Exhibit
10.122


 


FACTORING AND INVENTORY


ADVANCES AND SECURITY AGREEMENT


 


Date:
February 9, 2009.


 


Name of Client (“Client”):  MEADE INSTRUMENTS CORP.


 


Factor: FCC, LLC, doing business as First Capital
Western Region, LLC (“Factor”)


 


WHEREAS, Client
has requested and Factor has agreed to purchase certain of Client’s Accounts,
provide Account Advances against such Accounts, provide an Inventory Advance
against Inventory, guaranty Letters of Credit, and provide certain services;


 


NOW, THEREFORE,
in consideration of the agreements, provisions, and covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Client and Factor, hereby agree to the terms and
conditions set forth in this Agreement.


 


Section 1.  Definitions.


 


1.1                                 Defined Terms. Capitalized terms shall have the meanings
ascribed to them on Schedule A.


 


1.2                                 Other
Referential Provisions.


 


(a)                                  All
terms in this Agreement, the Exhibits and Schedules shall have the same defined
meanings when used in any other Factoring Documents, unless the context shall
require otherwise.


 


(b)                                 Except
as otherwise expressly provided herein, all accounting terms not specifically
defined or specified herein shall have the meanings generally attributed to
such terms under GAAP including, applicable statements and interpretations
issued by the Financial Accounting Standards Board and bulletins, opinions,
interpretations and statements issued by the American Institute of Certified
Public Accountants or its committees.


 


(c)                                  All
personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all other genders; the singular shall
include the plural, and the plural shall include the singular.


 


(d)                                 The
words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provisions of this Agreement.


 


(e)                                  Titles
of Articles and Sections in this Agreement are for convenience only, do not
constitute part of this Agreement and neither limit nor amplify the provisions
of this Agreement, and all references in this Agreement to Articles, Sections,
Subsections, paragraphs, clauses, sub clauses, Schedules or Exhibits shall
refer to the corresponding Article, Section, Subsection, paragraph, clause or
sub clause of, or Schedule or Exhibit attached to, this Agreement, unless
specific reference is made to the articles, sections or other subdivisions or
divisions of, or to schedules or exhibits to, another document or instrument.


 


(f)                                    Each
definition of or reference to a document in this Agreement shall include such
document as amended, modified, supplemented or restated from time to time.


 


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(g)                                 Except
where specifically restricted, reference to any Person shall be construed to
include such Person’s successors and permitted assigns.


 


(h)                                 Any
and all terms used in this Agreement which are defined in the UCC shall be
construed and defined in accordance with the meaning and definition ascribed to
such terms under the UCC, unless otherwise defined herein.


 


(i)                                     The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Reference to any law, constitution, statute,
treaty, regulation, rule or ordinance, including any section or other part
thereof (each, for purposes of this paragraph (i), a “law”), shall refer to
that law as amended from time to time and shall include any successor law.


 


1.3                                 Exhibits
and Schedules.  All Exhibits and
Schedules attached hereto are incorporated herein by reference and made a part
hereof.


 


Section 2. Purchase & Sale of Accounts.


 


2.1  Purchase of Accounts.  Client hereby sells to Factor all of Client’s
right, title and interest in and to all of Client’s Accounts.  Factor shall be the sole and exclusive owner
of such Accounts with full power to collect and otherwise deal with such
Accounts.  All Accounts shall be
submitted to Factor on a Schedule of Accounts listing each Account
separately.  The Schedule of Accounts
shall be in such form as Factor may prescribe from time to time and shall be
signed by an officer or authorized signer of the Client.  Client may submit such Accounts
electronically, by facsimile, by mail or other delivery service of Client’s
choosing that is approved by Factor.  Any
Accounts submitted electronically shall be submitted in such electronic format
as Factor may require.  At the time the
Schedule of Accounts is presented, Client shall also deliver to Factor, if
requested by Factor, one copy of an invoice for each Account together with
evidence of shipment, furnishing and/or delivery of the Goods or rendition of
service(s).


 


2.2         Credit Approval.


 


(a) 
Client shall submit to Factor the credit requirements of Client’s Customers, a
description of its selling terms and such other information as Factor may
request.  Factor may, in its sole credit
judgment, establish credit lines for sales by Client to its Customers on its
normal selling terms or such other terms as Factor may approve (“Credit
Lines”).  Client may also submit for
credit approval specific orders from Customers and Factor may, in its sole
credit judgment, approve such orders on a single order approval basis (“Single
Order Approval”).  Accounts arising under
the terms of Credit Lines or Single Order Approvals are hereinafter referred to
as Approved Accounts; Accounts not arising under Credit Lines or Single Order
Approvals are hereinafter referred to as Client Risk Accounts.  All Credit Approvals must be in writing to be
effective. Credit Approval(s) shall be limited to the specific terms and
amounts indicated in either the Credit Line or Single Order Approval.   If Goods are shipped or services are
rendered based on a verbal approval, it is Client’s responsibility to ensure
that such Credit Approval is received in writing.  Any Account for freight, samples, or
miscellaneous sales (including the sale of Goods and/or in quantities not
regularly sold by Client) shall always be a Client Risk Account,
notwithstanding any written Credit Approval from Factor.  For purposes of determining Factor’s Credit
Approval hereunder, the Account(s) balance due Factor from any given
Customer shall be calculated as the aggregate amount owed by that Customer less
any credits to which such Customer may be entitled, and is not to be construed
to mean individual invoices owed by that Customer.


 


(b) 
Credit Approval(s) may be withdrawn, either orally or in writing, in
Factor’s sole discretion at any time before actual delivery of Goods or
rendering of services. Credit Approval(s) are automatically rescinded and
withdrawn if the terms of sale vary from the terms approved by Factor, or if
the terms of sale are changed by Client without Factor’s prior written approval
of the new terms, or if the Account is not assigned to Factor within ten days
from the date of the invoice, or if the Goods are not delivered on or before the
expiration of the Single Order Approval or if there is no expiration date if
the Goods are not delivered within 30 days of the date of the Single Order
Credit Approval.  If Accounts exceed
either a Credit Line or Single Order Approval, only the amount in excess of the
Credit Line or Single Order Approval shall be considered Client Risk Accounts,
provided, however, that if Client ships Goods or 


 


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provides
services to a Customer who has outstanding Accounts owed to Client, and such
Customer’s Credit Line and/or outstanding Single Order Approval(s) have
been withdrawn by Factor, and the Accounts created by such shipment exceed ten
percent (10%) of the total amount of Client’s Accounts outstanding, any Credit Approvals
applying to those Accounts shall be deemed cancelled and all outstanding
Accounts from that Customer are Client Risk Accounts for all purposes.


 


(c) 
Factor shall have no liability of any kind for declining or refusing to give,
or for withdrawing, revoking, or modifying, any Credit Approval pursuant to the
terms of this Agreement, or for exercising or failing to exercise any rights or
remedies Factor may have under this Agreement or otherwise.  In the event Factor declines to give Credit
Approval on any order received by Client from a Customer and in advising Client
of such decline Factor furnishes Client with information as to the credit
standing of the Customer, such information shall be deemed to have been
requested of Factor by Client and Factor’s advice containing such information
is recognized as a privileged communication. 
Client agrees that such information shall not be given to Client’s
Customer or to Client’s sales representative(s).  If necessary, Client shall merely advise its
Customer(s) that credit has been declined on the account and that any
questions should be directed to Factor.


 


(d) 
Factor will assume the Credit Risk on Approved Accounts, i.e., if a Customer,
after receiving and accepting the delivery of Goods or services (subject to all
warranties herein) for which Factor has given written Credit Approval, fails to
pay an Account when due, and such nonpayment is due solely to financial
inability to pay, Factor shall bear any loss thereon up to the amount of the
Credit Approval, subject to the terms and provisions stated herein or in the
Credit Approval.  If Factor fails to
collect an Approved Account within 120 Days of its maturity solely due to the
Customer’s financial inability to pay, Factor will pay the Purchase Price of
such Approved Account to Client on the Collection Date.  Specifically, Factor shall not be responsible
for any nonpayment of a Credit Approved Account: (i) because of the
assertion of any claim or Dispute by a Customer for any reason whatsoever,
including, dispute as to price, terms of sales, delivery, quantity, quality, or
other, or the exercise of any counterclaim or offset (whether or not such
claim, counterclaim or offset relates to the specific Account); (ii) where
nonpayment is a consequence of enemy attack, terrorism, natural disaster, civil
commotion, strikes, lockouts, the act or restraint of public authorities, acts
of God or force majeure; or (iii) if any representation or warranty made
by Client to Factor in respect of such Account has been breached whether
intentionally or unintentionally.  The
assertion of a Dispute by a Customer shall have the effect of negating any
Credit Approval on the affected Approved Account(s) and such Approved
Account(s) shall be deemed a Client Risk Account until paid or otherwise
cleared from Factor’s books.


 


(e) 
Client shall bear the Credit Risk on all Client Risk Accounts; Factor shall
have full recourse to Client for all Client Risk Accounts.  Upon demand by Factor, Client shall pay to
Factor the full amount of a Client Risk Account, together with all expenses
incurred by Factor up to the date of such payment, including reasonable
attorney’s fees in attempting to collect or enforce such payment or payment of
such Account(s).


 


(f) 
If monies are owing from a Customer for both Approved Accounts and Client Risk
Accounts, Client agrees that any payments or credits applying to any Account
owing by such Customer will be applied:  first,
to any Approved Accounts outstanding on Factor’s books and second, to
any Client Risk Account outstanding on Factor’s books.  This order of payment applies regardless of
the respective dates the sales occurred and regardless of any notations on
payment items.


 


2.3         Purchase Price.


 


(a) 
On the Collection Date applicable to an Account, Factor shall pay to Client the
Purchase Price for such Account, less (i) any Reserve or credit balance
that Factor, in Factor’s sole discretion, determines to hold, (ii) all
Advances, moneys remitted, paid, or otherwise advanced by Factor to or on
behalf of Client (including any amounts which Client may reasonably be
obligated to pay in the future), (iii) any other charges provided for by
this Agreement or otherwise due Factor by Client, and (iv) any deductions
taken by the Customer in connection with such Account.


 


(b)         No discount, credit, allowance or deduction
with respect to any Account in excess of $10,000 shall be granted or approved
by Client to any Customer without the prior written consent of Factor unless 


 


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such
discount, credit, allowance or deduction is shown on the face of an invoice at
the time such invoice is submitted to Factor. 
Client agrees to give Factor notice of all discounts, credits,
allowances or deductions in excess of $10,000.


 


(c) 
Client shall pay to Factor or Factor may charge Client’s account with Factor or
to the Reserve, the amount of any payment that Factor receives with respect to
a Client Risk Account if Factor is subsequently required to return such
payment, whether as a result of any proceeding in bankruptcy or otherwise.


 


(d)   Client agrees to repurchase (i) any
Account upon the breach of any representations or warranties relating to such
Account or upon a Default hereunder, (ii) any Client Risk Account at any
time, and (iii) any Approved Account at any time after the assertion of a
Dispute.


 


2.4
Reserve. Factor shall be entitled to withhold a Reserve, and may revise
the Reserve at any time and from time to time if Factor deems it necessary to
do so in order to protect Factor’s interests. 
Factor may charge against the Reserve any amount for which Client may be
obligated to Factor at any time, whether under the terms of this Agreement, or
otherwise, including but not limited to the repayment of  any damages suffered by Factor as a result of
Client’s breach of any provision hereof (whether intentional or unintentional),
any adjustments due and any attorneys’ fees, costs and disbursements due.  Client recognizes that the Reserve represents
bookkeeping entries only and not cash funds. 
It is further agreed that with respect to the balance in the Reserve,
Factor is authorized to withhold, without giving prior notice to Client, such
payments and credits otherwise due to Client under the terms of this Agreement
for reasonably anticipated claims or to adequately satisfy reasonably
anticipated Obligation(s) Client may owe Factor.


 


2.5                                 Notice Of Purchase.  All
invoices submitted to Customers by Client shall plainly state on their face
that the amounts payable thereunder are payable at such lockbox address as
Factor may designate to Client in writing from time to time.


 


Section 3. 
Account Advances/Inventory Advances.


 


3.1
Account Advances.  In Factor’s
sole discretion, subject to the terms and conditions of this Agreement, Factor
may from time to time advance to Client up to eighty percent (80.0%) of the
aggregate Net Invoice Amount of Accounts outstanding at the time any such
Account Advance is made, with dilution of ten percent (10%) or less on a
trailing 12 month basis, less: (1) Any such Accounts that are in Dispute; (2) any
such Accounts that are not acceptable to Factor in its sole discretion; (3) the
amount of the Reserve; and (4) any interest, fees and other items, actual
or estimated, that are chargeable to the Reserve; or (5) the amount of any
Letters of Credit not deducted pursuant to Section 3.2(a).  The Account Advances shall be reduced by a
minimum of two percent (2%) for every one percent (1%) of dilution in excess of
ten percent (10%).


