(i) the sum of (a) 85% of the total amount of Eligible Accounts plus (b) thelesser of (i) 85% of the total amount of Eligible Government Accounts and (ii) $500,000; providedthat, such percentages shall be reduced on a point-for-point basis to the extent ERC US’s DilutionRate exceeds 5.0%, plus     (ii) 70% of the total amount of Eligible Special Accounts; provided that, the percentageshall be reduced on a point-for-point basis to the extent ERC US’s Dilution Rate exceeds 20%,plus     (iii) the lesser of (a) the Inventory Sublimit and (b) the sum of (i) the lesser of (A) 85% ofthe NOLV of Eligible Inventory and (B) (x) during each period commencing on February 1 andcontinuing through August 31 of each calendar year, 60% and (y) during each period commencing onSeptember 1 and continuing through January 31 of each calendar year, 55% of the total amount ofEligible Inventory, plus (ii) the lesser of (A) 85% of the NOLV of Eligible In-TransitInventory, and (B) (x) during each period commencing on February 1 and continuing through August 31of each calendar year, 60% and (y) during each period commencing on September 1 and continuingthrough January 31 of each calendar year, 55% of the total amount of Eligible In-Transit Inventoryand (C) $18,000,000, plus (iii) the lesser of (A) 85% of the NOLV of Eligible LicensedInventory, and (B) (x) during each period commencing on February 1 and continuing through August 31of each calendar year, 60% and (y) during each period commencing on September 1 and continuingthrough January 31 of each calendar year, 55% of the total amount of Eligible Licensed Inventoryand (C) (x) $3,000,0000 through and including December 31, 2009, (y) $2,000,000 commencing January1, 2010 through and including December 31, 2010 and $0 at all time thereafter, plus (iv)the lesser of (A) 85% of the NOLV of Eligible LC Inventory, and (B) (x) during each periodcommencing on February 1 and continuing through August 31 of each calendar year, 60% and (y) duringeach period commencing on September 1 and continuing through January 31 of each calendar year, 55%of the total amount of Eligible LC Inventory, plus     (iv) 100% of the cash proceeds received by ER Hong Kong in connection with the SubsidiarySale and which proceeds are maintained at all times by ER Hong Kong in a Deposit Account at Bankpursuant to Section 5.15(a) hereof, plus     (v) 100% of cash of Borrowers maintained in Deposit Account #2000018631676 and #2000030536885with Bank (and such other Deposit Accounts agreed to by Borrowers and Bank);minus
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     (vi) $3,000,000; minus     (vii) any Reserves.“Borrowing Base Certificate” means Borrowing Base Certificate in the form attached heretoas Exhibit 5.6(a) (a “Borrowing Base Certificate”), and to which Borrowers shallattach the following, which shall be certified by the chief financial officer, controller orpresident of Borrower Agent to be accurate and complete and in compliance with the terms of theLoan Documents: (i) a report listing all Accounts of Borrowers as of the last day of the priorcalendar month or calendar week if Borrowers are required to provide such Borrowing BaseCertificate more frequently than monthly (an “Accounts Receivable Report”) which shallinclude the amount and age of each Account on a due date aging basis, a detailing of all Accountswhich do not constitute Eligible Accounts, Eligible Government Accounts or Eligible SpecialAccounts and such other information as Bank may require in order to verify the Eligible Accounts,Eligible Government Accounts and Eligible Special Accounts, all in reasonable detail and in formacceptable to Bank, (ii) a detailed summary report listing all Inventory, all Eligible Inventory,all Eligible In-Transit Inventory, Eligible LC Inventory and all Eligible Licensed Inventory ofBorrowers by location as of the last day of the prior calendar month or calendar week if Borrowersare required to provide such Borrowing Base Certificate more frequently than monthly, the costthereof and all Inventory which has not been timely sold by Borrowers in the ordinary course ofbusiness, and such other information as Bank may require relating thereto, all in form acceptableto Bank (an “Inventory Report”), (iii) a listing of all accounts payable of ERC US and MI, (iv) alisting of the amount of royalty payments owing to each licensor with respect to Inventory subjectto a License Agreements sold by US Borrowers and which would be owing to each licensor with respectto Inventory subject to a License Agreement (including Eligible Licensed Inventory) and (v) anyother report as Bank may from time to time require in its reasonable discretion, each prepared withrespect to such periods and with respect to such information and reporting as Bank may require“Excess Availability” means at a particular date, an amount equal to (a) the lesser of (i)the Revolver Commitment or (ii) the Borrowing Base (without deducting the amount set forth inclause (vi) thereof), minus (b) the sum of (i) the outstanding amount of Loans plus (ii) Letter ofCredit Obligations, plus (iii) all amounts due and owing to Borrowers’ trade creditors which areoutstanding beyond normal trade terms except for those Properly Contested, plus (iv) fees andexpenses for which Borrowers are liable under this Agreement but which have not been paid, plus(v) all taxes due and owing to any federal, state or local governmental body except for thoseProperly Contested.
