**Exhibit10.6**

 

**INTERCOMPANYSUBORDINATION AGREEMENT**

 

**THIS INTERCOMPANY SUBORDINATION AGREEMENT**(this “Agreement”), dated as of June 26, 2002, is made by and among **ELGARHOLDINGS, INC.,** a Delaware corporation (“Parent”), and **ELGARELECTRONICS CORPORATION**,****a California corporation (“Borrower”;Parent and Borrower are referred to hereinafter each individually as an “Obligor”,and collectively, as the “Obligors”), in favor of **ABLECO FINANCE LLC**, aDelaware limited liability company, as the collateral agent for thebelow-defined Lender Group (in such capacity, together with its successors, ifany, in such capacity, “Collateral Agent”).

 

WHEREAS, the Obligors and the Lender Group haveentered into that certain Financing Agreement, of even date herewith (asamended, restated, modified, renewed or extended from time to time, the “FinancingAgreement”), pursuant to which (i) the Lender Group has agreed to makecertain financial accommodations to Borrower, and (ii) Parent has agreed toguarantee the obligations of Borrower to the Lender Group.

 

WHEREAS, each Obligor has made or may make certainloans or advances from time to time to one or more other Obligors; and

 

WHEREAS, each Obligor has agreed to the subordinationof such indebtedness of each other Obligor to such Obligor, upon the terms andsubject to the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutualpromises, covenants, conditions, representations, and warranties set forthherein and for other good and valuable consideration, the parties hereto agreeas follows:

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# SECTION1            Definitions;Interpretation.

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## (a)           Terms Defined in FinancingAgreement.  All capitalized termsused in this Agreement and not otherwise defined herein shall have the meaningsassigned to them in the Financing Agreement.

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## (b)           Certain Defined Terms.  As used in this Agreement, the followingterms shall have the following meanings:

 

“Administrative Agent” means Ableco FinanceLLC, a Delaware limited liability company, solely in its capacity asadministrative agent for the Lender Group, and shall include any successoradministrative agent.

 

“Agreement” has the meaning set forth in thepreamble hereto.

 

“Collateral Agent” has the meaning set forth inthe preamble hereto.

 

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“Financing Agreement” has the meaning set forthin the recitals hereto.

 

“Insolvency Event” has the meaning set forth inSection 3.

 

“Lender Group” means, individually andcollectively, Collateral Agent, Administrative Agent and each of the Lenders.

 

“Lenders” means, individually and collectively,each of the financial institutions listed on the signature pages of theFinancing Agreement and any other Person made a party thereto in accordancewith the provisions of Section 12.07 thereof (together with their respectivesuccessors and assigns).

 

“Obligors” has the meaning set forth in thepreamble hereto.

 

“Parent” has the meaning set forth in thepreamble hereto.

 

“Senior Debt” means the Obligations and otherindebtedness and liabilities of the Obligors to the Lender Group under or inconnection with the Financing Agreement, the Security Agreement and the otherLoan Documents, including all unpaid principal of the Loans, all interestaccrued thereon, all fees due under the Financing Agreement and the other LoanDocuments, and all other amounts payable by the Obligors to the Lender Groupthereunder or in connection therewith, whether now existing or hereafterarising, and whether due or to become due, absolute or contingent, liquidatedor unliquidated, determined or undetermined, and including without limitationinterest, fees, and other such amounts, which would accrue and become due butfor the commencement of an Insolvency Event, whether or not such interest,fees, and other amounts are allowed or allowable in whole or in part in anysuch Insolvency Event.

 

“Subordinated Debt” means, with respect to eachObligor, all indebtedness, liabilities, and other obligations of any otherObligor owing to such Obligor in respect of any and all loans or advances madeby such Obligor to such other Obligor whether now existing or hereafterarising, and whether due or to become due, absolute or contingent, liquidatedor unliquidated, determined or undetermined, including all fees and all otheramounts payable by any other Obligor to such Obligor under or in connectionwith any documents or instruments related thereto.

 

“Subordinated Debt Payment” means any paymentor distribution by or on behalf of the Obligors, directly or indirectly, ofassets of the Obligors of any kind or character, whether in cash, property, orsecurities, including on account of the purchase, redemption, or otheracquisition of Subordinated Debt, as a result of any collection, sale, or otherdisposition of collateral, or by setoff, exchange, or in any other manner, foror on account of the Subordinated Debt.