 


3.2
Inventory Advances.  (a)  In
Factor’s sole discretion, subject to the terms and conditions of this
Agreement, Factor may from time to time advance to Client up to the least of (i) fifty
percent (50.0%) of the dollar value (determined at the lower of cost or market)
of Eligible Inventory, (ii) $3,000,000, or (iii) seventy-five percent
(75.0%) of net orderly liquidation value of Eligible Inventory as per the most
recent approval (Inventory shall be appraised semi-annually by an appraiser
acceptable to Factor), less the face amount of all Letters of Credit issued or
guaranteed by Factor for or on behalf of the Client or such reserves as Factor
shall establish from time to time in its sole discretion.   Borrowed amounts that are repaid may be
reborrowed upon the terms and conditions of this Agreement.  Notwithstanding the foregoing, Advances will
not be made against Eligible Inventory until Factor receives the initial
appraisal of the Inventory and such appraisal is satisfactory to Factor.


 


(b)                                 Factor will determine eligibility and the
loan value of the Eligible Inventory, in its sole discretion, consistent with
Factor’s experience, prudent business judgment and standards of commercial
reasonableness applicable to asset-based credits and in good faith.


 


(c)                            Client shall deliver to Factor an Inventory
Certificate no less frequently than weekly (by the second Business Day of each
week and determined as of the close of business on the last Business Day 


 


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of
the immediately preceding week), except when no borrowings against Inventory
are made.  At times when no Advances are
outstanding against Inventory, Client shall deliver to Factor an Inventory
Certificate no less than monthly (by the tenth Business Day following the last
day of the applicable month).


 


(d)                                 In no event shall the total of the
outstanding Advances exceed the lesser of i) $10,000,000 or ii) the sum of
Account Advance Availability plus Inventory Advance Availability and Client
shall immediately pay to Factor any and all amounts necessary to reduce the
aggregate outstanding Advances below such limit.


 


3.3  Letters of Credit.


 


(a)                                  Subject to the terms of this
Agreement, and so long as no Default has occurred and is continuing, upon the
request of Client and for Client’s account, Factor shall issue or shall cause
to be issued one or more Letters of Credit for the purpose of facilitating the
purchase of goods or services in the ordinary course of Client’s business. The
aggregate face amount of all Letters of Credit shall be deducted from the
amount of Inventory Advances available under Section 3.2 hereof and to the
extent necessary, from the amount of Account Advances available under Section 3.2
hereof.  The aggregate face amount of all
Letters of Credit outstanding at any time shall not exceed an amount equal to
Eight Hundred Thousand No/100 Dollars ($800,000); provided, that, at no time
shall the aggregate face amount of all Letters of Credit outstanding, plus
the outstanding Account Advances and Inventory Advances, exceed the lesser of
the $800,000 or the amounts available to be advanced/borrowed under Sections
3.1 and 3.2 [and if available and only to the extent of such availability, Section 3.4
hereof] hereof.  The expiration date of
each Letter of Credit shall not be later than 365 days from the date of
issuance of such Letter of Credit.   No
Letter of Credit shall have any automatic or “evergreen” renewal provisions. No
extensions, modifications or amendments to a Letter of Credit shall be made
without Factor’s prior written consent.


 


(b)                                 In the event that Factor
shall make any payment on or pursuant to any Letter of Credit, such payment
shall then be deemed automatically to constitute first, an Inventory Advance,
and second an Account Advance, hereunder.


 


(c)                                  Client shall pay to Factor,
as compensation for the Letter of Credit Obligations incurred hereunder,
immediately upon demand, all amounts necessary for Factor to meet all
disbursements and payments of any kind or character, together with the Letter
of Credit Fee, and any interest, commissions and other charges, which Factor
has incurred or will incur or to which Factor is entitled in connection with
the Letters of Credit or any draft drawn thereunder and any fees charged by any
Bank issuing any Letters of Credit, all as set forth on Exhibit A.


 


(d)                                 Client shall give Factor at
least five (5) business days’ prior written notice of a requested Letter
of Credit.  The Letter of Credit
shall be issued pursuant to a letter of credit application entered into by
Client and Factor for the benefit of the Issuer, completed in a manner
satisfactory to Factor and the Issuer. The terms and conditions set forth in
such letter of credit application shall supplement the terms and conditions
hereof, but if the terms of such letter of credit application and the terms of
this Agreement are inconsistent, the terms hereof shall control.


 


(e)                                  The Client hereby agrees to
reimburse Factor for payments made with respect to any Letter of Credit
Obligations and such obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities. Client acknowledges that neither this Agreement nor any
guaranty of a Letter of Credit by Factor pursuant to this Agreement shall in
any way be construed to create any liability, obligation, warranty or
representation on Factor’s part with respect to any matter other than Factor’s
obligation to make payment of any Letter of Credit guarantied by Factor.  Neither Factor nor any Person issuing a
Letter of Credit shall be responsible for: (a) verifying the existence of
any act, condition or statement made by a beneficiary of a Letter of Credit in
relation to its drawing or presentment under the Letter of Credit or for
verifying or passing judgment on the reasonableness of any statement made by the
beneficiary of the Letter of Credit; (b) the validity, sufficiency or
genuineness of documents, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (c) the
failure to give any notice; or (d) any breach of contract between the
beneficiary of the Letter of Credit and Client. 
Furthermore, neither Factor nor any Person issuing a Letter of Credit
shall be responsible for errors, omissions, interruptions or delays in
transmission or delivery of any 


 


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messages, by mail, cable,
telegraph or otherwise; and none of the above shall affect or impair any of
Factor’s rights or powers hereunder.  In
furtherance of the foregoing, Client agrees that, absent gross negligence or
willful misconduct on Factor’s part, any action taken or not taken by Factor or
by any Person issuing a Letter of Credit, under or in connection with a Letter
of Credit or the related draft or documents shall be binding on Client and shall
not make Factor liable to Client.


 


(f)                                    Factor shall not be
obligated to issue or cause to be issued Letters of Credit for any purpose
other than the sole purpose of allowing Client to purchase goods or services in
the ordinary course of business.


 


(g)                                 Client
shall indemnify Factor and hold Factor harmless from and against any and all
liabilities, losses, costs, fees and expenses, including attorneys’ fees, that
Factor may sustain or incur based upon, arising under, or in any way relating
to any Letter of Credit.  Client’s
obligation to reimburse and indemnify Factor shall be conclusive but shall not
prejudice any rights Client may have against any other person in the event that
Client disputes liability of any amounts owing under any Letter of Credit.


 


(h)                                 Whenever
a draft is submitted under the Letter of Credit, Clients authorize Factor
(regardless of whether a Default exists or whether Clients have sufficient
borrowing availability hereunder) to make a Inventory Advance first and, to the
extent necessary to cover the amount of such Letter of Credit, an Account
Advance hereunder in the amount of such draft (plus any applicable fees of the
Issuer associated therewith) and to apply the proceeds of such Inventory
Advance or Account Advance thereto.  Such
Inventory Advances and/or Account Advances shall bear interest and be repayable
in accordance with, and be treated in all other respects pursuant to the terms
hereof.


 


(i)                                     Clients’
obligations arising hereunder shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances whatsoever, including (without limitation) the following
circumstances:


 


(A)                              any lack of
validity or enforceability of the Letter of Credit or any other agreement or
instrument relating thereto (collectively the “Related Documents”);


 


(B)                                any
amendment or waiver of or any consent to departure from all or any of the
Related Documents;


 


(C)                                the
existence of any claim, setoff, defense or other right which any Client may
have at any time, against any beneficiary or any transferee of the Letter of
Credit or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any unrelated
transactions;


 


(D)                               any
statement or any other document presented under the Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;


 


(E)                                 payment by
or on behalf of the Issuer under the Letter of Credit against presentation of a
draft or certificate which does not strictly comply with the terms of the
Letter of Credit; and


 


(F)                                 any other
circumstance or happening whatsoever, whether or not similar to any of the foregoing.


 


Section 4. 
Collections/Repayment.


 


4.1
Collections.


 


(a)                                  Factor shall have the right at any time with
or without notice to Client, to notify any or all Customers of the sale and
assignment of the Accounts and pledge of the Collateral to Factor and to direct
such Customers to make payment of all amounts due or to become due to Client
directly to Factor.  Client agrees not to
change any of such instructions or to give its Customers different instructions
so long as this Agreement shall remain in effect.  To the extent there are no Obligations of
Client owed to Factor hereunder and so long as Client is not in Default, Factor
shall be deemed to have received any such proceeds of Accounts and other
Collateral in excess of that which Factor is entitles as Owner of the Accounts
or in repayment in full of the Obligations as a pure pass-through for and on
account of Client.


 


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(b)         Factor, as the sole and absolute owner of the
Accounts, shall have the sole and exclusive power and authority to collect each
such Account, through legal action or otherwise, and Factor may, in its sole
discretion, settle, compromise, or assign (in whole or in part) any of such
Accounts, or otherwise exercise, to the maximum extent permitted by applicable
law, any other right now existing or hereafter arising with respect to any of
such Accounts.


 


(c)   Should Client receive payment of all or any
portion of any Account or other Collateral, Client shall immediately notify
Factor of the receipt of such payment, hold such payment in trust for Factor
separate and apart from Client’s own property and funds, and shall deliver such
payment to Factor without delay in the identical form in which received.  Should Client receive any check or other
payment instrument with respect to any Account or other Collateral and fail to
surrender and deliver to Factor such check or payment instrument within five (5) days,
Factor shall be entitled to charge Client a Misdirected Payment Fee to
compensate Factor for the additional administrative expenses that the parties
acknowledge are likely to be incurred as a result of such breach.


 


(d) In
the event any Goods, the sale of which gave rise to an Account, are returned to
or repossessed by Client, such Goods shall be held by Client in trust for
Factor, separate and apart from Client’s own property and subject to Factor’s
sole direction and control.


 


 (e)  Client agrees to notify Factor
promptly in writing of any credit loss, or anticipated credit loss, for Approved
Accounts, such notice in any event to be received by Factor no longer than 120
days after the maturity date of the invoice (based on its longest optional
terms).  Client’s failure to provide such
notice to Factor within the 120 day period shall result in Client assuming the
entire Credit Risk on such Account, and Factor shall be deemed free of any such
Credit Risk.


 


4.2
Repayment.


 


(a) 
Client hereby unconditionally promises to pay all Advances and all other
Obligations. All Advances and Obligations shall bear interest at the rate set
forth in subsection 5.1 below until paid in full.  All Advances and all other Obligations  shall be immediately due and payable upon
termination of this Agreement for any reason.


 


(b) 
The Purchase Price and all other amounts received by Factor will be paid to
Client by crediting same to Client’s account with Factor on the Collection
Date.  The Purchase Price and all other
amounts so credited to Client’s account with Factor shall be applied first to
all fees and expenses due Factor, next to accrued interest,  then to the Inventory Advances, then to
Account Advances, provided, however, that the allocation of Credit Risk shall
be governed by Section 2.2 hereof.


 


(c) 
Client shall make each payment required hereunder or under any other Factoring
Document without setoff, deduction or counterclaim.


 


(d) 
Unless payment is otherwise timely made by Client, the becoming due of any
amount required to be paid under this Agreement or any other Factoring
Documents as principal, accrued interest, expenses or fees shall be deemed
irrevocably to be a request by Client for an Account Advance or Inventory
Advance on the due date of, and in the amount required to pay, such principal,
accrued interest or fees or expenses and the proceeds of each such Account
Advances or Inventory Advance if made by Factor, shall be disbursed by Factor
by way of direct payment of such Obligation.


 


Section 5.  Interest and Fees.


 


5.1  Interest.


 


(a)   Client will pay Factor or, at Factor’s
option, Factor may charge Client’s account with, interest on the average daily
net principal amount of Obligations outstanding hereunder, calculated monthly
and payable on the first day of each calendar month, at a rate (computed on the
basis of the actual number of days elapsed over a year of 360 days) (the
“Interest Rate”) equal to the sum of (i) LIBOR (as defined below), plus
five and one-half percent (5.5%) (the “Interest Margin”), but in no event less
than 7.75%.  The Interest Rate may not be
the lowest or best rate at which Factor calculates interest or extends
credit.  The 


 


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Interest
Rate for each calendar month shall be adjusted (if necessary) on the first day
of such calendar month and shall be equal to the Interest Rate in effect as of
the close of business on the last Business Day of the immediately preceding
calendar month.


 


As
used herein, the following terms shall have the following meanings:


 


 “LIBOR” means, at any
time, an interest rate per annum equal to the interest rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) as published in the “Money Rates”
section of The Wall Street Journal (or another national publication
selected by the Factor) as the one month London Interbank Offered Rate for United
States dollar deposits or such other language (or, if such page shall
cease to be publicly available or, if the information/description contained on
such page, in Factor’s sole judgment, shall cease to accurately reflect such
London Interbank Offered Rate, then such rate as reported by any publicly
available recognized source of similar market data selected by Factor that, in
Factor’s reasonable judgment, accurately reflects such London Interbank Offered
Rate).


