REDUCING REVOLVING NOTE
$1,075,000.00 Los Angeles, California
May 14, 2003
FOR VALUE RECEIVED, the undersigned AUTO-GRAPHICS, INC., a California
corporation ("Borrower"), promises to pay to the order of WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank") at its office at 333 South Grand
Avenue, Los Angeles, California, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and
in immediately available funds, the principal sum of One Million Seventy-
five Thousand Dollars ($1,075,000.00), or so much thereof as may be
advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in that certain Amended and Restated Credit
Agreement dated as of August 1, 2000 (as amended, modified, supplemented
or restated from time to time, the "Credit Agreement") between Borrower
and Bank.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days
elapsed) at a rate per annum equal to the Prime Rate in effect from time
to time plus the Applicable Margin as in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto. Each change in the
rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within Bank.
The "Applicable Margin" shall mean the per annum rate set forth below for
the applicable period set forth opposite such rate.
Period Applicable Margin
May 14, 2003 through June 2, 2003 4.0%
June 3, 2003 through December 31, 2003 4.5%
January 1, 2004 through June 30, 2004 5.0%
(b) Payment of Interest. Interest accrued on this Note shall be
payable on the last day of each month, commencing June 30, 2003.
(c) Default Interest. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and
payable by acceleration or otherwise, the outstanding principal balance of
this Note shall bear interest until paid in full at an increased rate per
annum (computed on the basis of a 360-day year, actual days elapsed) equal
to four percent (4%) above the rate of interest from time to time
applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided, however, that the total outstanding
borrowings under this Note shall not at any time exceed the principal
amount set forth above or such lesser amount as shall at any time be
available hereunder. The unpaid principal balance of this obligation at
any time shall be the total amounts advanced hereunder by the holder
hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the
holder. The outstanding principal balance of this Note shall be due and
payable in full on June 30, 2004.
(b) Reductions in Availability. Notwithstanding the principal amount
set forth above, the maximum principal amount available under this Note
shall be reduced automatically and without further notice on: (i) October
1, 2003, by the amount of One Hundred Seventy-Five Thousand Dollars
($175,000.00) and (ii) January 1, 2004, by the amount of Five Hundred
Thousand Dollars ($500,000.00). If the outstanding principal balance of
this Note on any such date is greater than the new maximum principal
amount then available hereunder, Borrower shall make a principal reduction
on this Note on such date in an amount sufficient to reduce the then
outstanding principal balance hereof to an amount not greater than said
new maximum principal amount.
(c) Equity Proceeds. Borrower shall prepay the Line of Credit in an
amount equal to ten percent (10%) of Excess Equity Proceeds not more than
two (2) business days after any Excess Equity Proceeds are received, and
the Line of Credit shall be permanently reduced on such date by the amount
of prepayment required by this sentence. "Equity Proceeds" shall mean the
gross amount of new equity received by the Borrower and its Subsidiaries
from and after April 1, 2000. "Excess Equity Proceeds" shall mean Equity
Proceeds in excess of $5,000,000.00.
(d) Advances. Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or
written request of (i) Robert S. Cope or Daniel E. Luebben, any one acting
alone, who are authorized to request advances and direct the disposition
of any advances until written notice of the revocation of such authority
is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any deposit
account of Borrower, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an
advance is or has been authorized by Borrower.
(d) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Amended and Restated Credit Agreement between
Borrower and Bank dated as of August 1, 2000, as amended from time to time
(the "Credit Agreement"). Any default in the payment or performance of
any obligation under this Note, or any defined event of default under the
Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable
without presentment, demand, notice of nonperformance, notice of protest,
protest or notice of dishonor, all of which are expressly waived by
Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Borrower shall
pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys'
fees (to include outside counsel fees and all allocated costs of the
holder's in-house counsel), expended or incurred by the holder in
connection with the enforcement of the holder's rights and/or the
collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation,
any adversary proceeding, contested matter or motion brought by Bank or
any other person) relating to Borrower or any other person or entity.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
(c) Superseded Note. This Note replaces and supersedes in its
entirety that certain Revolving Note executed by Borrower in favor of Bank
dated June 4, 2002, in the original principal amount of $1,600,000.00.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
AUTO-GRAPHICS, INC., a California corporation
By: /s/Robert S. Cope
_____________________
Name: Robert S. Cope
Title: President