REVOLVING LINE OF CREDIT LOAN AGREEMENT

 

“Business Day” shall mean any day that is not a Saturday, a Sunday, or a day on which banks are required or permitted to be closed in the State of California.

 

“Capital Expenditures” shall mean, for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases that is capitalized on the balance sheet of Borrower including in connection with a sale-leaseback transaction) by Borrower and its Subsidiaries for the acquisition or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are required to be capitalized under GAAP on a consolidated balance sheet of Borrower and its Subsidiaries. Capital Expenditures shall not include (i) the actual value received for existing equipment either traded-in at time of purchase of new equipment or sold in the ordinary course of business (but only to the extent such equipment is replaced), and (ii) expenditures made from insurance proceeds.

 

“Capital Lease” shall mean any lease of any property (whether real, personal or mixed) by Borrower or a Subsidiary as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of Borrower or such Subsidiary or otherwise be disclosed as such in a note to such balance sheet.

 

“Cash Equivalents” shall mean any of the following: (i) certificates of deposit or other depository accounts with commercial banks organized under the laws of the United States or a state thereof, to the extent such certificates or accounts are fully insured by the Federal Deposit Insurance Corporation; (ii) treasury bills, and other marketable obligations issued or fully guaranteed by, or backed by the full faith and credit of, the United States and maturing not more than one (1) year from the date of issuance; or (iii) open market commercial paper rated at least “A 1” or “P 1 “ or higher by a national credit rating agency and maturing not more than two hundred seventy (270 ) days from the date of issuance.

 

“Closing Date” shall mean the date on which all of the conditions precedent described in Section 2 shall have been satisfied or waived by Lender, and the Loan has been funded or applied by Lender to refinance the Term Loan.

 

“Collateral” shall mean all of the real property and interests in property described in Section 9, and all other property and interests in property that now or hereafter secure the payment of any of the Obligations.

 

“Consolidated EBIT” shall mean, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (a) Consolidated Net Income; plus (b) the sum of (i) Federal, state, local, and foreign income taxes, and (ii) interest expense (including the interest portion of any capitalized lease obligations).

 

“Consolidated Funded Debt” shall mean, as at any date of determination, for Borrower and its Subsidiaries on a consolidated basis, all indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of indebtedness, and which by its term matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders thereunder to extend credit over a period of more than one year from the date of

 

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creation thereof, and specifically including (i) capital lease obligations, (ii) current maturities of long-term debt, (iii) revolving credit and short-term debt extendible beyond one year at the option of the debtor, and (iv) the Obligations.

 

“Consolidated Indebtedness” shall mean, as at any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of (i) all obligations for borrowed money or for the deferred purchase price of property or services (including the present value of capitalized lease obligations) which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as of the date at which such indebtedness is to be determined; (ii) guarantees; and (iii) letters of credit (other than letters of credit to support trade payables) and endorsements (other than of notes, bills, and checks presented to banks for collection or deposit in the ordinary course of business), in each case to support obligations for borrowed money of others.

 

“Consolidated Net Income” shall mean, for any period, on a consolidated basis, the net income, if any, of Borrower and its Subsidiaries, determined in accordance with GAAP.

 

“Consolidated Net Loss” shall mean, for any period, on a consolidated basis, the net loss, if any, of Borrower and its Subsidiaries, determined in accordance with GAAP.

 

“Consolidated Net Worth” shall mean, as at any date of determination, on a consolidated basis, the gross book value of the assets of Borrower, minus the sum of (i) all reserves applicable thereto, and (ii) all liabilities of Borrower (including subordinated liabilities).

 

“Consolidated Total Capitalization” shall mean, as at any date of determination, the sum of (i) Consolidated Funded Debt, plus (ii) Consolidated Net Worth.

 

“Default” shall mean the occurrence of any event or circumstance which, with the passage of time or the giving of notice or both, would become an Event of Default.

 

“Default Rate” shall mean a rate of interest that is three percent (3.00%) higher than the rate otherwise applicable.