 


(b) Market
Disruption Event. If, at any time, Factor determines (which determination
shall be conclusive and binding) that (a) by reason of circumstances
affecting the London interbank market generally, adequate and fair means do not
exist for ascertaining LIBOR for the following month as provided in subsection (a) hereof,
or (b) disruptions in the short term money markets have materially and
adversely affected Factor’s cost of funds such that the interest rate hereunder
does not adequately or fairly reflect Factor’s cost of making, funding or maintaining
the loan hereunder, a “Market Disruption Event” will be deemed to have occurred
and the Factor shall promptly notify the Client thereof. The rate of interest
hereunder (the “Adjusted Rate of Interest”) shall be adjusted and shall
thereafter be a rate equal to the sum of (x) the rate that Factor
determines (which determination shall be conclusive and binding), expressed as
a percentage rate per annum, to be the cost to Factor of funding the loan from
whatever source it may reasonably elect, plus (y) the Interest Margin.
Factor shall give prompt notice to Client of the Adjusted Rate of Interest.


 


Client
shall begin to be charged interest at the Adjusted Rate of Interest effective
as of the first day of the month following the month in which Factor provides
notice thereof to Client, provided, however, that if Client is unwilling to
accept the Adjusted Rate of Interest, it may terminate this Agreement and
prepay all amounts due hereunder within thirty (30) days of the effective date
of the Adjusted Rate of Interest without paying a prepayment fee.


 


(c)   If during any month, a net credit balance exists (i.e., the
Reserve or credit balance exceeds outstanding Accounts), then Factor shall
credit Client’s account as of the last day of each month with interest at a
rate equal to the greater of zero percent (0%) or one percent (1%) below the
LIBOR.


 


(d)   Interest upon the daily net balance of all of
Client’s Inventory Advances shall be payable at a rate equal that described in
5.1(a) above.


 


(e) 
Interest shall be charged to Client’s account with Factor as of the last day of
each month and shall constitute Obligations. 
Any adjustment in Factor’s interest rate, whether downward or upward
will become effective on the  first day of
the month following the month.  All
interest shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.


 


(f) 
To the extent permitted by law and without limiting any other right or remedy
of Factor hereunder, whenever there is a Default under this Agreement, the rate
of interest on the Obligations shall, at the option of Factor, be increased to
a default interest rate by adding five percent (5%) to the highest interest
rate otherwise in effect hereunder.  Factor
may charge such default interest rate retroactively beginning on the date the
applicable Default first occurred or existed. 
Client acknowledges that: (i) such additional rate is a material
inducement to Factor to purchase Accounts and consider requests for Advances
hereunder; (ii) Factor would not have made the Advances in the absence of
the agreement of Client to pay such additional rate; (iii) such additional
rate represents compensation for increased risk to Factor that Factor will not
be repaid; and (iv) such rate is not a penalty and represents a reasonable
estimate of (A) the cost to Factor in allocating its resources (both
personnel and financial) to the ongoing review, monitoring, administration and
collection of the Advances and Obligations, and (B) compensation to Factor
for losses 


 


8

















 


that
are difficult to ascertain.  In the event
of termination of this Agreement by either party hereto, Factor’s entitlement
to this charge will continue until all Obligations are paid in full.


 


(g) 
IT IS THE INTENTION OF THE PARTIES HERETO
THAT AS TO ALL ACCOUNTS, THE TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE
A TRUE PURCHASE AND SALE OF ACCOUNT(S) UNDER § 9-318 OF THE UCC AS IN
EFFECT IN THE STATE OF CALIFORNIA AND AS SUCH, THE CLIENT SHALL HAVE NO LEGAL
OR EQUITABLE INTEREST IN  SUCH PROPERTY
SOLD.   NEVERTHELESS, IN THE EVENT ANY
PORTION OF THIS TRANSACTION IS CHARACTERIZED AS A LOAN AND AS IT RELATES TO THE
INVENTORY ADVANCE, THE PARTIES HERETO INTEND TO CONTRACT IN STRICT COMPLIANCE
WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT.  IN FURTHERANCE THEREOF SUCH PARTIES STIPULATE
AND AGREE THAT NONE OF THE TERMS AND PROVISIONS CONTAINED IN THIS AGREEMENT
SHALL EVER BE CONSTRUED TO CREATE A CONTRACT TO PAY, FOR THE USE, FORBEARANCE
OR DETENTION OF MONEY, INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER
DEFINED) FROM TIME TO TIME IN EFFECT. 
NEITHER CLIENT, ANY PRESENT OR FUTURE GUARANTOR OR ANY OTHER PERSON
HEREAFTER BECOMING LIABLE FOR THE PAYMENT OF THE OBLIGATIONS, SHALL EVER BE LIABLE
FOR ANY OBLIGATION THAT MAY BE CHARACTERIZED AS UNEARNED INTEREST THEREON
OR SHALL EVER BE REQUIRED TO PAY ANY OBLIGATION THAT MAY BE CHARACTERIZED
AS INTEREST THEREON IN EXCESS OF THE MAXIMUM AMOUNT THAT MAY BE LAWFULLY
CHARGED UNDER APPLICABLE LAW FROM TIME TO TIME IN EFFECT, AND THE PROVISIONS OF
THIS SECTION SHALL CONTROL OVER ALL OTHER PROVISIONS OF THIS AGREEMENT
WHICH MAY BE IN CONFLICT THEREWITH. 
IF ANY INDEBTEDNESS OR OBLIGATION OWED BY CLIENT HEREUNDER IS DETERMINED
TO BE IN EXCESS OF THE LEGAL MAXIMUM, OR FACTOR SHALL OTHERWISE COLLECT MONEYS
WHICH ARE DETERMINED TO CONSTITUTE INTEREST WHICH WOULD OTHERWISE INCREASE THE
INTEREST ON ALL OR ANY PART OF SUCH OBLIGATIONS TO AN AMOUNT IN EXCESS OF
THAT PERMITTED TO BE CHARGED BY APPLICABLE LAW THEN IN EFFECT, THEN ALL SUCH
SUMS DETERMINED TO CONSTITUTE INTEREST IN EXCESS OF SUCH LEGAL LIMIT SHALL,
WITHOUT PENALTY, BE PROMPTLY APPLIED TO REDUCE THE THEN OUTSTANDING OBLIGATIONS
OR, AT FACTOR’S OPTION, RETURNED TO CLIENT OR THE OTHER PAYOR THEREOF UPON SUCH
DETERMINATION.  IF AT ANY TIME THE RATE
AT WHICH INTEREST IS PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT
OUTSTANDING HEREUNDER SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL
AMOUNT OF INTEREST ACCRUED HEREUNDER EQUALS (BUT DOES NOT EXCEED) THE MAXIMUM
RATE APPLICABLE HERETO.   AS USED IN THIS
SECTION, THE TERM “APPLICABLE LAW” MEANS THE LAWS OF THE STATE OF CALIFORNIA
OR, IF DIFFERENT, THE LAWS OF THE STATE OR TERRITORY IN WHICH THE CLIENT
RESIDES, WHICHEVER LAW ALLOWS THE GREATER RATE OF INTEREST, AS SUCH LAWS NOW
EXIST OR MAY BE CHANGED OR AMENDED OR COME INTO EFFECT IN THE FUTURE AND
THE TERM “MAXIMUM RATE” MEANS THE MAXIMUM NONUSURIOUS RATE OF INTEREST THAT
FACTOR IS PERMITTED UNDER APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR
RECEIVE WITH RESPECT TO THE OBLIGATIONS.


 


5.2
Commission.


 


(a)                                  For Factor’s services hereunder, Client shall
pay and Factor shall be entitled to receive a factoring Commission equal to
three-quarters of one percent (0.75%) of the gross invoice amount of each
Account (“Commission”).  The Commission
shall be due and payable to Factor on the date of creation of each Account and
shall be chargeable to Client’s account with Factor.  Factor shall be entitled to receive a
surcharge equal to two percent (2%) of the gross invoice amount of all Accounts
arising out of sales to any Customer that is a debtor-in-possession.  All of the foregoing fees constitute
compensation to Factor for services rendered and are not interest or a charge
for the use of money.


 


9

















 


(b)                                 Factor’s Commission is based upon Client’s
maximum selling terms of  ninety (90)
days.  Client will not grant additional
dating to any Customer without Factor’s prior written approval.   If Factor approves extended terms or
additional dating, the rate of Commission shall be increased by one quarter of
one percent (0.25%) of the gross invoice amount of each Account for each 30
days or portion thereof of extended or additional dating.


 


(c)                                  The minimum aggregate factoring commissions
payable under this Agreement for each Contract Year or part thereof
shall be One Hundred Fifty Thousand and no/100 Dollars ($150,000), which shall
be payable at the rate of Twelve Thousand Five Hundred and no/100 Dollars
($12,500) per month or part thereof.  To the extent of any deficiency (after giving
effect to commissions payable under the foregoing subsections), the difference
between the minimum and the amount already charged shall be chargeable to
Client’s account with Factor, or at Factor’s option, payable by Client on
Factor’s demand


 


5.3  Fees.


 


(a)                                  All of the fees charged under this Agreement
constitute compensation to Factor for services rendered and are not interest or
a charge for the use of money.  Each
installment of such fees shall be fully earned when due and payable and shall
not be subject to refund or rebate.


 


(b)                                 It is agreed by and between Client and Factor
that Factor should be compensated for maintaining available credit balances for
Client.  Should Client fail to utilize
the available credit line hereunder, Client agrees to pay to Factor, monthly, a
fee of three-quarters of one percent (0.75%) of the difference between the
available credit line and the average outstanding balance of Account advances.


 


(c)                                  It is agreed by and between Client and Factor
that Client shall pay Factor a documentation fee in the amount of Ten Thousand
and No/100 Dollars ($10,000.00).  Such
fee shall be fully earned and payable on the date of this Agreement.


 


Section 6.  Collateral.


 


6.1
Security Interest.  In order to
secure the payment of all Account Advances, Inventory Advances and Obligations
of Client to Factor, Client hereby grants to Factor a security interest in and
lien upon and assigns, mortgages and pledges to Factor all of Client’s right,
title and interest in and to all of Client’s presently existing or hereafter
arising Collateral wherever located. 
Factor and Client acknowledge that all Factor Sub Accounts sold pursuant
to the terms of the Factor Sub Factoring Agreement shall be sold free and of
any lien or interest of Factor in such Factor Sub Accounts, but that Factor
shall have a Lien on the Factor Sub Accounts Proceeds.


 


6.2
Perfection/Further Assurances. Client agrees to comply with all
appropriate laws in order to perfect Factor’s security interest in and to the
Collateral and to execute such documents as Factor may require from time to
time.  Client authorizes Factor to file
at such times and places as Factor may designate such financing statements,
continuations and amendments thereto as are necessary or desirable to perfect
Factor’s rights in and give notice of Factor’s purchase of the Accounts under
the Uniform Commercial Code in effect in any applicable jurisdiction and
Factor’s security interest in the Collateral. 
Factor may at any time and from time to time file financing statements,
continuation statements and amendments thereto that describe the Collateral as
“all assets” of Client or words of similar effect and which contain any other
information required by Part 5 of Article 9 of the applicable UCC for
the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether Client is an
organization, the type of organization and any organization identification
number issued to Client.  Client agrees
to furnish any such information to Factor promptly upon request.  Any such financing statements, continuation
statements or amendments may be signed by Factor on behalf of Client or filed
by Factor without the signature of Client and may be filed at any time in any
jurisdiction.  Client acknowledges that
it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement naming Client as
the debtor and Factor as the secured party without the prior written consent of
Factor, and Client agrees that it shall not do so without the prior written
consent of Factor.  Client hereby
ratifies any UCC financing statements previously filed by Factor.


 


10

















 


6.3  Collateral Representations, Warranties and
Covenants


 


(a) 
Client is the sole owner and holder of all Collateral and there is no security
interest, Lien, judgment or other encumbrance in or affecting such Accounts or
any of the other Collateral except for Permitted Liens;


 


(b) 
The Collateral is located at the locations set forth on Schedule 6.3 (b) hereof
and at no other location.  Client shall
provide written notice to Factor of any change in the locations at which it
keeps its Collateral at least thirty (30) days prior to any such change. Client
shall obtain from any landlord, warehouseman, or other third party operator of
premises on which any Collateral is located an acceptable lien waiver or
subordination agreement in Factor’s favor with respect to such Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Client shall,
immediately endorse and assign such Negotiable Collateral over to Factor and
deliver actual physical possession of the Negotiable Collateral to Factor.  Client shall at any time and from time to
time take such steps as Factor may request for Factor (i) to obtain an
acknowledgment, in form and substance satisfactory to Factor, of any bailee
having possession of any of the Collateral that such bailee holds such
Collateral for Factor, (ii) to obtain “control” of any investment
property, deposit accounts, letter-of-credit rights or electronic chattel paper
in accordance with Article 9 of the UCC, with any agreements establishing
control to be in form and substance satisfactory to Factor, and (iii) otherwise
to insure the continued perfection and priority of Factor’s security interest
in the Collateral and of the preservation of its rights therein other than the
Inventory in Mexico.