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          1.2New Definitions. The following new definitions are hereby added to Section 1.1 of the Loan Agreement:“Applicable Margin Adjustment Date” means the later of (i)December 31, 2009 or (ii) the first day of the calendar month of therequired delivery date for the financial statements delivered toBank pursuant to Section 5.6(b) (other than with respect to thecalendar month ending December 31, 2009) or Section 5.6(c)(ii) whichevidences that Borrowers maintained a Fixed Charge Coverage Ratio ofnot less than 1.00 to 1.00 for a period of four (4) consecutive,trailing calendar quarters.“Eligible LC Inventory” means all finished goods Inventoryotherwise constituting Eligible Inventory which is supported by aPurchase Order Supported Letter of Credit. For the avoidance ofdoubt, Eligible LC Inventory shall not be considered EligibleInventory.“Inventory Loan Reliance” means the positive difference, ifany, between (a) the outstanding principal balance of Obligationsand the face amount of all outstanding Letters of Credit and (b) theBorrowing Base (without including the amount determined pursuant toclause (iii) thereof) (as determined by Bank and whose determinationshall be final and binding absent manifest error).“Inventory Loan Reliance Percentage” means (a) the InventoryLoan Reliance divided by (b) the outstanding principal balance ofObligations and the face amount of all outstanding Letters of Credit(as determined by Bank and whose determination shall be final andbinding absent manifest error).“Purchase Order Supported Letters of Credit” means adocumentary Letter of Credit issued by Bank supported by a confirmedpurchase order for Eligible Inventory from a customer of a Borrower(confirmed in a manner acceptable to Bank in its sole discretion)which will be paid by a letter of credit in form and substance, andissued by a financial institution, acceptable to Bank in its solediscretion.          1.3 Adjustment of Interest Rate. Section 2.2.5 of the Loan Agreement isamended and restated in its entirety and shall read as follows:2.2.5 Adjustment of Interest Rate. Commencing on theApplicable Margin Adjustment Date (based upon prior calendarquarter’s average Excess Availability (as determined by Bank whosedetermination shall be final and binding absent manifest error)) and
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thereafter on the first day of each succeeding InterestAdjustment Period, the interest rate for all Loans for eachapplicable Interest Adjustment Period shall be determined based uponthe prior calendar quarter’s average Excess Availability (asdetermined by Bank whose determination shall be final and bindingabsent manifest error), in accordance with the following matrix:           **Applicable Margin** **Applicable Margin****Excess Availability** **for Prime Rate Loans** **for LIBOR Loans**Less than $5,000,000  1.50%  3.00%         Greater than or equal to$5,000,000 but lessthan $15,00,000  1.25%  2.75%         Greater than or equal$15,000,000  1.00%  2.50%For purposes of the foregoing no downward rate adjustment shalloccur if an Event of Default has occurred and is continuing on theapplicable Interest Adjustment Date, such adjustment to take effectonly upon the cure or waiver in writing (if any) of such Event ofDefault. In addition to the foregoing and in addition to Bank’sother rights and remedies hereunder, if during an InterestAdjustment Period it is determined that an Event of Default existsupon Bank’s receipt of Borrowers’ quarterly financial statements andcompliance certificate for such fiscal quarter, then the interestrate for all Loans shall be retroactively reset as of the first dayof such Interest Adjustment Period to the interest rate as of thelast day of the immediately preceding Interest Adjustment Period (ifsuch interest rate was higher).          