 

“Discounted Value” shall mean, with respect to any Prepayment, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Prepayment from their respective scheduled due dates to the payment date with respect to such Prepayment, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest is payable for such Prepayment) equal to the Reinvestment Yield with respect to such Prepayment.

 

“Environmental Laws” shall mean all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include: the Comprehensive Environmental Response,

 

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Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5 101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.); and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.

 

“Environmental Liabilities” shall mean, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, environmental permits, or in connection with any release or threatened release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.

 

“Event of Default” shall have the meaning assigned thereto in Section 13.

 

“Fiscal Quarter” shall mean any of the quarterly accounting periods of Borrower.

 

“Fiscal Year” shall mean the 12-month period of Borrower ending December 31 of each year. Subsequent changes of the fiscal year of Borrower shall not change the term “Fiscal Year,” unless Lender shall consent in writing to such change.

 

“Fixed Rate” means, with respect to any portion of the Loan that Borrower elects at any time pursuant to Section 3(d) to convert to a fixed rate of interest based on the LIBOR Rate, the applicable LIBOR Rate as of the date of such election plus a margin equal to the Applicable Spread.

 

“Fixed Rate Tranche” shall mean any one of the four interest rate components (each such interest rate component being referred to individually as a “Fixed Rate Tranche,” and all such interest rate components being referred to collectively as the “Fixed Rate Tranches”) of the Loan established pursuant to Section 3, consisting of the Thirty Day Fixed Rate Tranche, the Three Month Fixed Rate Tranche, the Six Month Fixed Rate Tranche and the One Year Fixed Rate Tranche.

 

“GAAP” shall mean generally accepted accounting principles.

 

“Guarantor” shall mean any Person that has guaranteed to Lender all or any portion of the Loan.

 

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“Guaranty Agreement” shall mean any Continuing Guaranty or other agreement by which a Guarantor has guaranteed all or any portion of the Loan.

 

“Hazardous Material” shall mean any substance, material or waste that is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCBs), or any radioactive substance.

 

“Indemnified Person” shall mean all Persons indemnified by Borrower pursuant to Section 15.

 

“Interest Coverage Ratio” shall mean, as at any date of determination, the ratio of Consolidated EBIT for any period to interest expense for such period.

 

“Interest Determination Date” means the date, as designated by Borrower, on which a portion of the Loan shall begin to bear interest at a Fixed Rate.

 

“Interest Period” means, with respect to any portion of the Loan that Borrower elects to have bear interest at a Fixed Rate, a period beginning on the Interest Determination Date and ending, at Borrower’s election, either one (1) month, three (3) months, six (6) months, or twelve (12) months thereafter.

 

“Investments” shall mean all expenditures by Borrower and its Subsidiaries, other than Capital Expenditures, made for the purpose of acquiring, increasing, or supplementing equity interests of any nature in partnerships, joint ventures, corporations, trusts, associations, or other business entities, or in real or personal property of any kind and as reflected as investments in Borrower’s financial statements.

 

“LIBOR Rate” means, for any Interest Determination Date, the rate offered from time to time for U.S. Dollar deposits for the Interest Period selected, as quoted by Telerate News Service as of 11:00 A.M. London setting time (or, at Lender’s option, a comparable reference on the Reuters Screen LIBOR Page or such other quotation service as may be chosen by Lender) on the first Eurodollar business day of the Interest Period; provided , that if two or more of such offered rates appear on Telerate (or on the Reuters Screen LIBOR Page or alternative service, as the case may be), the “LIBOR Rate” shall be highest of the two rates quoted.

 

“Lien” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing).

 

“Make-Whole Amount” shall mean, with respect to any Prepayment of any Fixed Rate Tranche, the amount, if any, by which the Discounted Value of the Remaining

 

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Scheduled Payments with respect to the Prepayment exceeds the amount of such Prepayment; provided , that the Make-Whole Amount shall in no event be less than zero.