 


(c) 
Accounts.  The Accounts are a
valid, bona fide account, representing an undisputed indebtedness incurred by
the named Customer for goods actually sold and delivered or for services
completely rendered; Other than
those discounts, allowances and deductions set forth on the face of the invoice
at the time it was created, there are and shall be no set-offs, allowances,
discounts, deductions, counterclaims, or disputes with respect to any Account.  Client shall inform Factor, in writing,
immediately upon learning that there exists any Dispute.  Client shall accept no returns and shall
grant no allowance or credit to any Customer without prior written notice to
Factor.  If required by Factor, Client
shall submit to Factor credit memos itemized on a separate Schedule of Accounts
for all returns and allowances made during the previous week.  At Factor’s option, Factor may require that
Client pay Factor for the amount of such credit memos, or in Factor’s sole and exclusive
discretion, Factor may agree to accept the Schedule of Accounts and apply same
to Client’s Reserve.


 


(d) 
Inventory.  Client will maintain
Inventory at the locations set forth on Schedule 6.3 (b) hereof subject to
a perfected, first-priority Lien in favor of Factor (other than Inventory
located in Mexico).  Sales of Inventory
will be made in compliance with all material requirements of applicable
law.  Client covenants and agrees:


 


(i)                                     To notify Factor immediately of any event
causing loss or depreciation in the value of Inventory and the amount of such
loss or depreciation;


 


(ii)                                  To keep correct current stock, cost and sales
records of Client’s Inventory, accurately and sufficiently itemizing and
describing the kinds, type, and quantities of Inventory and the cost and
selling prices thereof, all of which records shall be continuously available to
Factor for inspection, and Factor shall at all reasonable times have access to
and the right to inspect and draw off data from any of Client’s other books and
records for the purposes of checking and verifying all such statements, stock,
cost and sales records;


 


(iii)                               At all reasonable times and from time to
time, by or through any of Client’s officers, agents, attorneys, or
accountants, permit Factor to examine or inspect the Inventory wherever located
and, for such purposes, to enter upon Client’s premises or wherever any of the
Inventory may be found; and


 


(iv)                              Until Default, Client may use the Inventory
in any lawful manner not inconsistent with this Agreement or with the terms or
conditions of any policy of insurance thereon, may use and consume any raw
materials or supplies, the use and consumption of which is necessary in order
to carry on Client’s business, and may also sell the Inventory in the ordinary
course of business.  (A sale in the
ordinary course 


 


11

















 


of business does not include a transfer in partial or total
satisfaction of a debt owing by Client to any person other than Factor.)


 


(e) 
Equipment.  Client will maintain all
Equipment used or useful in Client’s business in good and workable condition,
ordinary wear and tear excepted, subject to a perfected, first-priority
security interest in Factor’s favor and free and clear of all other Liens except
Permitted Liens at one of the locations set forth on Schedule 6.3(b).


 


(f) 
Defense of Title.  All Collateral will at
all times be owned by Client, and Client will defend Client’s title to the
Collateral against the claims of third parties. 
Client will at all times keep accurate and complete records of the
Collateral.


 


(g) Insurance.  Client will obtain and maintain in full force
and effect insurance covering the Collateral against all risks to which the
Collateral is exposed, including loss, damage, fire, theft, and all other such
risks, in such amounts, with such companies, under such policies and in such
form as will be satisfactory to Factor, which policies will name Factor as an
additional insured and provide that loss thereunder will be payable to Factor
as Factor’s interests may appear upon a loss payee endorsement acceptable to
Factor.  All proceeds of any such
insurance will be paid over to Factor directly, and Factor may apply such
proceeds to payment of the Obligations, whether or not due, in such order of
application as Factor determines or, in Factor’s sole discretion, apply such
proceeds, in whole or in part, to the replacement, restoration or rebuilding of
the lost or damaged property.  Client
will provide to Factor from time to time certificates showing such coverage in
effect and, at Factor’s request, the underlying policies.


 


(h) Commercial
Tort Claims.  If Client shall at any time
acquire a commercial tort claim, Client shall immediately notify Factor in a
writing signed by Client of the details thereof and grant to Factor in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to Factor.


 


(i) 
Appraisal.  Client’s Inventory shall be
appraised semi-annually by an appraiser acceptable to Factor.


 


Section 7.  Power of Attorney.


 


7.1
Power of Attorney.  Client hereby
grants to Factor an irrevocable power of attorney authorizing and permitting
Factor, at its option, without notice to Client to do any or all of the
following:  (a) endorse the name of
Client on any checks or other evidences of payment whatsoever that may come
into the possession of Factor regarding Accounts or Collateral, including
checks received by Factor pursuant to Section 9 hereof;  (b) receive, open and dispose of any
mail addressed to Client and put Factor’s address on any statements mailed to
Customers; (c) pay, settle, compromise, prosecute or defend any action,
claim, conditional waiver and release, or proceeding relating to Accounts or
Collateral; (d) upon the occurrence of a Default, notify in the name of
the Client, the U.S. Post Office to change the address for delivery of mail
addressed to Client to such address as Factor may designate, however, Factor shall
turn over to Client all such mail not relating to Accounts or Collateral; (e) file
any financing statement deemed necessary or appropriate by Factor to protect
Factor’s interest in and to the Accounts or Collateral, or under any provision
of this Agreement; (f) effect debits to any deposit account or other
account that Client or Client’s principals who have executed a guaranty
agreement maintain at any bank for any sums due to or from the Client under
this Agreement; (g) upon a Default, to prepare and mail all invoices
relating to Accounts; and (h) to take all actions necessary and proper in
order to carry out this Agreement.  The
authority granted to Factor herein is irrevocable until this Agreement is
terminated and all Obligations are fully satisfied.


 


 Section 8.
Client’s Representations, Covenants and Warranties.


 


Section 8.1
Client’s Representations, Covenants and Warranties.  Client represents, warrants and covenants to
Factor that:


 


(a)                                  Client is a corporation or limited liability
company, duly organized, validly existing and in good standing under the laws
of the state of Delaware and is qualified and authorized to do business and is
in good standing in all states in which such qualification and good standing
are necessary or desirable;


 


12
















 


(b)           The execution, delivery and performance by Client of this
Agreement does not and will not constitute a violation of any applicable law,
violation of Client’s articles of incorporation or organization or bylaws or
any material breach of any other document, agreement or instrument to which
Client is a party or by which Client is bound. 
The Agreement is a legal, valid and binding obligation of Client
enforceable against it in accordance with its terms;


 


(c)           Client’s
address, as set forth below its signature line hereto, is Client’s mailing
address, its chief executive office, principal place of business and the office
where all of the books and records concerning the Accounts and/or Collateral
are maintained which shall not be changed without giving thirty (30) days prior
written notice to Factor;


 


(d)           Client
shall maintain its books and records in accordance with GAAP and shall reflect
on its books the absolute sale of the Accounts to Factor.  Client shall furnish Factor, upon request,
such information and statements, as Factor shall require from time to time
regarding Client’s business affairs, financial condition and results of its
operations.  Without limiting the
generality of the foregoing, Client shall provide Factor, (i) on or prior
to the 30th day of
each month, unaudited financial statements with respect to the prior month, (ii) within
forty-five (45) days after the end of each of Client’s quarters, unaudited
financial statements (on a fiscal year-to-date basis) prepared by a CPA
acceptable to Factor, (iii)  within ninety (90) days after the end of each
of Client’s fiscal years, audited financial statements prepared by a CPA
acceptable to Factor, (iv) prior to the Agreement Date and annually
thereafter, projected income statement, balance sheet and statement of cash
flows by month for the next year, (v) within 30 days of each month-end, a
certificate from the president or chief financial officer of Client stating
whether any Default has occurred and stating the nature of the Default, (vi) within
10 days of each month end, a detailed listing of Inventory with a cover summary
report, (vii) within 10 days of each month-end, a current listing of all
open and unpaid accounts payable, and (viii) such other information as
Factor may request.  All financial statements
and reports furnished to Factor hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in accordance
with GAAP;


 


(e)           Client
has paid and will pay all taxes and governmental charges imposed with respect
to sale of Goods and rendition of services and shall furnish to Factor upon
request satisfactory proof of payment and compliance with all federal, state
and local tax requirements;


 


(f)            Client
will promptly notify Factor of (i) the filing of any lawsuit against
Client involving amounts greater than $100,000.00, and (ii) any attachment
or any other legal process levied against Client;


 


(g)           The
application made and information delivered by or on behalf of Client in
connection with this Agreement, and the statements made therein are true and
correct at the time that this Agreement is executed.  There is no fact which Client has not
disclosed to Factor in writing which could materially adversely affect the
properties, business or financial condition of Client, or any of the Accounts
or Collateral, or which is necessary to disclose in order to keep the foregoing
representations and warranties from being misleading;


 


(h)           In
no event shall the funds paid to Client hereunder be used directly or
indirectly for personal, family, household or agricultural purposes;


 


(i)            Client
does business under no trade or assumed names except as indicated below.  These names are a trade name and/or
tradestyle by which Client will or may identify and sell certain of its products
and under which Client will or may conduct a portion of its business, and are
not an independent corporation or other legal entity.  Factor is hereby authorized to receive,
endorse and deposit any and all checks sent to it in payment of such Accounts
including such checks as are payable to any of the trade styles or
tradenames.  Accounts invoiced in the
name of any tradename or tradestyle are subject to all of the terms and
conditions of this Agreement with the same force and effect as if they were in
Client’s corporate name:


 


	
   

  	
   

  	
  Meade

  	
   

  	
   

  
	
   

  	
   

  	
  Meade.com

  	
   

  	
   

  
	
   

  	
   

  	
  Coronado

  	
   

  	
   

  



 


13

















 


(j)            Any
invoice or written communication that is issued by Client to Factor by
facsimile transmission is a duplicate of the original;


 


(k)           Any
electronic communication of data, whether by e-mail, tape, disk, or otherwise
that Client remits or causes to be remitted to Factor shall be authentic and
genuine; and


 


(l)            Client
does not own, control or exercise dominion over, in any way whatsoever, the
business of any Account or Customer.


 


(m)          Client
represents and warrants to Factor that: (i) Client is not engaged as one
of Client’s principal activities in owning, carrying or financing the purchase
or ownership by others of “margin stock” (as defined in Regulation U of the
Board of Governors of the Federal Reserve System); (ii) Client owns no
real property and leases no real property other than as listed on Schedule 8.1
(m); (iii) a true, correct and complete list of any warehousemen,
processors, consignees or other bailees with possession or control of any
Inventory is set forth on Schedule 6.3 (b); and (iv) a list and brief
description of all bank accounts maintained by Client with any bank or
financial institution is set forth on Schedule 8.1 (m);


 


8.2           Negative Covenants.


 


(a)           No Merger.  Client will not merge or consolidate with any
other Person or sell, transfer, lease, abandon, or otherwise dispose of a
substantial portion of Client’s assets or any of the Collateral or any interest
therein, except that, so long as no Default has occurred and is continuing,
Client may sell Inventory in the ordinary course of Client’s business.


 


(b)           No Debt or Liens; Taxes.  Other than as provided for in the Factor Sub
Factoring Agreement and the  Loan
Agreement — Factor Sub Accounts, Client will not obtain or attempt to obtain
from any Person other than Factor any loans, Account Advances, or other
financial accommodations or indebtedness of any kind, nor will Factor enter
into any direct or indirect guaranty of any obligation of another Person.  Other than as provided for in the Factor Sub
Factoring Agreement and the  Loan and
Security Agreement — Factor Sub Accounts, Client will not permit any of
Client’s assets or any part of the Collateral to be subject to any Lien.  Client shall pay when due (or before the
expiration of any extension period) any tax or other assessment (including all
required payments or deposits with respect to withholding taxes), and Client
will, upon request by Factor, promptly furnish Factor with proof satisfactory
to Factor that Client has made such payments and deposits.


 


(c)           No Distributions.  Client will not retire, repurchase or redeem
any of Client’s capital stock or other ownership interest in Client, nor
declare or pay any dividend in cash or other property (other than additional
shares of capital stock or additional ownership interests) to any owner or
holder of Client’s shares or other ownership interest.


 


(d)           No ERISA Liabilities.  Client will make timely payments of all
contributions required to meet the minimum funding standards for Client’s
employee benefit plans subject to the Employee Retirement Income Security Act
of 1974 (as amended, “ERISA”) and will promptly report to Factor the
occurrence of any reportable event (as defined in ERISA) and any giving or
receipt by Client of any governmental notice (other than routine requests for
information) in respect of any such plan.


