First Amendment To Credit Agreement

EXHIBIT 10.12


1st AMENDMENT TO
CREDIT AGREEMENT AND PROMISSORY NOTE


This First Amendment ("Amendment") amends: (i) that certain Promissory Note (the "Note") dated March 22, 1999, in the original principal amount of $500,000, executed by LXN Corporation ("Borrower") in favor of Imperial Bank ("Bank") and (ii) that certain Amended and Restated Credit Agreement (the "Agreement") dated March 22, 1999, by and between Borrower and Bank as follows:


1. The section of the Note entitled "PAYMENT" is hereby amended to read in its entirety as follows:


"PAYMENT. Borrower will pay this loan in accordance with the following
payment schedule:


Advances under the Note shall be available through March 21, 2001
("Revolving Draw Period") for the purchase of equipment (equipment
draws to include 100% of invoice value excluding soft costs, freight,
and sales tax). During the Revolving Draw Period, interest only shall
be due monthly beginning April 21, 2000. On September 21, 2000, the
then outstanding principal balance of the advances under the Note
shall be payable monthly in 30 equal payments of principal plus
accrued interest beginning October 21, 2000. The remaining
availability under the Note for equipment draws shall be reduced by
the principal balance outstanding as of September 21, 2000. On March
21, 2001, the then outstanding principal balance of the advances
under the Note shall be payable monthly in 24 equal payments of
principal plus accrued interest beginning April 21, 2001. All
principal and accrued but unpaid interest shall in any event be due
and payable on or before March 21, 2003."


2. The date "March 21, 2000" in Section 1.03 (a) of the Agreement is hereby amended to read as "March 21, 2001."


3. The following new sentence is hereby added to the end of Section 1.03(a) of the Agreement to read in its entirety as follows:


"Notwithstanding anything to contrary herein, prior to September 21, 2000, Bank shall upon Borrower's request, within the ABL Line of Credit, make ABL Loans up to a maximum of $500,000 irrespective of the Borrowing Base so long as said advances are for general corporate purposes."


4. Section 4.07 of the Agreement is hereby amended to read it its entirety as follows:


"Minimum Quick Ratio. Maintain on a monthly basis a minimum quick ratio of cash plus net accounts receivable divided by current liabilities plus bank debt of 1.5:1.00, or three months cash burn, beginning with month end April 30, 2000.


LXN Corporation 1st Amendment To Credit Agreement And Promissory note Page 2


5. Section 4.08 of the Agreement is herby amended to read in its entirety as
follows:


"Maximum Quarterly Loss. Maintain on a quarterly basis a maximum
quarterly loss of: (a) $1,700,000 for the quarter ending March 31, 2000;
(b) $1,100,000 for the quarter ending June 30, 2000; (c) $1,000,000 for
the quarter ending September 30, 2000; (d) $500,000 for the quarter
ending December 31, 2000; (e) $250,000 for the quarter ending March 31,
2001; and the Company to be profitable for the quarter ending June 30,
2001."


6. Section 4.16 of the Agreement is hereby added to read in its entirety as
follows:


"New Equity. Borrower to raise a minimum $3,000,000 of equity by
September 30, 2000."


7. Except as provided above, the Agreement and the Note remain unchanged.


8. This Amendment is effective as of March 30, 2000, upon Bank's receipt of (i) a $150.00 loan documentation fee and (ii) a five-year warrant to purchase $35,000 shares of Borrower's common stock at latest round valuation, and the parties hereby confirm that the Agreement and Note as amended are in full force and effect.


LXN CORPORATION "BORROWER"


By: /s/ Michael A. Beeuwsaert
---------------------------------------
Michael A. Beeuwsaert, President & CEO


IMPERIAL BANK "BANK"


By:
---------------------------------------


Title:
-----------------------------------


AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------


This Amended and Restated Credit Agreement ("Agreement") is made and entered into on March 22, 1999, by and between LXN CORPORATION, a Delaware corporation ("Borrower") and Imperial Bank, a California banking corporation, ("Bank") and amends, replaces and restates in its entirety that certain Credit Agreement dated as of February 6, 1998 by and between Borrower and Bank.


Subject to the terms and conditions of this Agreement, and security agreement(s) executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor of Bank, or any other agreements executed in conjunction therewith (collectively, the "Loan Documents"), Bank has made or shall make the loans or advances (individually, a "Loan," and collectively, "Loans") referred to below to Borrower.