1.4 Letters of Credit. Clause (i) of Section 2.10.1 of the Loan Agreement isamended and restated in its entirety and shall read as follows:(i) the aggregate face amount of Letters of Credit issued by Bankwhich are outstanding at any one time shall not exceed $36,000,000and of such amount the aggregate face amount of Purchase OrderSupported Letters of Credit issued by Bank which are outstanding atany one time shall not exceed $10,000,000;          1.5 Purchase Order Supported Letters of Credit. The following new Section2.10.3 is hereby added to the Loan Agreement:2.10.3 Purchase Order Supported Letters of Credit. Inaddition to the other requirements and conditions contained herein,as a condition to Bank’s obligation to issue a Purchase OrderSupported Letters of Credit, Borrowers shall deliver to Bank thefollowing (each in form and substance satisfactory to Bank): (a) thereference
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number of the letter of credit supporting the confirmedpurchase order in the application for the Letter of Credit; (b) acopy of the confirmed purchase order and letter of credit supportingthe purchase order which letter of credit shall include thefollowing: “Issuer acknowledges and consents to the securityinterest of Wachovia Bank, National Association (and its successorsand assigns) (“Wachovia”) in and to the proceeds of this letter ofcredit, and agrees to pay the proceeds hereof to Wachovia uponreceipt of written instructions of Wachovia, without the consent ofbeneficiary”, and (c) the letter of credit supporting the confirmedpurchase order shall be advised to a Borrower through Wachovia Bank,National Association and payable to a Borrower to Borrowers’collateral account number 2000018631676 at Bank.          1.6 Commitment Fee. Section 2.11.2 of the Loan Agreement is amended andrestated in its entirety and shall read as follows:2.11.2CommitmentFee. Borrowers shall pay to Bank a RevolverCommitment fee for each day equal to the product of (i) 0.375% on aper annum basis multiplied by (ii) the difference between (A) thethen existing Revolver Commitment and (B) the aggregate outstandingamount of the Revolver Loans and Letter of Credit Obligations onsuch day, payable monthly on the first day of each month withrespect to the immediately preceding month.          1.7Letter of Credit Fees. Section 2.11.3 of the Loan Agreement is amended andrestated in its entirety and shall read as follows:2.11.3Letter of Credit Fees. Borrowers shall pay to Bank, at suchtimes as Bank shall require, Bank’s normal scheduled fees andcharges in connection with Letters of Credit, as in effect from timeto time, and (a) with respect to standby Letters of Credit, at the timeof issuance and renewal of each such Letter of Credit, a fee equal tothe Applicable Margin for LIBOR Loans on a per annum basis on theface amount of the Letter of Credit for the period of time the Letterof Credit will be outstanding; (b) with respect to documentaryLetters of Credit (other than Purchase Order Supported Letters of Credit),monthly in arrears on the first day of each calendar month, a feeequal to the Applicable Margin for LIBOR Loans minus 0.75%multiplied by the average daily maximum face amount of alloutstanding documentary Letters of Credit computed at a per annumrate for each day; and (c) with respect to Purchase Order SupportedLetters of Credit, monthly in arrears on the first day of eachcalendar month, a fee equal to the Applicable Margin for LIBOR Loans minus1.25% multiplied by the average daily maximum face amount of alloutstanding documentary Letters of Credit computed at a per annumrate for each day.