 


(e)           Transactions with Affiliates.  Client will not engage in any transaction
with any of Client’s officers, directors, employees, owners or other
affiliates, except for an “arms-length” transaction on terms no less favorable
to Client than would be granted to Client in a transaction with a Person who is
not an affiliate, which transaction shall be approved by Client’s disinterested
directors and shall be disclosed in a timely manner to Client prior to the
consummation of the transaction.


 


(f)            Loans/Investments.  Client will not make any loans or Account
Advances to or extend any credit to any Person except (i) the extension of
trade credit in the ordinary course of business; and (ii) Account Advances
to employees not to exceed an aggregate outstanding amount of $10,000 at any
one time outstanding for all employees. 
Client shall not purchase, acquire or otherwise invest in any Person
except: 


 


14

















 


(A) existing investments in Client’s
subsidiaries described on Schedule 8.2 (f) ; (B) direct obligations
of the United States of America maturing within one year from the acquisition
thereof; (C) certificates of deposit issued by, or investment accounts in,
banks or financial institutions having a net worth of not less than
$50,000,000; and (D) commercial paper rated A-1 by Standard &
Poor’s Ratings Group or P-1 by Moody’s Investors Service, Inc.  Without limiting the generality of the
foregoing, Client shall not create any new subsidiary.


 


(g)           Capital Expenditures.  Client shall give Factor notice of any
capital expenditures in excess of $450,000 during any fiscal year.


 


Section 9.  Administration.


 


9.1   Disputes/Chargebacks. 
Client shall notify Factor immediately upon the assertion by a Customer
of a Dispute and Factor may charge such Account back to Client.  Factor may charge back to Client all amounts
owing on Client Risk Accounts at any time either before or after the due
date.  Client indemnifies and holds
Factor harmless from and against any and all loss, costs and expenses arising
out of Disputes or Client Risk Accounts, including collection and attorneys
fees with respect thereto.  A chargeback
shall not be deemed a reassignment of an Account and title thereto and to the
Goods represented thereby shall remain in Factor until such time as Factor
executes a reassignment of the Account.


 


9.2  Expenses.  Client shall pay all costs incurred by Factor
pursuant to this Agreement, including search and filing fees, wire and ACH
transfer fees, audit and field examination fees, legal fees (including the
allocated cost of internal counsel) for preparation of this Agreement and any
other Factoring Documents and the perfection, preservation and enforcement of
any of Factor’s rights hereunder.


 


9.3 Credit Inquiries.  Client authorizes Factor to disclose such
information as Factor deems appropriate to Persons making credit inquiries about
Client.


 


9.4 Persons Authorized to
Request Account Advances/Inventory Advances.  Client hereby authorizes and directs Factor
to make Account Advances or Inventory Advances to or for the benefit of Client
upon receipt of instructions from any of the persons listed on Schedule
9.4.  Factor shall have no liability
whatsoever to Client or any other Person for acting upon any such instructions
which Factor, in good faith, believes were given by any such person, and Factor
shall have no duty to inquire as to the propriety of any disbursement.  Factor is hereby authorized to make the loans
provided for herein based on instructions received by facsimile, electronic
mail, telephone or other method of communication from any of such persons.  Although Factor shall make a reasonable
effort to determine the person’s identity, Factor shall not be responsible for
determining the authenticity of any such instructions, and Factor may act on
the instructions of anyone it perceives to be one of the persons authorized to request
loans hereunder.  Factor shall have the
right to accept the instructions of any of the foregoing persons unless and
until Factor actually receives from Client (in accordance with the notice
provisions of this Agreement) written notice of termination of the authority of
that person.  Client may change persons
designated to give Factor borrowing instructions only by delivering to Factor
written notice of such change.  Client will
ensure that each telephone instruction from any person designated in or pursuant
to this paragraph shall be followed by written confirmation of the request for
disbursement in such form as Factor makes available to Client from time to time
for such purpose; provided, however, that Client’s failure to provide
written confirmation of any telephonic instruction shall not invalidate such
telephonic instruction.


 


9.5  Field Examinations.  During the term of this Agreement and so long
as there exists or has existed no Default, Factor may conduct up to four (4) field
examinations per Contract Year; provided, however, that upon the occurrence of
a Default and so long as it continues, Factor may conduct additional field
examinations.  Client agrees to pay to
Factor an audit fee of $900 per auditor, per day (including partial days), plus
all of Factor’s out-of-pocket travel and living expenses incurred while
performing each field examination.


 


15

















 


Section 10. Accounting Information.


 


10.1  Accounting
Statements.  Factor shall provide
Client with information on the Accounts and a monthly reconciliation of the
factoring relationship relating to billing, collection, Account Advances,
Inventory Advances, Obligations and account maintenance such as aging, posting,
error resolution and e-mailing or mailing of statements.  All of the foregoing shall be in a format and
in such detail, as Factor, in its sole discretion, deems appropriate.  Factor’s books and records shall be admissible
in evidence without objection as prima facie evidence of the status of the
Accounts and Reserve between Factor and Client. 
Each statement, report, or accounting rendered or issued by Factor to
Client shall be deemed conclusively accurate and binding on Client unless
within thirty (30) days after the date of issuance Client notifies Factor to
the contrary pursuant to Section 13 hereof, setting forth with specificity
the reasons why Client believes such statement, report, or accounting is
inaccurate, as well as what Client believes to be correct amount(s) therefore.  If the Client gives notice of its
disagreement with Factor’s statement, all matters in such statement that are
not objected to in Client’s notice, shall be deemed conclusively accurate and
binding on Client.  Client’s failure to
receive any monthly statement shall not relieve it of the responsibility to
request such statement and Client’s failure to do so shall nonetheless bind
Client to whatever Factor’s records would have reported.


 


10.2  Inspections.  Factor shall have the right at any time, at
Client’s expense, to visit and inspect Client’s books and records, and to make
and take away copies of Client’s books and records.


 


Section 11.  Defaults and Remedies.


 


11.1  Default.   A Default shall be deemed to have occurred
hereunder upon the happening of one or more of the following: (a) Client
shall fail to pay as and when due any amount owed to Factor; (b) any
Obligor shall breach any covenant, warranty or representation set forth herein
or in any Factoring Document or same shall be untrue when made; (c) any
Obligor becomes insolvent in that its debts are greater than the fair value of
its assets or is unable to pay its debts as they mature, or admits in writing
that it is insolvent or unable to pay its debts, makes an assignment for the
benefit of creditors, makes a conveyance fraudulent as to creditors under any
state or federal law, or a proceeding is instituted by or against any Obligor
alleging that such Obligor is insolvent or unable to pay debts as they mature,
or a petition under any provision of Title 11 of the United States Code, as
amended, or any state insolvency proceeding is filed by or against any Obligor;
(d) any involuntary lien, garnishment, attachment or the like shall be
issued against or shall attach to the 
Accounts, the Collateral or any portion thereof and the same is not
released within ten (10) days; (e) any Obligor suffers the entry
against it for a final judgment for the payment of money in excess of
$100,000.00, unless the same is discharged within thirty (30) days after the
date of entry thereof or an appeal or appropriate proceeding for review thereof
is taken within such periods and a stay of execution pending such appeal is
obtained; (f) any report, certificate, schedule, financial statement,
profit and loss statement or other statement furnished by Client, or by any
Obligor or other person on behalf of Client, to Factor is not true and correct
in any material respect; (g) Obligor shall have a federal or state tax
lien filed against any of its properties, or shall fail to pay any federal or
state tax when due, or shall fail to file any federal or state tax form as and
when due; (h) a material adverse change shall have occurred in Obligor’s
financial conditions, business or operations; (i) any suspension of the
operation of Obligor’s present business; (j) dissolution, merger, or
consolidation of any Obligor that is a corporation, partnership or limited
liability company, provided, however, that the sale of Meade Germany is
specifically permitted; (k) transfer of a substantial part (determined by
market value) of the property of any Obligor; (l) sale, transfer or
exchange, either directly or indirectly, of a controlling stock or equity
ownership interest of any Obligor; (m) termination, unenforceability or
withdrawal of any guaranty for the Obligations, or failure of any Obligor to
perform any of its obligations under such a guaranty or assertion by any
Obligor that it has no liability or obligation under such a guaranty, (n) 
a default or event of default shall occur under the terms of any agreement
between Client and Factor, and Client and Factor Sub, including the Loan
Agreement —Factor Sub Accounts and the Factor Sub Factoring Agreement, or (o) Client
shall breach any covenant or fail to perform any covenant in any agreement
between Client and Factor, and Client and Factor Sub, including the Loan
Agreement — Factor Sub Accounts and the Factor Sub Factoring Agreement.


 


11.2 Remedies.  (a)  Upon a Default, Factor may, without
demand or notice to Client, exercise all rights and remedies available to it
under this Agreement, under the UCC or otherwise, including, 


 


16

















 


terminating
this Agreement and declaring all Obligations immediately due and payable,
provided, however, that in the event a Default occurs under subsection (c) of
Section 11.1, such termination and acceleration shall occur automatically
without any notice, demand or presentment of any kind.


 


(b)           Without
notice to or demand upon Client or any other Person, Factor may make such
payments and do such acts as Factor considers necessary or reasonable to
protect its security interest in the Collateral.  Client authorizes Factor to enter each
premises where any Collateral is located, take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest or compromise any
lien which in Factor’s opinion appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith.  Factor may ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale and sell the
Collateral.  Any such sale may be either
a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms.  It
is not necessary that the Collateral be present at any such sale.


 


(c)           Factor
shall be entitled to any form of equitable relief that may be appropriate
without having to establish that any remedy at law is inadequate or other
grounds.  Factor shall be entitled to
freeze, debit and/or effect a set-off against any fund or account Client may
maintain with any bank.  In the event
Factor deems it necessary to seek equitable relief, including, but not limited
to, injunctive or receivership remedies, as a result of a Default, Client
waives any requirement that Factor post or otherwise obtain or procure any
bond.  Alternatively, in the event
Factor, in its sole and exclusive discretion, desires to procure and post a
bond, Factor may procure and file with the court a bond in an amount up to and
not greater than $100,000.00 notwithstanding any common or statutory law
requirement to the contrary.  Upon
Factor’s posting of such bond it shall be entitled to all benefits as if such
bond was posted in compliance with state law. 
Client waives any right it may be entitled to, including an award of
attorney’s fees or costs, in the event any equitable relief sought by and
awarded to Factor is thereafter, for whatever reason(s), vacated, dissolved or
reversed.


 


11.3  Cumulative
Rights; Waivers.  The occurrence of
any Default shall entitle Factor to all of the default rights and remedies
(without limiting the other rights and remedies exercisable by Factor either
prior or subsequent to a Default) as available to a Secured Party under the
Uniform Commercial Code in effect in any applicable jurisdiction.  All rights, remedies and powers granted to
Factor in this Agreement, or in any other instrument or agreement given by
Client to Factor or otherwise available to Factor in equity or at law, are
cumulative and may be exercised singularly or concurrently with such other
rights as Factor may have.  These rights
may be exercised from time to time as to all or any part of the Accounts
hereunder or the Collateral as Factor in its discretion may determine.  In the event that any part of the purchase of
Accounts hereunder by Factor is construed to be a loan from Factor to Client,
any Account Advances or payments made as the Purchase Price for all Accounts
shall be secured by the Accounts and the Collateral.  Factor may not be held to have waived its
rights and remedies unless the waiver is in writing and signed by Factor.  A waiver by Factor of a right, remedy or
default under this Agreement on one occasion is not a waiver of any right,
remedy or default on any subsequent occasion. 
No exercise by Factor of one right or remedy shall be deemed an
election, and no waiver by Factor of any default on Client’s part shall be
deemed a continuing waiver.  No delay by
Factor shall constitute a waiver, election or acquiescence by it.


 


Section 12. Term.


 


12.1 Term.  
This Agreement may be terminated upon 
forty-five days prior written notice from Factor to Client.  Client shall have the right to terminate this
Agreement at any time, however, upon payment of the appropriate Prepayment
Penalty as outlined below:


 


	
  Prepayment Penalty

  	
   

  	
  Time Period During

  Which Termination

  Occurs

  
	
  $

  	
  300,000

  	
   

  	
  During the first year

  
	
  $

  	
  200,000

  	
   

  	
  During the second year

  
	
  $

  	
  100,000

  	
   

  	
  During the third year

  



 


17

















 


If termination of the Agreement by the Client is a
result of the sale of all or substantially all of Client’s stock or assets, the
Prepayment Penalty will be as follows:


 


	
  Prepayment Penalty

  	
   

  	
  If Termination

  Occurs Due To

  Stock Or Asset Sale

  
	
  $

  	
  300,000

  	
   

  	
  Within 180 days of the
  Agreement Date

  
	
  $

  	
  150,000

  	
   

  	
  More than 181 days after
  the Agreement Date but prior to 365 days after the Agreement Date

  
	
  $

  	
  100,000

  	
   

  	
  During the second Contract
  Year

  
	
  $

  	
  50,000

  	
   

  	
  During the third Contract
  Year

  



 


Notwithstanding anything herein to the contrary,
Factor may terminate this Agreement i) at any time without notice after the
occurrence of a Default, or ii) assuming no Default  hereunder, 
at any time by giving not less than forty-five (45) days notice.  Notwithstanding payment in full of all
Obligations by Client, any such notice of termination is conditioned on
Client’s delivery, to Factor, of a general release in a form reasonably
satisfactory to Factor.  Client
understands that this provision constitutes a waiver of its rights under §
9-513 of the UCC.  Factor shall not be
required to record any terminations or satisfactions of any of Factor’s liens
on the Collateral unless and until Client has executed and delivered to Factor
said general release and Client shall have no authority to do so without Factor’s
express written consent.  Any termination
of this Agreement shall not affect Factor’s security interest in the Collateral
and Factor’s ownership of the Accounts, and this Agreement shall continue to be
effective, until all transactions entered into and Obligations incurred
hereunder have been completed and satisfied in full.  The expense reimbursement, repayment and
indemnification provisions of this Agreement shall survive the termination of
this Agreement.  All Obligations shall be
immediately due and payable in full upon termination of this Agreement.