In consideration of mutual covenants and conditions hereof, the parties hereto agree as follows:


1. AMOUNT AND TERMS OF CREDIT
--------------------------


1.01 Term A Loan Commitment.


(a) Term A Loan. Subject to the terms and conditions of this Agreement, Bank shall convert the existing $2,000,000 Revolving Line Of Credit evidenced by that certain promissory note dated November 19, 1997 into a term loan and such loan shall hereinafter be referred to as the "Term A Loan."


(b) Term A Loan Note. The interest rate, principal and interest payments, maturity date and certain other terms of the Term A Loan will be contained in a promissory note in the principal amount of $1,687,449.67 (the unpaid principal amount of the existing $2,000,000 Revolving Line of Credit as of the date of this Agreement) dated the date of this Agreement, as such may be amended or replaced from time to time.


1.02 Term B Loan Commitment.


(a) Term B Loan. Subject to the terms and conditions of this Agreement, Bank shall make available to Borrower a term loan (the "Term B Loan") in the amount of $500,000, the proceeds of which shall be used only for future equipment purchases.


(b) Term B Note. The interest rate, principal and interest payments and certain other terms of the Term B Loan will be contained in a promissory note dated the date of this Agreement, as such may be amended or replaced from time to time.


1.03 A Domestic Asset Based Line of Credit Commitment (ABL Line of Credit)


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(a) Line of Credit-Accounts Receivable Borrowing Base Constrained. Subject to all the terms and conditions of this Agreement, provided that no default hereunder or Event of Default then has occurred and is continuing, Bank shall upon Borrower's request, make advances ("ABL Loans") to Borrower, from time to time and in such amounts as Borrower shall request up to an aggregate principal amount outstanding not to exceed:


up to Eighty percent (80.0%) of Eligible Accounts,


and in no event more than $1,000,000.00 (the "ABL Line of
Credit").


If at any time or for any reason, the outstanding principal amount of the ABL Loan Account (as defined below) is greater than the lesser of: (x) the Borrowing Base of (y) the ABL Line of Credit, Borrower shall immediately pay to Bank, in cash, the amount of such excess. Any commitment of Bank, pursuant to the terms of this Agreement, to make ABL Loans shall expire on the ABL Maturity Date (as hereinafter defined), subject to Bank's right to renew said commitment in its sole and absolute discretion at Borrower's request. Any such renewal of said commitment shall not be binding upon Bank unless it is in writing and signed by an officer of Bank. Provided that no Event of Default (as hereinafter defined) has occurred and is continuing, all or any portion of the ABL Loans advanced by Bank which are repaid by Borrower shall be available for reborrowing in accordance with the terms hereof. Borrower promises to pay to Bank the entire outstanding unpaid principal balance (and all accrued unpaid interest thereon) of the ABL Loan Account on the earlier of demand by Bank or March 21, 2000 ("ABL Maturity Date").


(b) Limitation on Advance of any ABL Loans. Notwithstanding any of the provisions contained in Section 1.02(a) hereof, prior to any advance of an ABL Loan, a representative of Bank shall have conducted an audit of Borrower's books and records relating to the Accounts and Inventory (which term, when used in this Agreement, shall have the meaning ascribed to it in the California Uniform Commercial Code) and any other Collateral for the ABL Loans and made extracts therefrom, and arranged for verification of the Accounts, directly with the account debtors or otherwise, and of the Inventory all with results satisfactory to Bank, the cost of such audit of which shall be at Borrower's sole expense. Based on Bank's review of such audit, and prior to the advance of an ABL Loan in accordance with the terms of this hereof, Bank may adjust the Borrowing Base percentage, in its sole and reasonable discretion, as provided for under Section 4.16 hereof.


(c) Loan Ledger Account. The amount of each ABL Loan made by Bank to Borrower hereunder shall be debited to the ledger account of Borrower maintained by Bank for the ABL Line of Credit (herein called the "ABL Loan Account") and Bank shall credit the ABL Loan Account with all loan repayments in respect thereof made by Borrower. ABL Loan may only be used to support growth in trading assets and general corporate purposes.


(d) ABL Loans Interest. Borrower further promises to pay to Bank from the date of the advance of the initial ABL Loan through the ABL Maturity Date, on or before the twenty second (22) day of each month, interest on the unpaid balance of the ABL Loan Account at a


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rate of interest equal to zero percent (0.00%) per annum in excess of the rate of interest which Bank has announced as its prime lending rate (the "Prime Rate"), which shall vary concurrently with any change in the Prime Rate. Interest shall be computed at the above rate on the basis of the actual number of days during which the principal balance of the ABL Loan is outstanding divided by 360, which shall for interest computation purposes be considered one (1) year.