 

“Material Adverse Effect” shall mean a Material Adverse Effect with respect to (i) the business, assets, operations, prospects, or financial or other condition of Borrower or any Guarantor, (ii) Borrower’s ability to pay its obligations to Lender under this Agreement, or (iii) Lender’s rights and remedies under this Agreement or any Guaranty Agreement.

 

“Maturity Date” shall have the meaning set forth in Section 4.

 

“Modification Fee” shall have the meaning set forth in Section 2.

 

“Obligations” shall mean all loans, advances, debts, liabilities, and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable and whether or not allowed as a claim in any proceeding referred to in Section 13(f)) owing by Borrower to Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Other Documents.  This term includes the Loan, all principal, interest, fees, charges, expenses, attorneys’ fees and any other sum chargeable to Borrower under this Agreement or any of the Other Documents.

 

“One Year Fixed Rate Tranche” shall mean a Fixed Rate Tranche utilizing a fixed rate Interest Period of one year, established pursuant to Section 3.

 

“Other Documents” shall mean all of the documents listed in Exhibit A.

 

“Permitted Encumbrances” shall mean the following encumbrances: (i) Liens for taxes or assessments or other governmental charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of this Agreement; (ii) pledges or deposits securing obligations under workmen’s compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which Borrower or any Guarantor is a party as lessee made in the ordinary course of business; (iv) workers’, mechanics’, suppliers’ or similar Liens arising in the ordinary course of business that are either not yet due and payable or that are being contested in good faith by appropriate proceedings and for which Borrower or any Guarantor has established adequate reserves; (v) carriers’, warehousemen’s, or other similar possessory Liens arising in the ordinary course of business; (vi) an attachment or judgment Lien, but only for a period of thirty (30) days following attachment of such Lien and such attachment or judgment lien shall cease to be a Permitted Encumbrance if the obligation that it secures has not been satisfied or bonded during such thirty (30) day period; (vii) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real property, leases or leasehold estates; (viii) Liens securing indebtedness owed by a Subsidiary to Borrower; (ix) security interests securing purchase money indebtedness in capital assets, the acquisition of which is permitted by this Agreement, and so long as the security interest does not encumber any asset other than the asset acquired; (x) any Lien listed as a

 

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Permitted Encumbrance on the Disclosure Schedule referred to in Exhibit A; (xi) the refinancing of the real property mortgages referred to in the Disclosure Schedule referred to in Exhibit A, provided that such refinancing covers the same property covered by the original mortgages, secures a principal amount not in excess of that secured by such mortgages on the date of refinancing, and the terms of such refinancing have all been negotiated at arms length and are on fair market terms; and (xii) other Liens securing Consolidated Indebtedness not exceeding Fifteen Million Dollars ($15,000,000) in the aggregate outstanding at any time, so long as such other Liens do not attach to any of the Collateral.

 

“Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

 

“Prepayment” shall mean a prepayment, prior to the Maturity Date, of all or any portion of the principal amount of the Loan.

 

“Prime Rate” means, on any given day, the “Prime” rate as published from time to time in the Eastern Edition of The Wall Street Journal , or the highest such rate if more than one is shown, regardless of whether such rate is actually charged by any bank, or, in the event that The Wall Street Journal ceases publication of such rate, in such other nationally recognized financial publication of general circulation as Lender may, from time to time, designate in writing based on Lender’s reasonable determination that the rate so published is comparable to the “Prime” rate published in the Eastern Edition of The Wall Street Journal .

 

“Processing Fee” shall have the meaning set forth in Section 5.

 

“Reinvestment Yield” shall mean, with respect to any Prepayment of any Fixed Rate Tranche, the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the second Business Day preceding the payment date with respect to such Prepayment, on the display designated as “Page PX 1 “ or other applicable “PX” page of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 or such other page on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Prepayment as of such payment date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest date for which such yields have been so reported as of the second Business Day preceding the payment date with respect to such Prepayment, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Prepayment as of such payment date.  Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life.