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          1.8Inspection of Books and Records and Field Examinations. Section 5.5 of theLoan Agreement is amended and restated in its entirety and shall read as follows:5.5 Inspection of Books and Records and Field Examinations.Shall permit inspections of the Collateral and the records ofsuch Person pertaining thereto and verification of the Accounts, atsuch times and in such manner as may be required by Bank (whichexcept upon the occurrence and during the continuance of any Eventof Default, shall be upon reasonable notice and during reasonablebusiness hours) and shall further permit such inspections,collateral appraisals, reviews and field examinations of its otherbooks and records and properties (with such frequency and at suchtimes as Bank may desire) by Bank as Bank may deem necessary ordesirable from time to time. The cost of such field examinations,reviews, verifications, collateral appraisals, and inspections shallbe borne by Borrowers at Bank’s then current rate (currently at arate of $850 per examiner per day), plus Bank’s reasonableout-of-pocket expenses. Notwithstanding the foregoing, so long as noEvent of Default then exists, Borrowers shall be responsible forcosts and expenses associated with a maximum of two (2) examinationsper year, two (2) examiners per examination and eight (8) daysmaximum per examination; provided, however, so long as theInventory Loan Reliance Percentage was less than 30% (as determinedby Bank on a quarterly basis for the sixth (6) month period endingon the date of determination and whose determination shall be finaland binding absent manifest error) and so long as no Event ofDefault then exists, Borrowers shall be responsible for costs andexpenses associated with a maximum of one (1) examinations per year,two (2) examiners per examination and eight (8) days maximum for oneexamination and five (5) days maximum for the second examination. Inaddition to the foregoing, Bank anticipates conducting Inventoryappraisals (at Borrower’s sole cost and expenses) on a semi-annualbasis or in each case on a more frequent basis as Bank may determinein its reasonable discretion.          1.9 Borrowing Base Reporting Monthly and Annual Financial Statements.Section 5.6(a), Section 5.6(b) and Section 5.6(c) of the Loan Agreement is amended andrestated in its entirety and shall read as follows:(a) Periodic Borrowing Base Information. No later than 12:00noon on the applicable Borrowing Base Reporting Date (or morefrequently if required by Bank), Borrowers shall deliver to Bank acompleted Borrowing Base Certificate certified by the chieffinancial officer, controller or president of Borrower Agent to beaccurate and complete and in compliance with the terms of the LoanDocuments, For purposes hereof, “Borrowing Base Reporting Date”shall mean:
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     (i) tenth (10th) Business Day of the calendar month following a calendarmonth for which the outstanding principal balance of Obligations and the face amount of alloutstanding Letters of Credit at all times during such calendar month was less than or equal tothe aggregate amount determined pursuant to clauses (iv) and (v) of the definition of BorrowingBase; or     (ii) the third (3rd) Business Day of every other calendar week following theInventory Loan Reliance Percentage being less than 30% for three (3) consecutive Business Daysuntil such time as the outstanding principal balance of Obligations and the face amount of alloutstanding Letters of Credit was less than or equal to the aggregate amount determined pursuantto clauses (iv) and (v) of the definition of Borrowing Base for thirty (30) consecutive days andat such time Borrowers shall resume delivery of Borrowing Base Certificates on a monthly basis(i.e., no later than 12:00 noon on tenth(10th) Business Day of each calendar month);or     (iii)the third (3rd) Business Day of every calendar week following either (A) theInventory Loan Reliance Percentage being equal to or greater than 30% for three (3) consecutiveBusiness Days or (B) Borrowers’ Excess Availability is equal to or less than $5,000,000 at alltimes during the prior calendar month (as determined by Bank in its reasonable discretion) untilsuch time as, the Inventory Loan Reliance Percentage is less than 30% for thirty (30) consecutivedays or Borrowers’ Excess Availability exceeds $5,000,000 for thirty (30) consecutive days (asdetermined by Bank in its reasonable discretion), as applicable, and at such time Borrowers shallresume delivery of Borrowing Base Certificates on a monthly basis(i.e., no later than 12:00 noonon tenth (10th) Business Day of each calendar month).(b) Interim Statements. Within thirty (30) days after the end of each calendar month (otherthan calendar months ending March 31, June 30, September 30 or December 31) and within fifty (50)days after the end of each calendar month ending March 31, June 30, September 30 or December 31, aconsolidated and consolidating balance sheet of Borrowers at the end of that period and aconsolidated and consolidating income statement, and a statement of cash flows on a consolidatedbasis, for that period (and for the portion of the fiscal year ending with such period), settingforth in comparative form the figures for the same period of the preceding fiscal year. Theforegoing statements shall be certified by the chief financial officer of Borrower Agent as trueand correct and fairly representing the financial condition of Borrowers and their Subsidiaries andthat such statements are prepared in accordance with GAAP, except without footnotes and subject tonormal year-end audit adjustments.