(e) Application of Receipts. All sums received by Bank, whether from Borrower or from Borrower's account debtors shall be applied to the outstanding ABL Loan balance immediately upon receipt thereof by the Bank. The Borrower will be charged, on a monthly basis, for the uncollected balance fees.


(f) Certain Definitions. As used herein the following terms shall have the following meanings:


"Accounts" means any right to payment for goods sold or leased, or rented, or to be sold or to be leased, or to be rented, or for services rendered or to be rendered no matter how evidenced, including accounts receivable, contract rights, chattel paper, instruments, purchase orders, notes drafts, acceptances, general intangibles and other forms of obligations and receivables.


"Collateral" means any and all property of Borrower which is assigned or hereafter is assigned to Bank as security or in which Bank now has or hereafter acquires a security interest.


"Eligible Accounts" Eligible Accounts shall only include such accounts as Bank in its sole discretion shall determine are eligible from time to time. "Eligible Accounts" shall also NOT include any of the following:


(1) All Accounts under which payment is not received within 90 days from any invoice date;


(2) All Accounts against which the account debtor or any other person obligated to make payment thereon asserts an defense, offset, counterclaim or other right to avoid or reduce the liability represented by the Account;


(3) Any Accounts if the account debtor or any other person liable in connection therewith is insolvent, subject to bankruptcy of receivership proceedings or has made an assignment for the benefit or creditors or whose credit standing is unacceptable to Bank and Bank has so notified Borrower.


(4) Account balances less than 90 days from invoice date.


(5) Credit balances greater than 90 days from invoice date.


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(6) Accounts due from a debtor if 50% or more of the aggregate amount of accounts of such debtor have at that time remained unpaid for more then 90 days from invoice date.


(7) For accounts representing more than 20% of Borrower's total accounts receivable, the balance in excess of the 20% is not eligible. However, the Bank may deem, in its sole discretion, the entire amount, or any portion thereof, eligible.


(8) Accounts with respect to international transactions unless insured by an insurance company acceptable to the Bank or covered by letters of credit issued or confirmed by a bank acceptable to the Bank. Bank, in its sole discretion, may deem as eligible amounts due from major, publicly owned foreign companies.


(9) Accounts with respect to which the account debtor is an officer, director, shareholder, employee, subsidiary or affiliate of Borrower.


(10) Accounts where the account debtor is a seller to Borrower, whereby a potential offset (contra) exists.


(11) Consignment or guaranteed sales.


(12) Bill and hold accounts.


(13) Collection accounts.


(14) C.O.D. accounts.


(15) Salesmen's accounts for promotional purposes.


(16) All United States Government receivables, unless formally assigned to the Bank.


(17) Accounts representing billings for service or maintenance contracts or for inventory or equipment on rent to the account debtor.


(18) Deferred revenues.


(19) Pre-billings.


(g) Requests for ABL Loans. Requests for ABL Loans hereunder shall be in writing duly executed by Borrower in a form satisfactory to Bank and shall contain a certification setting forth the matters referred to in Section 1, which shall disclose that Borrower is entitled to the amount of loan being requested.


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Borrower's Name: LXN Corporation Date: March 22, 1999


(h) Late Charge. If any installment payment, interest payment, principal payment or principal balance due under the ABL Line of Credit is delinquent twenty (20) or more days, Borrower agrees to pay Bank a late charge in the amount of five percent (5%) of the payment so due and unpaid, in addition to the payment; but nothing in this paragraph is to be construed as any obligation on the part of the Bank to accept payment of any payment past due or less than the total unpaid principal balance after maturity. All payments, at Bank's sole discretion, shall be applied first to any late charges owing, then to interest and the remainder, if any, to principal.


(i) Default Rate. If an Event of Default occurs hereunder, then during the continuance thereof at the Bank's option, the interest rate shall be five percent (5%) per year in excess of the rate otherwise applicable.


(j) Interest Calculations. The term "Prime Rate" shall mean the rate that the Bank has announced as its prime lending rate, which shall vary concurrently with any change in the Prime Rate. Interest based on the Prime Rate shall vary concurrently with any change in the Prime Rate. All interest shall be computed at the rate specified in any note on the basis of the actual number of days during which the principal balance of the corresponding Loans are outstanding divided by 360, which shall for interest computation purposes be considered one (1) year.