 

## (c)           Interpretation.  Unless the context of this Agreement clearlyrequires otherwise, references to the plural include the singular, referencesto the singular include the plural, the term “including” is not limiting, andthe term “or” has, except where otherwise indicated, the inclusive meaningrepresented by the phrase “and/or.”  Thewords “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in thisAgreement refer to this Agreement as a 

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## whole and not to any particularprovision of this Agreement.  Section,subsection, clause, schedule, and exhibit references are to this Agreementunless otherwise specified.  Referencesto agreements and other contractual instruments shall be deemed to include allsubsequent amendments and other modifications thereto.  References to statutes or regulations are tobe construed as including all statutory and regulatory provisionsconsolidating, amending, or replacing the statute or regulation referredto.  The captions and headings are forconvenience of reference only and shall not affect the construction of thisAgreement.

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# SECTION2            Subordination to Paymentof Senior Debt.  As to each Obligor,all payments on account of the Subordinated Debt shall be subject, subordinate,and junior, in right of payment and exercise of remedies, to the extent and inthe manner set forth herein, to the prior payment, in full, in cash or cashequivalents of the Senior Debt (or the collateralization thereof in a mannerreasonably satisfactory to Collateral Agent).

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# SECTION3            Subordination Upon AnyDistribution of Assets of the Obligors. As to each Obligor, in the event of any payment or distribution ofassets of any other Obligor of any kind or character, whether in cash,property, or securities, upon the dissolution, winding up, or total or partialliquidation or reorganization, readjustment, arrangement, or similar proceedingrelating to such other Obligor or its property, whether voluntary orinvoluntary, or in bankruptcy, insolvency, receivership, arrangement, orsimilar proceedings or upon an assignment for the benefit of creditors, or uponany other marshaling or composition of the assets and liabilities of such otherObligor, or otherwise (such events, collectively, the “Insolvency Events”):  (i) all amounts owing on account of theSenior Debt shall first be paid, in full, in cash, or payment provided for incash or in cash equivalents, before any Subordinated Debt Payment is made; and(ii) to the extent permitted by applicable law, any Subordinated Debt Paymentto which such Obligor would be entitled except for the provisions hereof, shallbe paid or delivered by the trustee in bankruptcy, receiver, assignee for thebenefit of creditors, or other liquidating agent making such payment ordistribution directly to Collateral Agent for the benefit of the Lender Groupfor application to the payment of the Senior Debt in accordance with clause(i), after giving effect to any concurrent payment or distribution or provisiontherefor to the Lender Group, or Collateral Agent for the benefit thereof, inrespect of such Senior Debt.

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# SECTION4            Payments on SubordinatedDebt.

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## (a)           Permitted Payments.  So long as no Event of Default has occurredand is continuing, each Obligor may make, and each other Obligor shall beentitled to accept and receive, payments on account of the Subordinated Debt inthe ordinary course of business.

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## (b)           No Payment Upon Senior DebtDefaults.  Upon the occurrence ofany Event of Default, and until such Event of Default is cured or waived, eachObligor shall not make, and each other Obligor shall not accept or receive, anySubordinated Debt Payment.

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# SECTION5            Subordination of Remedies.  As long as any Senior Debt shall remainoutstanding and unpaid, following the occurrence of any Event of Default anduntil such Event of Default is cured or waived, each Obligor shall not, withoutthe prior written consent of Collateral Agent:

 

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## (a)           accelerate, make demand, or otherwisemake due and payable prior to the original due date thereof any SubordinatedDebt or bring suit or institute any other actions or proceedings to enforce itsrights or interests in respect of the obligations of any other Obligor owing tosuch Obligor;

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## (b)           exercise any rights under or withrespect to guaranties of the Subordinated Debt, if any;

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## (c)           exercise any rights to set-offs andcounterclaims in respect of any indebtedness, liabilities, or obligations ofsuch Obligor to any other Obligor against any of the Subordinated Debt; or

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## (d)           commence, or cause to be commenced,or join with any creditor other than the Lender Group, or Collateral Agent onbehalf thereof, in commencing, any bankruptcy, insolvency, or receivershipproceeding against the other Obligor.

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# SECTION6            Payment Over to CollateralAgent.  In the event that,notwithstanding the provisions of Sections 3, 4, and 5, any Subordinated DebtPayments shall be received in contravention of such Sections 3, 4, and 5 by anyObligor before all Senior Debt is paid, in full, in cash or cash equivalents,such Subordinated Debt Payments shall be held in trust for the benefit of theLender Group and shall be paid over or delivered to Collateral Agent for thebenefit of the Lender Group for application to the payment, in full, in cash orcash equivalents of all Senior Debt remaining unpaid to the extent necessary togive effect to such Sections 3, 4, and 5, after giving effect to any concurrentpayments or distributions to the Lender Group in respect of the Senior Debt.