 

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“Remaining Average Life” shall mean, with respect to any Prepayment of any Fixed Rate Tranche, the number of years (calculated to the nearest one-twelfth year) obtained by: (i) multiplying (a) the principal component of each Remaining Scheduled Payment covered by such Prepayment by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the date of such Prepayment and the scheduled due date of such Remaining Scheduled Payment; (ii) adding the products of each such calculation; and (iii) dividing the resulting sum by the amount of such Prepayment.

 

“Remaining Scheduled Payments” shall mean, with respect to any Prepayment of any Fixed Rate Tranche, all payments and interest that would be due after the date of the Prepayment and on or prior to the next Reset Date with respect to the principal prepaid if such Prepayment were not made; provided , that if such payment date is not a date on which interest payments are due to be made under the terms of this Agreement, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such payment date and required to be paid on such payment date pursuant to this Agreement.

 

“Reset Date” shall mean (i) with respect to the Three Year Fixed Rate Tranche, December 1, 2005, (ii) with respect to a Fixed Rate Tranche, expiration of the applicable Interest Rate Period, and (iii) with respect to all other portions of the Loan, daily.

 

“Restricted Payments” shall mean (i) dividends or other distributions or payments on account of or with respect to any capital stock of Borrower or of any Guarantor, except distributions consisting of such stock or, in the case of a Guarantor, distributions or payments made to Borrower, (ii) the redemption or acquisition of such stock or of warrants, rights, or other options to purchase such stock, except, in the case of a Guarantor, redemption or acquisition of stock held by Borrower, and (iii) any payment, repayment, redemption, retirement, repurchase or other acquisition, direct or indirect, by Borrower, any Guarantor or any Subsidiary of Borrower or any Guarantor of any principal portion of any obligation or indebtedness that has been subordinated to the indebtedness owed by Borrower to Lender.

 

“Revolving Loan” means the revolving line of credit referred to in Section 3 of this Agreement.

 

“Six Month Fixed Rate Tranche” shall mean a Fixed Rate Tranche utilizing a fixed rate Interest Period of six months, established pursuant to Section 3.

 

“Stock” shall mean all shares, options, warrants, general or limited partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including, without limitation, common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended).

 

“Subsidiary” shall mean, with respect to any Person, (i) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the

 

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time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of law or otherwise and (ii) any partnership, trust, limited liability company, or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner.

 

“Term Loan” shall mean the $15,000,000 term loan advanced by Lender to Borrower pursuant to and in accordance with the Term Loan Agreement.  As of the Effective Date the outstanding principal balance of the Term Loan was Thirteen Million Five Hundred Thousand ($13,500,000).

 

“Thirty-Day Fixed Rate Tranche” shall mean a Fixed Rate Tranche utilizing a fixed rate Interest Period of thirty days, established pursuant to Section 3.

 

“Three Month Fixed Rate Tranche” shall mean a Fixed Rate Tranche utilizing a fixed rate Interest Period of three months, established pursuant to Section 3.

 

“Three Year Fixed Rate Tranche” shall mean the Fixed Rate Tranche for Four Million Dollars ($4,000,000) previously established pursuant to Section 2 of the Term Loan Agreement.

 

(b)           Rules of Construction . Unless otherwise specified, references in this Agreement to a Section, Subsection, clause, Exhibit, or Schedule refer to such Section, Subsection, clause, Exhibit, or Schedule as contained in this Agreement. The words “herein,” hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole, including all Exhibits and Schedules hereto, as the same may from time to time be amended, restated, modified or supplemented. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural. The words “including,” “includes,” and “include” shall be deemed to be followed by the words “without limitation”; references to persons include their respective successors and assigns, to the extent permitted by the loan documents executed in connection with this Agreement, or, in the case of governmental persons, persons succeeding to the relevant functions of such persons; all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations; whenever any provision in this Agreement or any such loan document refers to the knowledge (or analogous phrase) of Borrower or any Affiliate of Borrower, such words are intended to signify that Borrower or such Affiliate has actual knowledge or awareness of a particular fact or circumstance of that Borrower or such Affiliate, if it had exercised reasonable due diligence, would have known or been aware of such fact or circumstance.