1.04 Documentation Fee, Costs and Expenses. In addition to any other amounts due, or to become due, concurrently with the execution hereof, Borrower agrees to pay to Bank a documentation fee in the amount of $650.00, and all other costs and expenses incurred by the Bank in the preparation of this Agreement, the other Loan Documents and the perfection of any security interest granted to Bank by Borrower.


1.05 Collateral. Borrower shall grant or cause to be granted to Bank a first priority lien on any and all personal property assets of Borrower which is assigned or hereafter is assigned to Bank as security or in which Bank now has or hereafter acquires a security interest or pursuant to the terms of any security agreement, or otherwise as security for all of Borrower's obligations to Bank, all as may be subject to Section 5.03 herein.


1.06 Collection of Payments. Borrower authorizes Bank to collect all interest, fees, costs, and/or expenses due under this Agreement by charging Borrower's demand deposit account number 38-050-060 with Bank, or any other demand deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such demand deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.


1.07 Intellectual Property. The Borrower shall not transfer, sell or permit any liens on intellectual property or general intangibles without the prior written consent of Bank.


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Borrower's Name: LXN Corporation Date: March 22, 1999


2. REPRESENTATIONS OF BORROWER
---------------------------


Borrower represents and warrants that:


2.01 Existence and Rights. Borrower is a corporation, duly organized and existing and in good standing under the laws of the state of Delaware, without limit as to the duration of its existence and is authorized and in good standing to do business in the State of California; each Borrower has the appropriate powers and adequate authority, rights and franchises to own its property and to carry on its business as now conducted, and is duly qualified and in good standing in each state in which the character of the properties owned by it therein or the conduct of its business makes such qualification necessary; and Borrower has the power and adequate authority to make and carry out this Agreement. Borrower has no investment in any other business entity unless specified in writing to Bank.


2.02 Agreement Authorized. The execution, delivery and performance of this Agreement and the Loan Documents are duly authorized and do not require the consent or approval of any governmental body or other regulatory authority; are not in contravention of or in conflict with any law or regulation or any term or provision of Borrower's articles of incorporation, by-laws, as the case may be, and this Agreement is the valid, binding and legally enforceable obligation of Borrower in accordance with its terms; subject only to bankruptcy, insolvency or similar laws affecting creditors rights generally.


2.03 No Conflict. The execution, delivery and performance of this Agreement and the Loan Documents are not in contravention of or in conflict with any agreement, indenture of undertaking to which Borrower is a party or by which it or any of its property may be bound or affected, and do not cause any lien, charge or other encumbrance to be created or imposed upon any such property by reason thereof.


2.04 Litigation. Except as disclosed in writing to bank by Borrower, there is no litigation or other proceeding pending or threatened against or affecting Borrower which if determined adversely to Borrower or its interest would have a material adverse effect on the financial condition of Borrower, and Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority.


2.05 Financial Condition. The balance sheet of Borrower as of December 31, 1998, and the related profit and loss statement for the twelve month period ended as of that date, a copy of which has heretofore been delivered to Bank by Borrower, and all other statements and data submitted in writing by Borrower to Bank in connection with this request for credit are true and correct, and said balance sheet truly presents the financial condition of Borrower as of the date thereof, and has been prepared in accordance with generally accepted accounting principles on a basis consistently maintained. Since such date there have been no material adverse changes in the financial condition or business of Borrower. Borrower has no knowledge of any liabilities, contingent or otherwise, at such date not reflected in said balance sheet, and Borrower has not entered into any special commitments or substantial contracts which are not reflected in said balance sheet, other than in the ordinary and normal course of its business,


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Borrower's Name: LXN Corporation Date: March 22, 1999


which may have materially adverse effect upon its financial condition, operations or business as now conducted.


2.06 Title to Assets. Borrower has good title to its assets, and the same are not subject to any liens or encumbrances other than those permitted by Section 5.03 hereof.


2.07 Tax Status. Borrower has no liability for any delinquent state, local or federal taxes, and, if Borrower has contracted with any government agency, Borrower has no liability for renegotiation of profits.


2.08 Trademarks, Patents. Borrower, as of the date hereof, possesses all necessary trademarks, trade names, copyrights, patents, patent rights, and licenses to conduct its business as now operated, without any known conflict with the valid trademarks, trade names, copyrights, patents and license rights of others.