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(e)Annual Statements. (i) Within seventy five (75) days after the end of each fiscal year,a consolidated financial report of Borrowers and their Subsidiaries containing a consolidated andconsolidating balance sheet at the end of that period and a consolidated and consolidating incomestatement and statement of cash flow for that period, setting forth in comparative form the figuresfor the preceding fiscal year, together with footnotes with the foregoing statements shall becertified by the chief financial officer of Borrower Agent as true and correct and fairlyrepresenting the financial condition of Borrowers and their Subsidiaries and that such statementsare prepared in accordance with GAAP and (ii) within one hundred ten (110) days after the end ofeach fiscal year, an audited consolidated financial report of Borrowers and their Subsidiariescontaining a consolidated balance sheet at the end of that period and a consolidated incomestatement and statement of cash flow for that period, setting forth in comparative form the figuresfor the preceding fiscal year, together with footnotes, and containing an unqualified audit opinionof independent certified public accountants acceptable to Bank that the financial statements wereprepared in accordance with GAAP. Borrowers shall obtain such written acknowledgments fromBorrowers’ independent certified public accountants with respect to the financial statementsdescribed in caluse (ii) above.          1.10 Excess Availability. Section 6.17 of the Loan Agreement is amended and restatedin its entirety and shall read as follows:          6.17 RESERVED          1.11 Fixed Charge Coverage Ratio. Section 7.1 of the Loan Agreement is amended andrestated in its entirety and shall read as follows:          7.1 Fixed Charge Coverage Ratio.Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00 as of the endof each calendar quarter commencing with the calendar quarter endingJune 30, 2009. As used herein,“Fixed Charge Coverage Ratio” means (i) EBITDA, less the sum of (A) all unfinanced CapitalExpenditures made in the Applicable Fiscal Period, and (B) any dividends, distributions or stockpurchases permitted in Section 6.3 hereof paid in the Applicable Fiscal Period, and (C) cash taxespaid in the Applicable Fiscal Period (without benefit of any refunds unless related to periodsprior to the date hereof), divided by (ii) the sum of (A) the current portion of scheduledprincipal amortization on Funded Debt for the Applicable Fiscal period, plus (B) cashinterest payments (including payments made in cash with respect to letter of credit fees) paid inthe Applicable Fiscal Period. As used herein, (i) “EBITDA” means the
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sum of (A) consolidated net income of Borrowers and their Subsidiaries in the Applicable FiscalPeriod (computed without regard to any extraordinary or other non-recurring or non-operating itemsof gain or loss) plus (B) to the extent deducted from revenue in computing consolidated netincome for such period, the sum of (1) interest expense (including expenses related to letter ofcredit fees), (2) income tax expense, and non-cash charges and (3) depreciation and amortization;(ii) “Capital Expenditures” means for any period the aggregate cost of all capital assetsacquired by Borrowers and their Subsidiaries during such period, as determined in accordance withGAAP; (iii) “Applicable Fiscal Period” means the calendar year to date period for thecalendar quarters on June 30, 2009, September 30, 2009, December 31, 2009 and March 31, 2010 andthereafter a period of four (4) consecutive, trailing calendar quarters ending at the end of eachprescribed calendar quarter and (iv) “Funded Debt” means (A) debt for borrowed funds (other than(x) the debt associated with the term loan provided by PNC Bank, National Association in theoriginal principal amount of $7,500,000 and (y) the ERC Intercompany Payable), (B) debt for thedeferred payment by one (1) year or more of any purchase money obligation, and (C) any subordinateddebt.          