Conversion/Continuation, Borrower may by giving
notice (by telephone confirmed in writing) to Lender no later than the
date immediately prior to the date on which such LIBOR Rate Loans are to
be made, withdraw that Notice of Borrowing or Notice of
Conversion/Continuation and the LIBOR Rate Loans then being requested
shall be made by Lender as Prime Rate Loans; or
(2) Upon written notice to Lender, Borrower may terminate
the obligations of Lender to make or maintain Loans as, and to convert
Loans into, LIBOR Rate Loans and in such event, Borrower shall, prior to
the time any payment pursuant to subsection 2.8(C) is required to be
made or, if the provisions of subsection 2.8(B) are applicable, at the
end of the then current Interest Period, convert all of the LIBOR Rate
Loans into Prime Rate Loans in the manner contemplated by subsection
2.2(E) but without satisfying the advance notice requirements therein.
(E) Compensation. Borrower shall compensate Lender, upon
written request by Lender (which request shall set forth in reasonable
detail the basis for requesting such amounts and which shall, absent
manifest error, be conclusive and binding upon all parties hereto), for
all reasonable losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) sustained by Lender in
connection with the re-employment of such funds), that Lender may
sustain: (1) if for any reason (other than a default by Lender) a
borrowing of any LIBOR Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing, a Notice of Conversion/Continuation
or a telephonic request for borrowing or conversion/ continuation
therefor is given pursuant to subsection 2.2(E); (2) if any prepayment
of any LIBOR Rate Loans occurs on a date that is not the last day of an
Interest Period applicable to that Loan; (3) if any prepayment of any
LIBOR Rate Loans is not made on any date specified in a notice of
prepayment given by Borrower; or (4) as a consequence of any other
default by Borrower to repay its LIBOR Rate Loans when required by the
terms of this Agreement; provided that during the period while any such
amounts have not been paid, Lender shall reserve an equal amount from
amounts otherwise available to be borrowed under the Revolving Loans.
(F) Booking of LIBOR Rate Loans. Lender may make, carry or
transfer LIBOR Rate Loans at, to, or for the account of, any of its
branch offices or the office of an affiliate of Lender.
(G) Increased Costs. Except as provided in subsection 2.8(B) with
respect to certain determinations on Interest Rate Determination Dates,
if, after the date hereof by reason of, (1) the introduction of or any
change (including, without limitation, any change by way of imposition
or increase of reserve requirements) in or in the interpretation of any
treaty, law, rule, or regulation, or (2) the compliance with any
guideline or request from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks
or financial institutions generally (whether or not having the force of
law):
(a) Lender (or its applicable lending office) shall be
subject to any tax, duty, levy, cost or other charge (except for taxes
on the overall net income or alternative minimum taxable income of
Lender or its applicable lending office imposed by the jurisdiction in
which Lender's principal executive office or applicable lending office
is organized, located or is doing business) with respect to its LIBOR
Rate Loans or its obligation to make LIBOR Rate Loans, or the recording,
registration notarization or other formalization of the LIBOR Rate Loans
or the basis of taxation of payments to Lender of the principal of or
interest or commitment fees or any amount payable on its LIBOR Rate
Loans or its obligation to make LIBOR Rate Loans shall change; or
(b) 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, Lender's applicable
lending office shall be imposed on Lender or its applicable lending
office or the interbank LIBOR market, and as a result thereof there shall
be any increase in the cost to Lender of agreeing to make or making,
funding or maintaining LIBOR Rate Loans, or there shall be a reduction
in the amount received or receivable by Lender or its applicable lending
office, then Borrower shall from time to time, upon written notice from
and demand by Lender, pay to Lender, within five (5) Business Days after
receipt of such notice, demand and appropriate proof of such cost,
additional amounts sufficient to indemnify Lender against such increased
cost or reduced amount. A certificate as to the amount of such
increased cost or reduced amount, submitted to Borrower by Lender,
shall, except for manifest error, be final, conclusive and binding for
all purposes. Any payments to be made by Borrower under subsections
2.8(B), 2.8(E) or 2.8(G) are to be without duplication.
(H) Assumptions Concerning Funding of LIBOR Rate Loans.
Calculation of all amounts payable to Lender under this subsection 2.8
shall be made as though Lender had actually funded its relevant LIBOR
Rate Loan through the purchase of a LIBOR deposit bearing interest at
the LIBOR Rate in an amount equal to the amount of that LIBOR Rate Loan
and having a maturity comparable to the relevant Interest Period and
through the transfer of such LIBOR deposit from an offshore office to a
domestic office in the United States of America; provided, however, that
Lender may fund each of its LIBOR Rate Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for the calculation
of amounts payable under this subsection 2.8.
(I) LIBOR Rate Loans After Default. Unless Lender shall
otherwise agree, after the occurrence of and during the continuance of a
Default or Event of Default, Borrower may not elect to have a Loan be
made or continued as, or converted to, a LIBOR Rate Loan after the
expiration of any Interest Period then in effect for that Loan.