 

2.             Conditions Precedent . Lender’s obligation to make any Advances under the Loan hereunder is subject to the following conditions precedent:

 

(a)           Required Documents . Lender must have received from Borrower either an executed original, or a facsimile of the signature page of an executed original, of this Agreement

 

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as well as all of the other documents (the “Other Documents”) listed in Exhibit A, each of which must be satisfactory to Lender in its sole discretion.

 

(b)           INTENTIONALLY OMITTED 

 

(c)           Approvals . Lender shall have received evidence satisfactory to Lender that all consents and approvals which are necessary for or required as a condition of the validity and enforceability of this Agreement and all documents and instruments contemplated hereby, have been obtained and are in full force and effect.

 

(d)           Event of Default . No Default or Event of Default shall have occurred and be continuing, and no default or event of default shall have occurred and be continuing under this Agreement.

 

(e)           Loan Fees . Borrower shall have paid to Lender the Modification Fee and the Processing Fee required by Section 5.

 

(f)            Continuing Guaranty Agreements . Borrower shall have delivered to Lender continuing guaranty agreements, in form and substance satisfactory to Lender, from the persons identified on Exhibit A pursuant to which such Persons guarantee to Lender all of Borrower’s obligations to Lender under this Agreement.

 

(g)           Title Insurance Endorsements . Borrower shall have caused Lender’s title insurer to issue to Lender, at Borrower’s expense, a revolving credit endorsement to Lender’s title insurance policy together with such other and additional endorsements as lender may require.

 

3.             Conversion to Revolving Loan; Base Rate; Fixed Rate Tranches .

 

(a)           Loan Conversion . On the terms and conditions set forth in this Agreement, Lender agrees to make available, from time to time, until the Maturity Date, advances (each, an “Advance”, and collectively, the “Revolving Loan”) to Borrower, so long as such advance shall not cause the aggregate principal balance of the Loan to at any time exceed Thirteen Million Five Hundred Thousand Dollars ($13,500,000).  The amount of any Advance shall be not less than Two Hundred Fifty Thousand Dollars ($250,000) and shall be in integral multiples of Fifty Thousand Dollars ($50,000).  When all conditions precedent set forth in Section 2 have been satisfied, the Revolving Loan shall be used to refinance all obligations of Borrower to Lender under the Term Loan other than those encompassed by the Three Year Fixed Rate Tranche.  On December 1, 2005, the then outstanding balance of the Three Year Fixed Rate Tranche shall be added to the outstanding balance of the Revolving Loan.

 

(b)           Revolving Nature of Loan . The Loan is a revolving line of credit and Borrower may borrow, repay principal, and reborrow in accordance with the terms of this Agreement.  Borrower may request advances in amounts of not less than $250,000 per draw and in multiples of $50,000 by delivering to Lender at its office located at  5560 South Broadway, Eureka California a written request by no later than 11:00 a.m. PST on the day of the proposed disbursement.  Advances will be disbursed via wire transfer of federal funds to Borrower’s account no. 61-058745 at Bank of Hawaii.

 

(c)           Base Rate . The Loan shall bear interest at the Base Rate, unless Borrower elects to convert the interest rate to the Fixed Rate in accordance with the provisions of Section

 

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3(d).  Notwithstanding any other provision of this Agreement to the contrary, until but not including December 1, 2005, the Three Year Fixed Rate Tranche shall bear interest at the fixed rate of 5.98% per annum.

 

(d)           Fixed Rate Options .

 

(1)           Fixed Rate Based on the LIBOR Rate . Borrower may, from time to time, elect to convert all or a portion of the Loan to a Fixed Rate based on the LIBOR Rate for the LIBOR Interest Period specified by Borrower; provided , that (i) at least three (3) Business Days prior to the proposed Interest Determination Date, Borrower has provided Lender with written notice of such election, the requested Interest Determination Date, and the amount of the Advances to be converted, (ii) at the time of delivery of such written notice and upon the date of conversion, no Default or Event of Default exists under this Agreement, (iii) at no time shall there be more than six (6) outstanding tranches of the Loan bearing interest at the LIBOR Fixed Rate, (iv) the last day of the Interest Period chosen by Borrower shall not extend beyond the Maturity Date, and (v) the amount converted to the LIBOR Fixed Rate at any one time shall be not less than Five Hundred Thousand Dollars ($500,000) and any amounts in excess thereof shall be in integral multiples of Fifty Thousand Dollars ($50,000).