 


Section 13. 
Notices.  Any notice or
communication with respect to this Agreement shall be given in writing, sent by
(i) personal delivery, or (ii) overnight delivery service with proof
of delivery, or (iii) United States mail, first-class with postage
prepaid, or registered or certified mail, or (iv) prepaid telegram, telex
or telecopy, addressed to each party hereto at its address and to the attention
of the person listed as set forth below the signatures of the parties to this
Agreement.  Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of overnight delivery service or telecopy, on the next
business day at the receiving location or in the case of mail, upon receipt.


 


Section 14. Attorney’s Fees.  Client agrees to reimburse Factor upon demand
for all reasonable attorney’s fees, court costs and other expenses incurred by
Factor in the preparation, negotiation and enforcement of this Agreement and
protecting or enforcing its interest in the Accounts or the Collateral, or in
the representation of Factor in connection with any bankruptcy case or
insolvency proceeding involving Client, the Collateral, or any Accounts,
including any defense of any Avoidance Claims (except to the extent related to
Approved Accounts where no Dispute exists). 
Client hereby agrees to pay such fees, costs and expenses and Factor
shall also have the right to charge the Reserve therefore.  Notwithstanding the existence of any law,
statute or rule, in any jurisdiction which may provide Client with a right to
attorney’s fees or costs, Client hereby waives any and all rights to hereafter
seek attorney’s fees or costs hereunder and Client agrees that Factor exclusively
shall be entitled to indemnification and recovery of any and all attorney’s
fees or costs in respect to any litigation based hereon, arising out of, or
related hereto, whether under, or in connection with, this and/or any agreement
executed in conjunction herewith, or any course of conduct, course of dealing,
statements (whether verbal or written) or actions of either party.


 


18

















 


Section 15. 
Indemnity.  Client hereby
indemnifies and agrees to hold harmless and defend Factor from and against any
and all claims, judgments, liabilities, fees and expenses (including attorney’s
fees) which may be imposed upon, threatened or asserted against Factor at any
time and from time to time in any way connected with this Agreement or the
Collateral.  The foregoing
indemnification shall apply whether or not such indemnified claims are in any
way or to any extent owed, in whole or in part, under any claim or theory of
strict liability, or are caused, in whole or in part, by any negligent act or
omission of Factor except for gross negligence or willful misconduct of Factor.


 


Section 16. 
Severability.  Each and
every provision, condition, covenant and representation contained in this
Agreement is, and shall be construed to be, a separate and independent covenant
and agreement.  If any term or provision
of this Agreement shall to any extent be invalid or unenforceable, the
remainder of the Agreement shall not be affected thereby.


 


Section 17. 
Parties in Interest.  All
grants, covenants and agreements contained in this Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Client may not delegate or assign any of its
duties or obligations under this Agreement without the prior written consent of
Factor.  Notwithstanding anything herein
to the contrary, the Factor may, without consent of the Client, grant
a security interest in, sell or assign, grant or sell participations in or
otherwise transfer all or any portion of its rights and obligations hereunder
to one or more Persons and upon notice of such assignment, sale or grant of
participation by Factor, to treat such assignee, transferee or participant
as  “Factor” for all purposes hereunder.


 


Section 18. 
Governing Law;  Submission to
Process and Venue.  This Agreement
shall be deemed a contract made under the laws of the State of California and
shall be construed and enforced in accordance with and governed by the internal
laws of the State of California, without reference to the rules thereof
relating to conflicts of law.  Client
hereby irrevocably submits itself to the exclusive jurisdiction of the state
and federal courts located in any county in the state of California in which
Factor has an business location, and agrees and consents that service of
process may be made upon it in any legal proceeding relating to this Agreement,
the purchase of Accounts or any other relationship between Factor and Client by
any means allowed under state or federal law.   
Client hereby waives and agrees not to assert, by way of motion, as a
defense or otherwise, that any such proceeding, is brought in any inconvenient
forum or that the venue thereof is improper.


 


Section 19. 
Complete Agreement.  This
Agreement, the written documents executed pursuant to this Agreement, if any,
and the acknowledgment delivered in connection herewith set forth the entire
understanding and agreement of the parties hereto with respect to the
transactions contemplated herein and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties.  No modification or amendment of or supplement
to this Agreement shall be valid or effective unless the same is in writing and
signed by the party against whom it is sought to be enforced.


 


Section 20. Miscellaneous.


 


(a)           Client
acknowledges that there is no, and it will not seek or attempt to establish
any, fiduciary relationship between Factor and Client, and Client waives any
right to assert, now or in the future, the existence or creation of any
fiduciary relationship between Factor and Client in any action or proceeding
(whether by way of claim, counterclaim, crossclaim or otherwise) for damages.


 


(b)           This
Agreement shall be deemed to be one of financial accommodation and not
assumable by any debtor, trustee or debtor-in-possession in any bankruptcy
proceeding without Factor’s express written consent and may be suspended in the
event a petition in bankruptcy is filed by or against Client.


 


(c)           In
the event Client’s principals, officers or directors form a new entity, whether
corporate, partnership, limited liability company or otherwise, similar to that
of Client during the term of this Agreement, such entity shall be deemed to
have expressly assumed the obligations due Factor by Client under this
Agreement.  Upon the formation of any
such entity, Factor shall be deemed to have been granted an irrevocable power
of attorney with authority to file, on behalf of the newly formed successor
business, a 


 


19

















 


new
UCC financing statement or other Uniform Commercial Code statement with the
appropriate secretary of state or Uniform Commercial Code filing office.  Factor shall be held-harmless and be relieved
of any liability resulting from the filing of a financing statement or the
resulting perfection of a lien in any of the successor entity’s assets.  In addition, Factor shall have the right to
notify the successor entity’s Customers of Factor’s lien rights, its right to
collect all Accounts, and to notify any new factor or Factor who has sought to
procure a competing lien of Factor’s right is in such successor entity’s
assets.


 


(d)           Client
expressly authorizes Factor to access the systems of and/or communicate with
any shipping or trucking company in order to obtain or verify tracking,
shipment or delivery status of any Goods regarding an Account.


 


(e)           INTENTIONALLY RESERVED


 


(f)            Client shall indemnify Factor from
any loss arising out of the assertion of any Avoidance Claim.  Client shall notify Factor within two
business days of it becoming aware of the assertion of an Avoidance Claim.


 


(g)           Client agrees to execute any and all
forms (i.e. Forms 8821 and/or 2848) that Factor may require in order to enable
Factor to obtain and receive tax information issued by the Department of the
Treasury, Internal Revenue Service, or receive refund checks.


 


(h)           The Client shall make each payment required hereunder,
and/or under any instrument delivered hereunder, without setoff, deduction or
counterclaim of any kind, whether any right of setoff, deduction or
counterclaim arises pursuant to this Agreement, arises pursuant to applicable
law or otherwise.


 


(i)            The terms of this Agreement and the
other Factoring Documents are confidential and Client agrees not to disclose
same to any party other than its accountants, attorneys and others that are in
a confidential relationship with Client and who agree to treat this Agreement
and the other Factoring documents and the contents of same as confidential,
except as required by law (i.e. SEC filings).


 


(j)            Client
will cooperate with Factor in obtaining a control agreement in form and
substance satisfactory to Factor with respect to Collateral consisting of:  Deposit Accounts; Investment Property; Letter-of-Credit
Rights; and electronic Chattel Paper.


 


(k)           Client
and Factor agree and acknowledge that the loan facility provided for by this
Agreement is not conditioned upon the existence or provision of any other loan
facility, factoring arrangement or other financial accommodations between
Factor and Client or any of their affiliates.


 


Section 21.  Governing
Law; Jurisdiction; Venue, Waiver of Jury Trial and Service of Process.


 


(A)   THIS
AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE,
AND CLIENT HEREBY AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF CALIFORNIA, AND WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON CLIENT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
CERTIFIED MAIL DIRECTED TO CLIENT AT ITS ADDRESS AS IT APPEARS AT THE BEGINNING
OF THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S. MAILS, CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID.  CLIENT WAIVES ANY OBJECTION BASED ON FORUM
NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.  NOTHING IN
THIS SECTION SHALL AFFECT FACTOR’S RIGHT TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT FACTOR’S 


 


20

















 


RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST CLIENT
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.


 


(B)  EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO. 
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTIONS SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.


 


Section 22.  Acknowledgment of Waivers and Loss of Defenses.


 


(a)           Client acknowledges that certain
provisions of this Agreement operate as waivers of rights that Client would
otherwise have under applicable law. 
Other provisions permit Factor to take actions that Factor would
otherwise not have a right to take, to fail to take actions that Factor would
otherwise have an obligation to take, or to take actions that may prejudice
Client’s rights and obligations under this Agreement and against the
Client.  In the absence of these
provisions Client might have defenses against Client’s obligations under this
Agreement.  These defenses might permit
Client to avoid some or all of Client’s obligations under this Agreement.


 


(b)           Client intends by the waivers and
other provisions of this Agreement, including the acknowledgement set forth in
this section, to be liable to the greatest extent permitted by law for all of
Client’s obligations to Factor.  Client
intends to have this liability even if the terms of the Factoring Documents
change or if Client does not have any rights against Client.


 


(c)           Client
acknowledges that (i) Client understands the seriousness of the provisions
of this Agreement; (ii) Client has had a full opportunity to consult with
counsel of Client’s choice; and (iii) Client has consulted with counsel of
Client’s choice or has decided not to consult with counsel.


 


Section 23.            Waiver Of Jury Trial.  This Section concerns
the resolution of any controversies or claims between the Client and Factor,
whether arising in contract, tort or by statute, including but not limited to
controversies or claims that arise out of or relate to: (i) this Agreement
(including any renewals, extensions or modifications); or (ii) any of the
other Factoring Documents (collectively a “Claim”).


 


(a)           Judicial
Reference.


 


	
  i.

  	
   

  	
  The parties prefer that
  any dispute between them be resolved in litigation subject to a Jury Trial
  Waiver as set forth in Section 21 herein, but the California Supreme
  Court has held that such pre-dispute jury trial waivers are
  unenforceable.  This Section will
  be applicable until: (i) the California Supreme Court holds that a
  pre-dispute jury trial waiver provision similar to that contained in Section 21
  herein is valid or enforceable; or (ii) the California Legislature
  passes legislation and the governor of the State of California signs into law
  a statute authorizing pre-dispute jury trial waivers and as a result such
  waivers become enforceable.

  



 


21

















 


	
  ii.

  	
   

  	
  Other than the exercise
  of provisional remedies (any of which may be initiated pursuant to applicable
  law), any controversy, dispute or claim (each, a “Claim”) between the parties
  arising out of or relating to this Agreement will be resolved by a reference
  proceeding in California in accordance with the provisions of
  Section 638 et seq. of the California Code of Civil Procedure (“CCP”),
  or their successor sections, which shall constitute the exclusive remedy for
  the resolution of any Claim, including whether the Claim is subject to the
  reference proceeding.  Venue for the
  reference proceeding will be in the Superior Court or Federal District Court
  in Los Angeles County, California (the “Court”).

  
	
   

  	
   

  	
   

  
	
  iii.

  	
   

  	
  The referee shall be a
  retired Judge or Justice selected by mutual written agreement of the
  parties.  If the parties do not agree,
  the referee shall be selected by the Presiding Judge of the Court (or his or
  her representative).  A request for
  appointment of a referee may be heard on an ex parte
  or expedited basis, and the parties agree that irreparable harm would result
  if ex parte relief is not granted.  The referee shall be appointed to sit with
  all the powers provided by law. 
  Pending appointment of the referee, the Court has power to issue
  temporary or provisional remedies.

  
	
   

  	
   

  	
   

  
	
  iv.

  	
   

  	
  The parties agree that
  time is of the essence in conducting the reference proceedings.  Accordingly, the referee shall be
  requested, subject to change in the time periods specified herein for good
  cause shown, to (a) set the matter for a status and trial-setting conference
  within forty-five (45) days after the date of selection of the referee,
  (b) if practicable, try all issues of law or fact within one hundred
  twenty (120) days after the date of the conference and (c) report a
  statement of decision within twenty (20) days after the matter has been submitted
  for decision.