1.12 Advanced Sound and Image, LLC. Pursuant to that certain FifthAmendment to Loan and Security Agreement dated as of February 28, 2008 among Borrowers and Bank(the “Fifth Amendment”), Bank consented to Borrowers entering into and consummating the ADCOMTransactions (as defined in the Fifth Amendment). Borrowers have informed Bank that they intend toterminate the ADCOM Transactions in their entirety in exchange for a $200,000 distribution fromAdvanced (as defined in the Fifth Amendment) to ERC US while writing off the remaining investmentin and loan to Advanced (the “JV Termination”) and Borrowers have requested that Bank consent tothe JV Termination. Upon the effectiveness of this Amendment, Bank consents to the JV Termination.          1.13 Purchase of OLEVIA Trademark. Borrowers have informed Bank that a Borrower oran Affiliate of a Borrower intends to purchase that certain intellectual property in connectionwith the OLEVIA brand name and/or trademark (the “OLEVIA Purchase”) and Borrowers have requestedthat Bank consent to the OLEVIA Purchase. Upon the effectiveness of this Amendment, Bank consentsto the OLEVIA Purchase so long as the (a) aggregate purchase price does not exceed $1,400,000 and(b) the documents, instruments and agreements evidencing the OLEVIA Purchase and the terms andconditions contained therein are acceptable to Bank in its sole discretion          1.14 Purchase of Real Property. Borrowers have informed Bank that a Borrower or anAffiliate of a Borrower intends to purchase that certain parcel ofreal property (the “Real Estate Purchase”) commonlyknown as 85 Oxford Drive, Moonachie, New Jersey (the “Target Real Property”) and Borrowers have requested that Bank consent to the Real Estate Purchase andeither consent to financing from a financial institution (“Real Estate Financing”) or otherwiseprovide the financing in connection therewith upon terms, conditions and documentation acceptableto Bank in its sole discretion. Upon the effectiveness of this Amendment, Bank consents to theReal Estate
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Purchase so long as the (a) aggregate purchase price does not exceed $2,850,000 and (b) thedocuments, instruments and agreements evidencing the Real Estate Purchase and the terms andconditions contained therein are acceptable to Bank in its solediscretion. Upon the effectivenessof this Amendment, Bank consents to the Real Estate Financing so long as the (a) aggregateindebtedness incurred with respect thereto does not exceed $1,850,000, (b) the financialinstitution is acceptable to Bank in its sole discretion, (c) the Real Estate Financing in securedsolely by the Target Real Property, (d) the financial institution providing the Real EstateFinancing executes and delivers to Bank a Third Party Waiver and (e) the documents, instruments andagreements evidencing the Real Estate Financing and the terms and conditions contained therein areacceptable to Bank in its sole discretion. Borrowers agree to provide Bank final documentsevidencing the Real Estate Purchase and Real Estate Financing at least five (5) Business Days priorto the effectiveness of each such transaction.     **2. WAIVER**          Uponthe effectiveness of this Amendment, Bank hereby waives the Existing Defaults. The waiverof the Existing Defaults shall not constitute a waiver of any other Default or Event of Default.Nothing contained herein shall obligate Bank to grant any future waiver of any other Default orEvent of Default or be deemed to constitute a course of conduct or course of dealing (whethersimilar or dissimilar).     **3. CONFIRMATION OF INDEBTEDNESS**          EachBorrower hereby confirms and agrees that, as of the close of business on June 30, 2009,the total principal amount of outstanding Revolver Loans under the Loan Agreement is $0, and theface amount of all outstanding Letters of Credit is $8,181,750 and that each Borrower isunconditionally liable to Bank for such amounts, together with all accrued and unpaid interest andexpenses through the date hereof, without any set-off, deduction, counterclaim or defense.     **4. FURTHER ASSURANCES**          Each Borrower hereby agrees to take all such actions and to execute and/or deliver to Bank allsuch agreements, instruments, certificates, assignments, financing statements and other documents,as Bank may reasonably require from time to time, to effectuate and implement the purposes of thisAmendment. On or before August 15, 2008, Borrowers shall deliver to Lender authorizing resolutionsauthorizing each Borrower’s execution, delivery and performance of this Amendment.     **5. CONFIRMATION OF COLLATERAL**          Each Borrower covenants, confirms and agrees that as security for the repayment of theObligations, Bank has, and shall continue to have, and is hereby granted a continuing lien on andsecurity interest in the Collateral (including the Smith Barney Securities), all whether now ownedor hereafter acquired, created or arising, including all proceeds thereof. Each Borroweracknowledges and agrees that nothing herein contained in any way impairs Bank’s existing rights andpriority in the Collateral.
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     **6. REPRESENTATIONS AND WARRANTIES**          Each Borrower warrants and represents to Bank that:          6.1 By execution of this Amendment, Borrowers confirm that all representations and warrantiesmade by Borrowers to Bank shall be true and correct in all material respects, with the same effectas though the representations and warranties had been made on and as of the date hereof, except tothe extent such representation and warranty are made as of a specificprior date.          6.2 The execution and delivery by each Borrower of this Amendment and the performance of thetransactions herein contemplated (i) are and will be within its power, (ii) have been authorized byall necessary action, and (iii) are not and will not be in contravention of any order of court orother agency of government, of law, of any organization document of such Borrower or of anyindenture, agreement or undertaking to which such Borrower is a party or by which the property ofsuch Borrower is bound, or be in conflict with, result in a breach of or constitute (with duenotice and/or lapse of time) a default under any such indenture, agreement or undertaking, orresult in the imposition of any lien, charge or encumbrance of any nature on any of the propertiesof such Borrower.          6.3 This Amendment and any assignment or other instrument, document or agreement executed anddelivered in connection herewith, will constitute the legal, valid and binding obligations of eachBorrower, enforceable in accordance with their respective terms, subject only to bankruptcy andsimilar laws affecting creditors’ rights generally.          6.4 After giving effect to Section 2 of this Amendment, there are no outstanding Defaults orEvents of Default under any of the Loan Documents.          6.5 There has been no change which could have a Material Adverse Effect on any Borrower sincethe date of the most recent financial statements of such Borrower delivered to Bank from time totime.     **7. EFFECTIVENESS CONDITIONS**          This Amendment shall not be effective until the following conditions have been met to the solesatisfaction of Bank (which satisfaction shall be evidenced by Bank’s counter-execution anddelivery to ERC US of a fully executed counterpart of this Amendment):               (i) Borrowers shall have executed and delivered to Bank this Amendment.               (ii) Borrowers shall have paid to Bank, in immediately available funds, a non-refundablewaiver and amendment fee in an amount equal to $50,000, which fee is fully earned by Bank upon theexecution of this Amendment.     **8. PAYMENT OF EXPENSES**          Borrowers shall pay or reimburse Bank for all reasonable attorneys’ fees and expenses and allreasonable out of pocket costs in connection with the analysis, preparation, negotiation andexecution of this Amendment and all agreements, instruments and documents provided for herein orrelated hereto.