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# SECTION7            Authorization toCollateral Agent.  If, while anySubordinated Debt is outstanding, any Insolvency Event shall occur and becontinuing with respect to the other Obligor or its property:  (i) Collateral Agent, on behalf of theLender Group, hereby is irrevocably authorized and empowered (in the name ofeach Obligor or otherwise), but shall have no obligation, to demand, sue for,collect, and receive every payment or distribution in respect of theSubordinated Debt and give acquittance therefor and to file claims and proofsof claim and take such other action (including voting the Subordinated Debt) asit may deem necessary or advisable for the exercise or enforcement of any ofthe rights or interests of the Lender Group; and (ii) each Obligor shallpromptly take such action as Collateral Agent reasonably may request (A) tocollect the Subordinated Debt for the account of the Lender Group and to fileappropriate claims or proofs of claim in respect of the Subordinated Debt, (B)to execute and deliver to Collateral Agent such powers of attorney,assignments, and other instruments as it may request to enable it to enforceany and all claims with respect to the Subordinated Debt, and (C) to collectand receive any and all Subordinated Debt Payments.

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# SECTION8            Certain Agreements of EachObligor.

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## (a)           No Benefits.  Each Obligor understands that there may bevarious agreements between the Lender Group and any other Obligor evidencingand governing the Senior Debt, and each Obligor acknowledges and agrees thatsuch agreements are not intended to confer any benefits on such Obligor andthat the Lender Group and Collateral Agent on behalf 

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## thereof shall have no obligation to suchObligor or any other Person to exercise any rights, enforce any remedies, ortake any actions which may be available to them under such agreements.

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## (b)           No Interference.  Each Obligor acknowledges that each otherObligor has granted to Collateral Agent for the benefit of the Lender Groupsecurity interests in all of such other Obligor’s assets, and agrees not tointerfere with or in any manner oppose a disposition of any Collateral by theLender Group, or Collateral Agent on behalf thereof, in accordance withapplicable law.

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## (c)           Reliance by the Lender Group.  Each Obligor acknowledges and agrees thatthe Lender Group will have relied upon and will continue to rely upon thesubordination provisions provided for herein and the other provisions hereof inentering into the Loan Documents and making or issuing the Loans, or otherfinancial accommodations thereunder.

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## (d)           Waivers.  Except as provided under the FinancingAgreement, each Obligor hereby waives any and all notice of the incurrence ofthe Senior Debt or any part thereof and any right to require marshaling ofassets.

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## (e)           Obligations of Each Obligor NotAffected.  Each Obligor herebyagrees that at any time and from time to time, without notice to or the consentof such Obligor, without incurring responsibility to such Obligor, and withoutimpairing or releasing the subordination provided for herein or otherwiseimpairing the rights of the Lender Group hereunder: (i) the time for any otherObligor’s performance of or compliance with any of its agreements contained inthe Loan Documents may be extended or such performance or compliance may bewaived by the Lender Group or Collateral Agent on behalf thereof; (ii) theagreements of any other Obligor with respect to the Loan Documents may fromtime to time be modified by such other Obligor and the Lender Group orCollateral Agent on behalf thereof for the purpose of adding any requirementsthereto or changing in any manner the rights and obligations of such otherObligor or the Lender Group thereunder; (iii) the manner, place, or terms forpayment of Senior Debt or any portion thereof may be altered or the terms forpayment extended, or the Senior Debt may be renewed in whole or in part; (iv)the maturity of the Senior Debt may be accelerated in accordance with the termsof any present or future agreement by any other Obligor and the Lender Group orCollateral Agent on behalf thereof; (v) any Collateral may be sold, exchanged,released, or substituted and any Lien in favor of Collateral Agent for thebenefit of the Lender Group may be terminated, subordinated, or fail to beperfected or become unperfected; (vi) any Person liable in any manner forSenior Debt may be discharged, released, or substituted; and (vii) all otherrights against the other Obligor, any other Person, or with respect to anyCollateral may be exercised (or the Lender Group or Collateral Agent on behalfthereof may waive or refrain from exercising such rights).