  
	
   

  	
   

  	
   

  
	
  v.

  	
   

  	
  The referee will have
  power to expand or limit the amount and duration of discovery.  The referee may set or extend discovery
  deadlines or cutoffs for good cause, including a party’s failure to provide
  requested discovery for any reason whatsoever.  Unless otherwise ordered based upon good
  cause shown, no party shall be entitled to “priority” in conducting
  discovery, depositions may be taken by either party upon ten (10) days
  written notice, and all other discovery shall be responded to within twenty
  (20) days after service.  All disputes
  relating to discovery which cannot be resolved by the parties shall be
  submitted to the referee whose decision shall be final and binding.

  
	
   

  	
   

  	
   

  
	
  vi.

  	
   

  	
  Except as expressly set
  forth in this Agreement, the referee shall determine the manner in which the
  reference proceeding is conducted including the time and place of hearings,
  the order of presentation of evidence, and all other questions that arise
  with respect to the course of the reference proceeding.  All proceedings and hearings conducted
  before the referee, except for trial, shall be conducted without a court
  reporter, except that when any party so requests, a court reporter will be
  used at any hearing conducted before the referee, and the referee will be
  provided a courtesy copy of the transcript. 
  The party making such a request shall have the obligation to arrange
  for and pay the court reporter. 
  Subject to the referee’s power to award costs to the prevailing party,
  the parties will equally share the cost of the referee and the court reporter
  at trial.

  
	
   

  	
   

  	
   

  
	
  vii.

  	
   

  	
  The referee shall be
  required to determine all issues in accordance with existing case law and the
  statutory laws of the State of California. 
  The rules of evidence applicable to proceedings at law in the
  State of California will be applicable to the reference proceeding.  The referee shall be empowered to enter
  equitable as well as legal relief, provide all temporary or

  



 


22

















 


	
   

  	
   

  	
  provisional remedies,
  enter equitable orders that will be binding on the parties and rule on
  any motion which would be authorized in a trial, including without limitation
  motions for summary judgment or summary adjudication.  The referee shall issue a decision pursuant
  to CCP Section 644 the referee’s decision shall be entered by the Court
  as a judgment or an order in the same manner as if the action had been tried
  by the Court.  The final judgment or
  order or from any appealable decision or order entered by the referee shall be
  fully appealable as provided by law. 
  The parties reserve the right to findings of fact, conclusions of
  laws, a written statement of decision, and the right to move for a new trial
  or a different judgment, which new trial, if granted, is also to be a reference
  proceeding under this provision.

  
	
   

  	
   

  	
   

  
	
  viii.

  	
   

  	
  If the enabling
  legislation which provides for appointment of a referee is repealed (and no
  successor statute is enacted), any dispute between the parties that would
  otherwise be determined by reference procedure will be resolved and
  determined by arbitration.  The
  arbitration will be conducted by a retired judge or Justice, in accordance
  with the California Arbitration Act Section 1280 through
  Section 1294.2 of the CCP as amended from time to time.  The limitations with respect to discovery
  set forth above shall apply to any such arbitration proceeding.

  
	
   

  	
   

  	
   

  
	
  ix.

  	
   

  	
  THE PARTIES RECOGNIZE
  AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE
  DECIDED BY A REFEREE AND NOT BY A JURY. 
  AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
  COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR
  THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY
  DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT.

  
	
   

  	
   

  	
   

  



[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]


 


23

















 


In Witness Whereof, the parties have set their hands
and seals on the day and year first hereinabove written.


 


	
   

  	
  FCC, LLC, doing business as First Capital Western Region, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/Robert S. Yasuda

  
	
   

  	
  Name:

  	
  Robert S. Yasuda

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  700 South Flower Street

  
	
   

  	
   

  	
   

  	
  Suite 2325

  
	
   

  	
   

  	
   

  	
  Los Angeles CA 90017

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEADE INSTRUMENTS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Steven G. Murdock

  
	
   

  	
   

  	
  Steven G. Murdock

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Client address & name for notice through

  
	
   

  	
  February 28, 2009:

  
	
   

  	
   

  	
   

  
	
   

  	
  6001 Oak Canyon

  
	
   

  	
  Irvine CA 92618

  
	
   

  	
  Attention: 

  	
  John A. Elwood

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Client address & name for notice after

  
	
   

  	
  February 28, 2009:

  
	
   

  	
   

  	
   

  
	
   

  	
  27 Hubble

  
	
   

  	
  Irvine, CA 92618

  
	
   

  	
  Attention: 

  	
  John A. Elwood

  
					



 


24

















 


	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  ) SS:

  
	
  COUNTY OF

  	
  )

  
			



 


On                                           ,
2009, before me,                                  ,
Notary Public, personally appeared Steven L. Muellner, who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.


 


I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.


 


WITNESS
my hand and official seal.


 


	
  Signature

  	
   

  	
  (Signature of Notary)

  	
  (Seal of Notary)

  



 


25
















 


SCHEDULE
“A”


 


Definitions


 


“Account(s)”
means (i) all “accounts” as defined in the UCC due to Client, whether
presently existing or hereafter arising, due to Client, and (ii) all
presently existing or hereafter arising accounts receivable due to Client (including
medical and health-care-insurance receivables), book debts, notes, drafts and
acceptances and other forms of obligations or rights to payment of a monetary
obligation now or hereafter owing to Client, whether arising from the sale or
lease of goods or the rendition of services by Client or otherwise (including
any obligation that might be characterized as an account, contract right,
general intangible or chattel paper under the UCC), all of Client’s rights in,
to and under all purchase orders now or hereafter received by Client for goods
and services, all proceeds from the sale of Inventory, all monies due or to
become due to Client under all contracts for the sale or lease of goods or the
rendition of services by Client or otherwise (whether or not yet earned by
performance) (including the right to receive the proceeds of said purchase
orders and contracts), all collateral security and guarantees of any kind given
by any obligor with respect to any of the foregoing, and all goods returned to
or reclaimed by Client that correspond to any of the foregoing and all proceeds
of the foregoing, provided, however, that Accounts shall exclude all Factor Sub
Accounts.


 


“Account
Advance” means amounts Account Advanced by Factor to or for the benefit of
the Client under this Agreement or otherwise against the Net Invoice Amount of
Accounts.


 


“Account
Advance Availability” means the amount determined by Factor pursuant to
section 3.1 hereof.


 


“Advance(s)”
means all Account Advances and Inventory Advances and any other amounts
advanced by Factor to or on behalf of Client.


 


“Agreement”
means this Agreement, including the Exhibits and any Schedules hereto, and all
amendments, modifications and supplements hereto and thereto and restatements
hereof and thereof.


 


“Approved
Account” means an Account representing a sale to a Customer within the
terms of a Credit Line established for such Customer on Client’s normal selling
terms or within the Single Order Approval issued by Factor provided that
delivery is completed while such Credit Line or Single Order Approval remains
in effect and such Account has not been charged back to the Client.


 


 “Avoidance Claim” means any claim that
any payment received by Factor from or for the account of an Account Debtor is
avoidable under the federal Bankruptcy Code or any other debtor relief statute.


 


 “Business Day” means any
day that a bank located in California, Oklahoma or Ohio is open for business.


 


“Chattel
Paper” means (i) all “chattel paper” as defined in the UCC, and (ii) all
record or records that evidence both a monetary obligation and a security
interest in specific goods, a security interest in specific goods and software
used in the goods, a security interest in specific goods and license of
software used in the goods, a lease of specific goods, or a lease of specific
goods and license of software used in the goods.


 


“Client” has the meaning ascribed thereto in
the introductory paragraphs hereof.


 


“Client
Risk Account” means those Accounts for which Factor has not given Credit Approval,
for which Credit Approval has been withdrawn or revoked or with respect to
which Factor is not responsible under Section 2 hereof.


 


26

















 


“Collateral”
means and includes all of Client’s right, title and interest in and to all of
Client’s property other than Factor Sub Accounts whether real or personal,
tangible or intangible, now owned or existing or hereafter acquired or arising
and wherever located, including all of the following: (a) all Accounts, (b) Chattel
Paper, (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents,
(f) Equipment (g) General Intangibles (including but not limited to
all files, correspondence, computer programs, tapes, disks and related data
processing software which contain information identifying or pertaining to any
of the Collateral or any Customer or showing the amounts thereof or payments
thereon or otherwise necessary or helpful in the realization thereon or the
collection thereof), (h) Goods, (i) Inventory, (j) Instruments, (k) Investment
Property, (l) Letters of Credit and Letter of Credit Rights, (m) Negotiable
Collateral (n) the Reserve, (o) all Supporting Obligations, (p) Factor
Sub Accounts Proceeds, (q) to the extent permitted by law, all other
personal property and assets of the Client and (q) all proceeds (as
defined in the UCC) and any other products of the foregoing and this clause
(q).


 


“Collection
Date” means (a) for payments received by Factor in payment of
Accounts, the date a check, draft or other item representing payment on an
invoice is posted to Factor’s account plus two (2) business days; or (b) for
Approved Accounts paid by Factor solely for any reason other than a Bona
Fide Defense,, the Friday of the
calendar week following the calendar week in which the 120 day period for such
Approved Account ends.


 


“Commercial
Tort Claim” means (i) all “commercial tort claims” as defined in the
UCC, and (ii) all claims arising in tort with respect to which:  (A) The claimant is an organization; or (B) The
claimant is an individual and the claim: (x) arose in the course of the
claimant’s business or profession; and (y) does not include damages
arising out of personal injury to or the death of an individual.


 


“Commission” has the meaning ascribed thereto
in Section 5.2 hereof.


 


“Contract
Year” means the twelve month period ending on the date that is twelve
months after the effective date of this Agreement and the twelve month period
ending on each annual anniversary thereof.


 


“Credit
Approval(s) and Credit Approved” means, with regard to an Approved
Account, that Factor has accepted the Credit Risk.


 


“Credit Lines” has the meaning ascribed
thereto in Section 2.2 (a).


 


“Credit
Risk” means the Customer’s failure to pay an Account when due solely
because of its financial inability to pay.


 


“Customer” means any Person who is obligated
on an Account, Chattel Paper or General Intangible.


 


 “Default”
means any of the events specified in Section 11 of this Agreement.


 


“Deposit
Account” means (i) all “deposit accounts” as defined in the UCC, and (ii) any
demand, time, savings, passbook or like account maintained with a bank, savings
and loan association, credit union, trust company or like organization, other
than an account evidenced by a certificate of deposit that is an instrument
under the UCC.


 


“Dispute
or Disputed Account” means any claim, whether or not provable, bona fide,
or with or without support, made by an Customer as a basis for refusing to pay
an Account, either in whole or in part, including, but not limited to, any
contract dispute, charge back, credit, right to return Goods, or other matter
which diminishes or may diminish the dollar amount or timely collection of such
Account.


 


“Documents” means a document of title or a
receipt of the type described in UCC 7-201(2).


 


“Eligible
Inventory” means and includes that Inventory (other than packaging
materials, labels and supplies) located in the continental United States which
Factor, in its discretion, deems to be Eligible Inventory.  Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory unless:


 


27

















 


(a)                                  it is finished goods;


 


(b)                                 at all times it strictly complies with all of
Client’s warranties, covenants and representations to Factor;


 


(c)                                  it is in good, new and salable condition;


 


(d)                                 it is not slow moving, obsolete or
unmerchantable, in Factor’s discretion;


 


(e)                                  it meets all standards imposed by any
governmental agency or authority;


 


(f)                                    it is at all times subject to Factor’s duly
perfected, first-priority security interest and there exists no other Lien
thereon;


 


(g)                                 it is in Client’s possession and control
situated at a U.S. based location disclosed to Factor in compliance with this
Agreement, the Inventory is not in-transit, Client’s books reflect the
Inventory, the Inventory is insured to the full value thereof, and the
insurance policy lists Factor as sole loss payee;


 


(h)                                 it is not in the hands of any third party,
including a warehouseman, finisher, consignee, bailor, etc., unless such
arrangement is fully disclosed to Factor in writing and Client shall have
provided to Factor such waivers, acknowledgments and other items requested by
Factor in its discretion;


 


(i)                                     it is not subject to any license or other
agreement that limits, conditions, or restricts Client’s or Factor’s right to
sell, transfer or otherwise dispose of such Inventory;


 


(j)                                     Client owns such Inventory and such Inventory
is not in Client’s possession based upon any consignment, guaranteed sale, or
similar basis; and


 


(k)                                  it is not of a type that Factor, in its
discretion, has determined is not Eligible Inventory.