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     **9. REAFFIRMATION**          This Amendment shall be incorporated into and made part of the Loan Agreement. Except asexpressly modified by the terms hereof, all of the terms and conditions of the Loan Agreement, andall of the other Loan Documents, are hereby reaffirmed and shall continue in full force and effectas therein written.     **10. RELEASE**          As further consideration for the agreement of Bank to enter into this Amendment, each Borrowerhereby waives, releases, and discharges Bank, all affiliates of Bank and all of the directors,officers, employees, attorneys and agents of Bank and all affiliates of such Persons, from any andall known claims, demands, actions or causes of action existing as of the date hereof, arising outof or in any way relating to this Amendment, the Loan Agreement, the Loan Documents and/or anydocuments, agreements, instruments, dealings or other matters connected with this Amendment, theLoan Agreement, the Loan Documents or the administration thereof.     **11. MISCELLANEOUS**          11.1 Integrated Agreement. The Loan Documents and this Amendment shall be construed asintegrated and complementary of each other, and as augmenting and not restricting Bank’s rights,remedies and security. If, after applying the foregoing, an inconsistency still exists, theprovisions of this Amendment shall control.          11.2 Severability. Any provision hereof, or of the Loan Agreement or any other LoanDocument that is prohibited or unenforceable in any jurisdiction shall be, as to such jurisdiction,ineffective to the extent of such prohibition or unenforceability without invalidating theremaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shallnot invalidate or render unenforceable such provision in any otherjurisdiction.          11.3 Non-Waiver. No omission or delay by Bank in exercising any right or power underthis Amendment, or the Loan Documents or any related agreement will impair such right or power orbe construed to be a waiver of any Default or Event of Default or an acquiescence therein, and anysingle or partial exercise of any such right or power will not preclude other or further exercisethereof or the exercise of any other right, and no waiver will be valid unless in writing andsigned by Bank and then only to the extent specified. Bank’s rights and remedies are cumulative andconcurrent and may be pursued singly, successively or together.          11.4 Headings. The headings of any paragraph of this Amendment are for convenienceonly and shall not be used to interpret any provision of thisAmendment.          11.5 Survival. All warranties, representations and covenants made by Borrowers herein,or in any agreement referred to herein or on any certificate, document or other instrumentdelivered by it or on its behalf under this Amendment, shall be considered to have been relied uponby Bank. All statements in any such certificate or other instrument shall constitute warranties andrepresentations by Borrower hereunder. All warranties, representations, and covenants made byBorrowers hereunder or under any other agreement or instrument shall be deemed continuing untilthe Obligations are indefeasibly paid and satisfied in full.
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          11.6 Successors and Assigns. This Amendment shall be binding upon and shall inure tothe benefit of Borrowers and Bank, and their respective successors and assigns; provided, thatBorrowers may not assign any of its rights hereunder without the prior written consent of Bank, andany such assignment made without such consent will be void.          11.7 Governing Law. This Amendment, the Loan Agreement and the Loan Documents shall bedeemed contracts made under the laws of the State of the Jurisdiction and shall be governed by andconstrued in accordance with the laws of said state (excluding its conflict of laws provisions ifsuch provisions would require application of the laws of another jurisdiction) except insofar asthe laws of another jurisdiction may, by reason of mandatory provisions of law, govern theperfection, priority and enforcement of security interests in the Collateral.          11.8 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER BY EXECUTION HEREOFAND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVESANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ORARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT, THE LOAN AGREEMENT, THE LOAN DOCUMENTSOR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AMENDMENT OR THE LOANAGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TOENTER INTO AND ACCEPT THIS AMENDMENT.          11.9 Counterparts. This Amendment may be executed in any number of counterparts andby different parties hereto in separate counterparts, each of which when so executed and deliveredshall be deemed an original and all of which when taken together shall constitute but one and thesame instrument. Any signature delivered by a party by facsimile transmission or pdf shall bedeemed to be an original signature hereto.[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered bytheir duly authorized officers as of the date first above written.     BORROWERS:  EMERSON RADIO CORP.