 

(2)           Elections Are Irrevocable; Automatic Conversion to Base Rate if No Additional Fixed Rate Election . Any election by Borrower pursuant to this Section 3(d)(2) shall be irrevocable during the Interest Period selected by Borrower, and that portion of the Loan so converted shall bear interest at the applicable Fixed Rate until the expiration of the applicable Interest Period at which time, unless another Fixed Rate has been duly elected by Borrower pursuant to this Section 3(d)(2), the interest rate for such portion of the Loan will automatically convert to the Base Rate.

 

(e)           No Designation Upon Occurrence of a Default or Event of Default . If a Default or Event of Default shall have occurred, then, during the continuance of such Default or Event of Default, Borrower shall have no right to designate the Fixed Rate for any portion of the Loan.  If an Event of Default shall have occurred and is continuing, any portion of the Loan bearing interest at the Fixed Rate shall, at the end of the relevant Interest Period, convert to the Default Rate calculated with reference to the Base Rate. If such Default or Event of Default shall subsequently be cured, Borrower may thereafter designate Interest Periods in accordance with this Agreement.

 

(f)            Computation of Interest . All computations of interest at the Fixed Rate shall be made by Lender on the basis of a three hundred sixty (360) day year for the actual number of days occurring in the period for which such interest is payable.  All computations of interest at the Base Rate shall be made by Lender on the basis of a three hundred sixty five (365) day year, in each case for the actual number of days occurring in the period for which such interest is payable.  Interest determined by reference to the Base Rate shall be determined on a daily basis for use in calculating the interest that is payable for such day, and any change in the Base Rate shall become effective on the day such change occurs.  Each determination by Lender of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error or bad faith.

 

(g)           Default Rate . Any overdue principal or interest with respect to any portion of the Loan, and the amount of any fees, costs, or expenses that Borrower is obligated to pay to

 

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Lender under this Agreement not paid when due, shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate.  In addition, upon and after the occurrence of an Event of Default and continuing until such Event of Default has been cured or waived in writing by Lender in accordance with the terms of this Agreement, interest shall accrue on all obligations owed by Borrower hereunder at the Default Rate.  The interest rate increase to the Default Rate shall take effect immediately upon the occurrence of an Event of Default, without prior notice to Borrower.

 

(h)           Interest Not to Exceed Maximum Lawful Rate . Notwithstanding anything to the contrary set forth in this Agreement, if at any time until payment in full of all of obligations under this Agreement, the rate of interest payable hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the “Maximum Lawful Rate”), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Lender is equal to the total interest which Lender would have received had the interest rate payable hereunder been (but for the operation of this Section 3(h) the interest rate payable since the date of this Agreement. Thereafter, the interest rate payable hereunder shall be the rate of interest set forth herein, unless and until the rate of interest again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount which Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this Section 3(h), such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 3(h), shall make a final determination that Lender has received interest hereunder in excess of the Maximum Lawful Rate, Lender shall, to the extent permitted by applicable law, promptly apply such excess first to any interest due and not yet paid, then to the outstanding principal of the Loan (without premium or penalty), and then to any other unpaid obligations owed by Borrower under this Agreement and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

 

(i)            Additional Fixed Rate Provisions . If at any time Lender reasonably determines that for any reason adequate and reasonable means do not exist for ascertaining the LIBOR Rate or any other index hereunder or the LIBOR Rate or any such index generally becomes unavailable to Lender, Lender shall promptly give notice thereof to Borrower and shall designate an alternative index that is reasonably comparable to the LIBOR Rate or such other index; provided , that Lender’s determination under this Section 3(i) as to Borrower shall be in accordance with its treatment of other borrowers under commercial loans gen