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## (f)            Rights of the Lender Group Not toBe Impaired.  No right of the LenderGroup or Collateral Agent on behalf thereof to enforce the subordinationprovided for herein or to exercise its other rights hereunder shall at any timein any way be prejudiced or impaired by any act or failure to act by any otherObligor, the Lender Group, or Collateral Agent hereunder or under or inconnection with the other Loan Documents or by any noncompliance by the otherObligor with the terms and provisions and covenants herein or in any other LoanDocument,

 

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## regardless of any knowledge thereofthe Lender Group or Collateral Agent on behalf thereof may have or otherwise becharged with.

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## (g)           Financial Condition of theObligors.  Except as provided underthe Financing Agreement, each Obligor shall not have any right to require theLender Group to obtain or disclose any information with respect to:  (i) the financial condition or character ofany other Obligor or the ability of the other Obligor to pay and perform SeniorDebt; (ii) the Senior Debt; (iii) the Collateral or other security for any orall of the Senior Debt; (iv) the existence or nonexistence of any guaranteesof, or any other subordination agreements with respect to, all or any part ofthe Senior Debt; (v) any action or inaction on the part of the Lender Group orany other Person; or (vi) any other matter, fact, or occurrence whatsoever.

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## (h)           Acquisition of Liens or Guaranties.  Except as permitted under the FinancingAgreement, each Obligor shall not, without the prior consent of CollateralAgent (such consent not to be withheld unreasonably), acquire any right orinterest in or to any Collateral not owned by such Obligor or accept anyguaranties for the Subordinated Debt.

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# SECTION9            Subrogation.

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## (a)           Subrogation.  Until the payment and performance in full incash of all Senior Debt (or the collateralization thereof in a mannerreasonably satisfactory to Collateral Agent), each Obligor shall not have, andshall not directly or indirectly exercise, any rights that it may acquire byway of subrogation under this Agreement, by any payment or distribution to theLender Group hereunder or otherwise. Upon the payment and performance in full in cash of all Senior Debt,each Obligor shall be subrogated to the rights of the Lender Group to receivepayments or distributions applicable to the Senior Debt until the SubordinatedDebt shall be paid in full.  For thepurposes of the foregoing subrogation, no payments or distributions to theLender Group of any cash, property, or securities to which any Obligor would beentitled except for the provisions of Section 3, 4, or 5 shall, as among suchObligor, its creditors (other than the Lender Group), and the other Obligor, bedeemed to be a payment by the other Obligors to or on account of the SeniorDebt.

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## (b)           Payments Over to the Obligors.  If any payment or distribution to which anyObligor would otherwise have been entitled but for the provisions of Section 3,4, or 5 shall have been applied pursuant to the provisions of Section 3, 4, or5 to the payment of all amounts payable under the Senior Debt, such Obligorshall be entitled to receive from the Lender Group any payments ordistributions received by the Lender Group in excess of the amount sufficientto pay in full in cash all amounts payable under or in respect of the SeniorDebt.  If any such excess payment ismade to the Lender Group, the Lender Group shall promptly remit such excess tosuch Obligor and until so remitted shall hold such excess payment for the benefitof such Obligor.

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# SECTION10          Continuing Agreement;Reinstatement.

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## (a)           Continuing Agreement.  This Agreement is a continuing agreement ofsubordination and shall continue in effect and be binding upon each Obligoruntil payment and performance in full in cash of the Senior Debt (or the collateralizationthereof in a manner 

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## reasonably satisfactory to CollateralAgent).  The subordinations, agreements,and priorities set forth herein shall remain in full force and effectregardless of whether any party hereto in the future seeks to rescind, amend,terminate, or reform, by litigation or otherwise, its respective agreementswith the other Obligor.

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## (b)           Reinstatement.  This Agreement shall continue to beeffective or shall be reinstated, as the case may be, if, for any reason, anypayment of the Senior Debt by or on behalf of any other Obligor shall berescinded or must otherwise be restored by the Lender Group, whether as aresult of an Insolvency Event or otherwise.

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# SECTION11          Transfer of SubordinatedDebt.  Each Obligor may not assignor transfer its rights and obligations in respect of the Subordinated Debtwithout the prior written consent of Collateral Agent (such consent not to bewithheld unreasonably), and any such transferee or assignee, as a condition toacquiring an interest in the Subordinated Debt shall agree to be bound hereby,in form reasonably satisfactory to Collateral Agent.