 


“Equipment” means (a) all
“equipment” as defined in the UCC, and (b) all of Client’s present and
hereafter acquired machinery, equipment, furniture, fixtures, goods, and all
other tangible personal property (other than Inventory), including computer and
other electronic data processing equipment and other office equipment and
supplies, computer programs and related data processing software, embedded software,
spare parts, tools, motors, automobiles, trucks, tractors and other motor
vehicles, rolling stock, jigs, as well as all of such types of property leased
by Client and all of Client’s rights and interests with respect thereto under
such leases (including, options to purchase), together with all present and
future additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.


 


“Factor”
has the meaning ascribed thereto in the introductory paragraph hereof.


 


“Factor Sub” means FCC Factor Subsidiary II,
LLC, a Delaware limited liability company.


 


“Factor
Sub Accounts” means (i) all “accounts” as defined in the UCC, whether
presently existing or hereafter arising, and (ii) all presently existing
or hereafter arising accounts receivable due to Client (including medical and
health-care-insurance receivables), book debts, notes, drafts and acceptances
and other forms of obligations or rights to payment of a monetary obligation
now or hereafter owing to Client, whether arising from the sale or lease of
goods or the rendition of services by Client (including any obligation that
might be characterized as an account, contract right, general intangible or
chattel paper under the UCC), all of Client’s rights in, to and under all
purchase orders now or hereafter received by Client for goods and services, all
proceeds from the sale of Inventory, all monies due or to become due to Client
under all contracts for the sale or lease of goods or the rendition of services
by Client (whether or not yet earned by performance) (including the right to
receive the proceeds of said purchase orders and contracts), all collateral
security and guarantees of any kind given by any obligor with respect to any of
the foregoing, and all goods returned to or reclaimed by Client that correspond
to any of the foregoing but only


 


28

















 


to
the extent that such accounts are purchased by Factor Sub under the terms of
the Factor Sub Factoring Agreement.


 


“Factor
Sub Accounts Proceeds” means the proceeds of Factor Sub Accounts, including
any amounts payable by Factor Sub as the Purchase Price of the Factor Sub
Accounts under the Factor Sub Factoring Agreement.


 


“Factor
Sub Factoring Agreement” means that certain Factoring and Security
Agreement entered into by and between Factor Sub and Client dated as of the
date hereof.


 


“Factoring
Documents” means, collectively, this Agreement and any other agreements,
instruments, certificates or other documents entered into in connection with
this Agreement, including collateral documents, letter of credit agreements,
riders covering inventory or other loans, security agreements, pledges,
guaranties, mortgages, deeds of trust, assignments and subordination
agreements, and any other agreement executed by Client, any guarantor or any
affiliate of Client or any guarantor pursuant hereto or in connection herewith.


 


“Financing
Statement” means each Uniform Commercial Code financing statement naming
the Factor as purchaser/secured party and the Client as Client/debtor, in
connection with this Agreement.


 


“GAAP”
means generally accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent with the prior
financial practices of the Person referred to.


 


“General
Intangible” means (i) all “general intangibles” as defined in the UCC,
and (ii) all of Client’s present and future general intangibles and all
other presently owned or hereafter acquired intangible personal property of
Client (including payment intangibles and any and all choses or things in
action, goodwill, patents and patent applications, tradenames, servicemarks,
trademarks and trademark applications, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
licenses and rights under any licensing agreements, route lists, infringement
claims, software, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit accounts, tax refunds and tax refund
claims) other than Goods, Accounts, Chattel Paper, Commercial Tort Claims,
Deposit Accounts, Documents, Equipment, Instruments, Investment Property,
Letters of Credit or Letters of Credit Rights, but specifically including all
of Client’s books and records.


 


“Goods”
means (i) all “goods” as defined in the UCC, and (ii) all of Client’s
present and hereafter acquired goods, wherever located, including imbedded
software to the extent included in “goods”, manufactured homes, and standing
timber that is cut and removed for sale.


 


 “Instrument” means (i) all
“instruments” as defined in the UCC, and (ii) all negotiable instruments
or any other writings that evidence a right to the payment of a monetary
obligation, is not itself a security agreement or lease, and is of a type that
in ordinary course of business is transferred by delivery with any necessary
endorsement or assignment.  The term does
not include (i) Investment Property, (ii) Letters of Credit, or (iii) writings
that evidence a right to payment arising out of the use of a credit or charge
card or information contained on or for use with the card.


 


“Inventory”
means (i) all “inventory” as defined in the UCC, and (ii) all of
Client’s inventory, together with all of Client’s present and future inventory,
including goods held for sale or lease or to be furnished under a contract of
service and all of Client’s present and future raw materials, work in process,
finished goods, shelving and racking upon which the inventory is stored and
packing and shipping materials, wherever located, and any documents of title
representing any of the above.


 


“Inventory
Advance” means amounts advanced by Factor to or for the benefit of the
Client under this Agreement or otherwise against Eligible Inventory pursuant to
Section 3.2 hereof.


 


“Inventory
Advance Availability” means the amount determined by Factor in under
section 3.2 hereof.


 


29

















 


 “Inventory Certificate” means the
certificate in such form as Factor may prescribe form time to time
substantially with appropriate insertions, to be submitted to Factor by Client
pursuant to this Agreement and certified as true and correct by the Chief
Executive Officer or the Chief Financial Officer of Client.


 


 “Issuer”
means a financial institution selected by Factor and reasonably acceptable to
Client.


 


“Investment
Property” means (i) any “investment property” as defined in the UCC,
and (ii) a security, whether certificated or uncertificated, security
entitlement, securities account, commodity contract, or commodity account.


 


“Ledger
Debt” means any debt, liability or obligation now or hereafter owing by
Client to others, including any present or future client of Factor, which
Factor may have obtained or may obtain by purchase, assignment, negotiation,
discount, participation or otherwise.


 


“Letter of Credit” means a commercial or stand-by
letter of credit issued by or on behalf of or for the benefit of Client.


 


“Letter of Credit Fee” means a monthly fee equal to
           percent
(  .0 %) of the face amount of all issued and/or outstanding Letters
of Credit and such other fees and charges as set forth on Exhibit A hereto
as such may be revised from time to time.


 


“Letter
of Credit Obligations” means all indebtedness, liabilities and obligations
incurred by Factor at the request of Client in connection with the issuance of
Letters of Credit.


 


“Letter
of Credit Reserve” means, from time to time, an amount equal to the
aggregate amount that may then be drawn under the Letter of Credit assuming
compliance with all conditions for drawing, plus the aggregate amount of all
draws under the Letter of Credit for which Client has not reimbursed Factor.


 


“Letter
of Credit Right” means (i) “letter of credit right” as defined in the
UCC, and (ii) a right to payment or performance under a Letter of Credit,
whether or not the beneficiary has demanded or is at the time entitled to
demand payment or performance.  The term
does not include the right of a beneficiary to demand payment or performance
under a Letter of Credit.


 


“Lien”
means any security interest, security title, mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, conditional sale or other title retention
agreement, or other encumbrance of any kind in respect of any property,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.


 


“Loan Agreement – Factor Sub
Accounts” means that certain Loan and Security Agreement – Factor Sub
Accounts by and between Client and FCC, LLC dated as of the date hereof.


 


“Misdirected
Payment Fee” means fifteen percent (15%) of the amount of any payment on
account of an Account which has been received by Client and not delivered in
kind to Factor within two (2) business days following the date of receipt
by Client.


 


“Negotiable
Collateral” means all of Client’s present and future letters of credit,
advises of credit, notes, drafts, instruments, and documents, including bills
of lading, leases, and chattel paper, and Client’s books and records relating
to any of the foregoing.


 


“Net
Invoice Amount” means the invoice amount of the Account, less returns
(whenever made), all selling discounts (at Factor’s option, calculated on
shortest terms), credits or deductions of any kind allowed or granted to or
taken by the Customer at any time.


 


30

















 


“Obligations” means all present and
future Account Advances, Inventory Advances, Letter of Credit Obligations,
Commissions, interest, fees, expenses, and all other present and future
obligations (including the obligation to turn over all proceeds of Accounts
purchased hereunder) owing by Client to Factor, including interest thereon,
whether or not for the payment of money, whether or not evidenced by any note
or other instrument, whether direct or indirect, absolute or contingent, due or
to become due, joint or several, primary or secondary, liquidated or unliquidated,
secured or unsecured, original or renewed or extended, whether presently
contemplated or not, regardless of how the same arise, or by what instrument,
agreement or book account they may be evidenced, or whether evidenced by any
instrument, agreement or book account, whether arising before, during or after
the commencement of any federal Bankruptcy Case in which Client is a debtor,
including but not limited to, obligations arising pursuant to Letters of Credit
or acceptance transactions or any other financial accommodations, agreements or
any guaranty executed by Client in favor of Factor.


 


“Obligor”
means Client and any other Person primarily or secondarily, directly or
indirectly, liable on any of the Obligations, including, but not limited to,
any guarantor thereof (individually an “Obligor” and collectively, the “Obligors”),


 


 “Permitted Liens” means (a) liens
for unpaid taxes, assessments, or other governmental charges or levies that are
not yet delinquent, (b) liens set forth on Schedule 1 hereto, (c)  the
interests of lessors in goods which are leased to Client, including leases
which are deemed to be “capital leases” in accordance with GAAP, (d) liens
arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which liens
are for sums not yet delinquent, (e) Liens in favor of FCC or its
affiliates; and (f) encumbrances on trademarks arising pursuant to any
agreements whereby Client grants a license to a third party to use one or more
of Client’s trademarks.


 


“Person”
means an individual, corporation, limited liability company, partnership,
association, trust or unincorporated organization or a government or any agency
or political subdivision thereof.


 


“Purchase Price” means the Net Invoice
Amount less Factor’s Commission.


 


“Reserve” means a bookkeeping
account on the books of the Factor representing an unpaid portion of the
Purchase Price and such other amounts as Factor deems advisable as security for
the payment and performance by Client of its Obligations hereunder.


 


 “Schedule of Accounts” means a form
supplied by Factor from time to time wherein Client lists all Accounts.


 


“Security
Interest” means the rights, title and interest in and to and liens of
Factor on and in the Collateral.


 


“Single
Order Approval” has the meaning ascribed thereto in Section 2.2 (a) hereof.


 


“Supporting
Obligation” means (i) a “supporting obligation” as defined in the UCC,
and (ii) a Letter of Credit Right or secondary obligation that supports
the payment or performance of an Account, Chattel paper, a Document, a General
Intangible, an Instrument, or Investment Property.


 


 “UCC” means the Uniform Commercial Code
as in effect from time to time in the State of California.


 


31

















 


Schedule 1


Permitted Liens


 


UCC
#10998869 filed with the Delaware Secretary of State by Bank of America, N.A.
(all assets)—TO BE TERMINATED


 


UCC
#30280704 filed with the Delaware Secretary of State by General Electric
Capital Corporation (leased equipment)


 


UCC
#30932981 filed with the Delaware Secretary of State by General Electric
Capital Corporation (leased equipment)


 


UCC
# 41350471 filed with the Delaware Secretary of State by Celtic Leasing
Corporation and Banc One Leasing Corp. (leased equipment)


 


UCC
#06-7088609600 filed with the California Secretary of State by Celtic Leasing
Corp. (leased equipment)


 


32

















 


Schedule 6.3 (b)


Collateral Locations


 


6001 Oak Canyon


Irvine CA  92618


 


Boulevard San Antonio


De los Buenos de Mendoza


No. 20104, Parque Industrial Valle Sur 2


Tijuana, Baja California, Mexico CP. 22114


 


Ave La Paz No 10009


Parque Industrial Pacifico


Nave 15-AB-0500


Tijuana, Baja California, Mexico CP. 22670


 


27 Hubble


Irvine, CA   92618


 


 


Warehousemen, Bailees,
Consignees & Processors


 


None


 


33

















 


Schedule 8.1 (m)


Real Property


 


6001 Oak Canyon


Irvine CA  92618


 


Boulevard San Antonio


De los Buenos de Mendoza


No. 20104, Parque Industrial Valle Sur 2


Tijuana, Baja California, Mexico CP. 22114


 


Ave La Paz No 10009


Parque Industrial Pacifico


Nave 15-AB-0500


Tijuana, Baja California, Mexico CP. 22670


 


 


Bank Accounts


 


Bank of America        #xxxxxxxxx0477
(Controlled Disbursement)


Bank of America #xxxxxxxxx5331 (Payroll)


Bank of America #xxxxxxxxx5330 (General)


Bank of America #xxxxxxxxx7067 (Lockbox)


 


34

















 


Schedule 8.2 (f)


Subsidiaries


 


Meade Coronado Holdings Corp.


Coronado Instruments, Inc.


MTSC Holdings, Inc.


Simmons Outdoor Corporation


MC Holdings, Inc.


Meade.com


Meade Instruments (Guangzhou) Co., Ltd.


Meade Instruments Foreign Sales Corporation Limited


Meade Instruments Mexico, S. de R.L. de C.V.


Meade Instruments Europe Corporation


 


35

















 


Schedule 9.4


Persons Authorized to Request Loans


 


Steven G. Murdock


Paul E. Ross


John A. Elwood


 


36