2.09 Regulation U. None of the proceeds of any Loan shall be used to purchase or carry margin stock (as defined within Regulation U of the Board of Governors of the Federal Reserve system).


2.10 ERISA. All defined benefit pension plans as defined in the Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet, as of the date hereof, the minimum funding standards of Section 302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in ERISA has occurred with respect to any such plan.


2.11 Year 2000 Compliance. Borrower and its subsidiaries, as applicable, have reviewed the areas within their operations and business which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the Year 2000 Problem and have made related appropriate inquiry of material suppliers and vendors, and based on such review and program, the Year 2000 Problem will not have a material adverse effect upon its financial condition, operations or business as now conducted. "Year 2000 Problem" means the possibility that any computer applications or equipment used by Borrower may be unable to recognize and properly perform date sensitive functions involving certain dates prior to and any dates one or after December 31, 1999.


3. CONDITIONS PRECEDENT TO LOAN.
-----------------------------


Prior to Bank being obligated to make any Loan pursuant to this Agreement, Bank must receive all of the following, each of which must be in form and substance satisfactory to Bank:


3.01 Promissory Note(s). Original, executed promissory note(s).


3.02 Security Agreement. Original, executed security agreement(s) covering the personal property collateral securing the Loan(s).


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Borrower's Name: LXN Corporation Date: March 22, 1999


3.03 Financing Statement. Financing statement(s) executed by Borrower.


3.04 Insurance. Borrower shall have delivered to Bank evidence of insurance coverage required pursuant to that Agreement to Provide Insurance executed by Borrower, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank.


3.05 Organizational Documents. Copies of the articles of incorporation, or similar document as the case may be, of the Borrower.


3.06 Authorizations. Certified copies of all action taken by the Borrower to authorize the execution, delivery and performance of the Loan Documents.


3.07 Good Standing. Good standing certificates from the appropriate secretary of state of the state in which the Borrower is organized and in each state in which it is required to be qualified to do business.


3.08 Additional Documents. Such other documents as Bank may reasonable deem necessary.


4. AFFIRMATIVE COVENANTS OF BORROWER
---------------------------------


Borrower agrees that so long as it is indebted to Bank, under borrowings, or other indebtedness, or so long as Bank has any obligation to extend credit to Borrower it will, unless Bank shall otherwise consent in writing:


4.01 Rights and Facilities. Maintain and preserve all rights, franchises and other authority adequate for the conduct of its business; maintain its properties, equipment and facilities in good order and repair; conduct its business in an orderly manner without voluntary interruption and, if a corporation or partnership, maintain and preserve its existence.


4.02 Use of Proceeds. Use the proceeds of the Loans only for purposes specified in Section1 of this Agreement.


4.03 Insurance. Maintain public liability, property damage and workers' compensation insurance and insurance on all its insurable property against fire and other hazards with responsible insurance carriers to the extent usually maintained by similar businesses and/or in the exercise of good business judgment, and as required by that Agreement to Provide Insurance executed by Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.


4.04 Taxes and Other Liabilities. Pay and discharge, before the same become delinquent and before penalties accrue thereon, all taxes, assessments and governmental


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Borrower's Name: LXN Corporation Date: March 22, 1999


charges upon or against it or any of its properties, and all its other liabilities at any time existing, except to the extent and so long as:


(a) The same are being contested in good faith and by appropriate proceedings in such manner as not to cause any materially adverse effect upon its financial condition or the loss of any right of redemption from any sale thereunder; and


(b) It shall have set aside on its books reserves (segregated to the extent required by generally accepted accounting practice) deemed by it to be adequate with respect thereto.


4.05 [Intentionally Omitted.]


4.06 Records and Reports. Maintain a standard and modern system of accounting in accordance with generally accepted accounting principles on a basis consistently maintained; permit Bank's representatives to have access to, and to examine its properties, books and records at all reasonable times and upon reasonable notice during normal business hours; and furnish Bank:


(a) Monthly Financial Statement. As soon as available, and in any event within thirty (30) days after the close of each month, a balance sheet, profit and loss statement and reconciliation of Borrower's capital balance accounts as of the close of such period and covering operations for the portion of Borrower's fiscal year ending on the last day of such period, all in reasonable detail and reasonably acceptable to Bank, in accordance with generally accepted accounting principles on a basis consistently maintained by Borrower and certified by an appropriate offi ...