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# SECTION12          Obligations of the ObligorsNot Affected.  The provisions ofthis Agreement are intended solely for the purpose of defining the relativerights of each Obligor against the other Obligors, on the one hand, and of theLender Group against the Obligors, on the other hand.  Nothing contained in this Agreement shall (i) impair, as betweeneach Obligor and the other Obligors, the obligation of the other Obligors topay their respective obligations with respect to the Subordinated Debt as andwhen the same shall become due and payable, or (ii) otherwise affect therelative rights of each Obligor against the other Obligors, on the one hand,and of the creditors (other than the Lender Group) of the other Obligorsagainst the other Obligors, on the other hand.

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# SECTION13          Endorsement of ObligorDocuments; Further Assurances and Additional Acts.

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## (a)           Endorsement of Obligor Documents.  At the reasonable request of CollateralAgent, all documents and instruments evidencing any of the Subordinated Debt,if any, shall be endorsed with a legend noting that such documents andinstruments are subject to this Agreement, and each Obligor shall promptlydeliver to Collateral Agent evidence of the same.

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## (b)           Further Assurances and AdditionalActs.  Each Obligor shall execute,acknowledge, deliver, file, notarize, and register at its own expense all suchfurther agreements, instruments, certificates, financing statements, documents,and assurances, and perform such acts as Collateral Agent reasonably shall deemnecessary or appropriate to effectuate the purposes of this Agreement, andpromptly provide Collateral Agent with evidence of the foregoing reasonablysatisfactory in form and substance to Collateral Agent.

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# SECTION14          Notices.  All notices and other communicationsprovided for hereunder shall, unless otherwise stated herein, be in writing(including by facsimile transmission) and shall be mailed, sent, or deliveredin accordance with the notice provisions contained in the Financing Agreement.

 

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# SECTION15          No Waiver; CumulativeRemedies.  No failure on the part ofthe Lender Group or Collateral Agent on behalf thereof to exercise, and nodelay in exercising, any right, remedy, power, or privilege hereunder shalloperate as a waiver thereof, nor shall any single or partial exercise of anysuch right, remedy, power, or privilege preclude any other or further exercisethereof or the exercise of any other right, remedy, power, or privilege.  The rights and remedies under this Agreementare cumulative and not exclusive of any rights, remedies, powers, andprivileges that may otherwise be available to the Lender Group.

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# SECTION16          Costs and Expenses.

 

## (a)           Payments by the Obligors.  Each of the Obligors, jointly and severally,agrees to pay to Collateral Agent, for the account of the Lender Group, ondemand, the reasonable out-of-pocket costs and expenses of the Lender Group,and the reasonable fees and disbursements of counsel to the Lender Group, inconnection with the negotiation, preparation, execution, delivery, andadministration of this Agreement, and any amendments, modifications, or waiversof the terms thereof.

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## (b)           Payments by the Obligors.  Each of the Obligors, jointly and severally,agrees to pay to Collateral Agent for the account of the Lender Group on demandall reasonable costs and expenses of the Lender Group, and the fees anddisbursements of counsel, in connection with the enforcement or attemptedenforcement of, and preservation of rights or interests under, this Agreement,including any reasonable losses, costs and expenses sustained by the Lender Groupas a result of any failure by any Obligor to perform or observe its obligationscontained in this Agreement.

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# SECTION17          Survival.  All covenants, agreements, representationsand warranties made in this Agreement shall, except to the extent otherwiseprovided herein, survive the execution and delivery of this Agreement, andshall continue in full force and effect so long as any Senior Debt remainsunpaid.  Without limiting the generalityof the foregoing, the obligations of each Obligor under Section 16 shallsurvive the satisfaction of the Senior Debt.

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# SECTION18          Benefits of Agreement.  This Agreement is entered into for the soleprotection and benefit of the parties hereto and their successors and assigns,and no other Person shall be a direct or indirect beneficiary of, or shall haveany direct or indirect cause of action or claim in connection with, thisAgreement.

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# SECTION19          Binding Effect.  This Agreement shall be binding upon, inureto the benefit of and be enforceable by each Obligor and the Lender Group andtheir respective successors and permitted assigns.