1.8 Subsection 5.1 of the Loan and Security Agreement is amended by
deleting subparts 5.1(A) and (G) and by substituting the following new
subparts 5.1(A) and (G).
(A) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month, Borrower will
deliver the consolidated and consolidating balance sheet of Borrower as
at the end of such month and the related consolidated and consolidating
statements of income for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month;
provided, however, that when the ending date of any Monthly Financials
coincides with the ending date of any Quarterly Financials due under
subpart 5.1(B), then any such coincidental Monthly Financials shall be
due at the same time of such Quarterly Financials.
(G) Reconciliation Reports, Inventory Reports and Listings and
Agings. On the Closing Date and within fifteen (15) calendar days after
the last day of each month and from time to time upon the request of
Lender, Borrower will deliver to Lender: (1) an aged trial balance of
all then existing Accounts; and (2) an Inventory Report as of the last
day of such period. As soon as available and in any event within
fifteen (15) calendar days after the last day of each month, and from
time to time upon the request of Lender, Borrower will deliver to
Lender: (1) a Reconciliation Report as at the last day of such period;
(2) an aged trial balance of all then existing accounts payable; and (3)
a detailed inventory listing and cover summary report. All of the above
reports shall be in form and substance satisfactory to Lender.
Notwithstanding the foregoing, Borrower's obligation to provide all of
the above reports within (15) calendar days after the last day of each
month shall be suspended until the earlier to occur of the following:
(i) sixty (60) days prior to the initial borrowing under this Agreement;
or (ii) the date upon which Borrower's Cash Collateral Fund is less
than $4,000,000.
1.9 The Loan and Security Agreement is amended by deleting Subsection
5.3 in its entirety and by substituting the following new Subsection 5.3.
5.3 Inspection. Borrower shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of the
properties of Borrower or any of its Subsidiaries, including its and
their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and independent public accountants,
at such reasonable times during normal business hours and as often as
may be reasonably requested. Borrower acknowledges that Lender intends
to make such inspections on at least a quarterly basis, and Borrower
agrees to pay to Lender an audit fee for each inspection equal to
$650.00 per auditor per day or any portion thereof, excluding all full
days spent by Lender traveling to or from Borrower's locations plus all
out-of-pocket expenses incurred in connection with any such examination.
Notwithstanding the foregoing, Lender's intention to make inspections on
at least a quarterly basis shall be suspended until the earlier to occur
of the following: (i) sixty (60) days prior to the initial borrowing
under this Agreement; or (ii) the date upon which Borrower's Cash
Collateral Fund is less than $4,000,000.
1.10 The Loan and Security Agreement is amended by deleting Subsection
7.4 in its entirety and by substituting the following new Subsection 7.4.
7.4 Investments and Loans. Borrower shall not and shall not permit any
of its Subsidiaries to make or permit to exist investments in or loans
to any other Person, except: (a) investments in short-term direct
obligations of the United States Government; (b) investments in
negotiable certificates of deposit issued by banks satisfactory to
Lender, in its reasonable discretion; (c) investments in commercial
paper rated at least A-1 by Standard and Poors or at least P-1 by
Xxxxx'x Investor Service; (d) loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business; and (e) during the three year period beginning
October 1, 1995 and ending September 30, 1998, equity investments in any
Persons which in the aggregate shall not exceed $5,000,000 in any single
Person and $10,000,000 in the aggregate. Any investments by Borrower or
any of its Subsidiaries under subpart (e) of this subsection shall (i)
be exclusively equity investments in a Person that constitute a minority
interest (less than fifty percent (50%) of the common equity of such
Person) and (ii) shall not expose Borrower or any of its Subsidiaries to
a loss greater than the amount of such cash investment,
including, without limitation, the assumption or guaranty of any
Liabilities of such Person in exchange for such investment.
SECTION 2. RATIFICATION OF AGREEMENT
2.1 To induce Lender to enter into this Amendment, Borrower represents
and warrants that after giving effect to this Amendment no violation of the
terms of the Loan and Security Agreement exist and all representations and
warranties contained in the Loan and Security Agreement are true, correct and
complete in all material respects on and as of the date hereof except to the
extent such representations and warranties specifically relate to an earlier
date in which case they were true, correct and complete in all material
respects on and as of such earlier date.
2.2 Except as expressly set forth in this Amendment, the terms,
provisions and conditions of the Loan and Security Agreement and the other
Loan Documents are unchanged, and said agreements, as amended, shall remain in
full force and effect and are hereby confirmed and ratified.
SECTION 3. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts, and all
such counterparts taken together shall be deemed to constitute one and the
same instrument. Signature pages may be detached from counterpart documents
and reassembled to form duplicate executed originals. This Amendment shall
become effective as of the date hereof upon the execution of the counterparts
hereof by Borrower and Lender and upon payment to Lender of a documentation
fee in the amount of $2,500.
SECTION 4. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
Witness the execution hereof by the respective duly authorized officers
of the undersigned as of the date first above written.
XXXXXX FINANCIAL, INC. ADVANCED LOGIC RESEARCH, INC.
By: _________________________ By: _________________________
Title: ______________________ Title: ______________________