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# SECTION20          GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, ANDCONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

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# SECTION21          SUBMISSION TO JURISDICTION.  EACH OBLIGOR HEREBY (i) SUBMITS TO THEEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERALCOURTS OF THE UNITED STATES SITTING IN THE COUNTY OF NEW YORK, STATE OF NEWYORK, FOR THE PURPOSE 

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# OF ANY ACTION OR PROCEEDING ARISINGOUT OF OR RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OFANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS, OR ATTHE SOLE OPTION OF AGENT, IN ANY OTHER COURT IN WHICH AGENT SHALL INITIATELEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVERTHE MATTER IN CONTROVERSY (iii) IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED BYAPPLICABLE LAW) ANY OBJECTION WHICH IT NOW OR HEREAFTER MAY HAVE TO THE LAYINGOF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY OF THE FOREGOINGCOURTS, AND ANY OBJECTION ON THE GROUND THAT ANY SUCH ACTION OR PROCEEDING INANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND (iv) AGREES THAT AFINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BEENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNERPERMITTED BY LAW.

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# SECTION22          Entire Agreement;Amendments and Waivers.

 

## (a)           Entire Agreement.  This Agreement constitutes the entireagreement of each of the Obligors and the Lender Group with respect to thematters set forth herein and supersedes any prior agreements, commitments,drafts, communications, discussions, and understandings, oral or written, withrespect thereto.

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## (b)           Amendments and Waivers.  No amendment to any provision of thisAgreement shall in any event be effective unless the same shall be in writingand signed by each of the Obligors and Collateral Agent; and no waiver of anyprovision of this Agreement, or consent to any departure by any Obligortherefrom, shall in any event be effective unless the same shall be in writingand signed by Collateral Agent.  Anysuch amendment, waiver, or consent shall be effective only in the specificinstance and for the specific purpose for which given.

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# SECTION23          Conflicts.  In case of any conflict or inconsistencybetween any terms of this Agreement, on the one hand, and any documents orinstruments in respect of the Subordinated Debt, on the other hand, then theterms of this Agreement shall control.

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# SECTION24          Severability.  Whenever possible, each provision of thisAgreement shall be interpreted in such manner as to be effective and validunder all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by orinvalid under any such law or regulation in any jurisdiction, it shall, as tosuch jurisdiction, be deemed modified to conform to the minimum requirements ofsuch law or regulation, or, if for any reason it is not deemed so modified, itshall be ineffective and invalid only to the extent of such prohibition orinvalidity without affecting the remaining provisions of this Agreement or thevalidity or effectiveness of such provision in any other jurisdiction.

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# SECTION25          Interpretation.  This Agreement is the result of negotiationsbetween, and have been reviewed by the respective counsel to, the Obligors andthe several members of the Lender Group and is the product of all partieshereto.  Accordingly, this

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# Agreement shall not be construedagainst the Lender Group merely because of the Lender Group’s involvement inthe preparation hereof.

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# SECTION26          Counterparts; TelefacsimileExecution.  This Agreement may beexecuted in any number of counterparts and by different parties hereto inseparate counterparts, each of which when so executed shall be deemed to be anoriginal and all of which taken together shall constitute but one and the sameagreement.  Delivery of an executedcounterpart of this Agreement by telefacsimile shall be equally effective asdelivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpartof this Agreement by telefacsimile also shall deliver an original executed counterpartof this Agreement but the failure to deliver an original executed counterpartshall not affect the validity, enforceability, and bind effect of thisAgreement.

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# SECTION27          Termination of Agreement.  Upon payment and performance in full in cashof the Senior Debt, this Agreement shall terminate and Collateral Agent onbehalf of the Lender Group shall promptly execute and deliver to each Obligorsuch documents and instruments as shall be reasonably necessary to evidencesuch termination; provided, however, that the obligations of each Obligor underSection 16 shall survive such termination.

 

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, each of the undersigned hasexecuted and delivered this Agreement as of the date first written above.

 
|   | **ELGAR  ELECTRONICS CORPORATION,** |
|--------|-------------------------------------|
|   | a California corporation            |
|   |                                |
|   |                                |
|   | By:                                 | /s/ Joseph A.Stroud |   |
|   | Name:                               | Joseph A. Stroud |   |
|   | Title:                              | Chief Financial Officer |   |
|   |                                |
|   | **ELGAR  HOLDINGS, INC.,**          |
|   | a Delaware corporation              |
|   |                                |
|   |                                |
|   | By:                                 | /s/ Joseph A.Stroud |   |
|   | Name:                               | Joseph A. Stroud |   |
|   | Title:                              | Chief Financial Officer |   |

 

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|   | **ABLECO  FINANCE LLC,**             |
|--------|--------------------------------------|
|   | a Delaware limited liability company |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ Kevin Genda |   |
|   | Name:                                | Kevin Genda |   |
|   | Title:                               | Senior Vice President |   |

 

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