Exhibit 10.124


 


FACTORING
AND SECURITY AGREEMENT


FACTOR SUB ACCOUNTS


 


Date: February 9, 2009


 


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


 


Client and FCC Factor Subsidiary II, LLC, a Delaware limited liability
company (“Factor Sub”), hereby agree to the terms and conditions set forth in
this Factoring 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.


 


(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 Factor Sub Accounts.


 


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


 


2.2  Credit Approval.


 


(a) 
Client shall submit to Factor Sub the credit requirements of Client’s
Customers, a description of its selling terms and such other information as
Factor Sub may request.  Factor Sub 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 Sub may approve
(“Credit Lines”).  Client may also submit
for credit approval specific orders from Customers and Factor Sub may, in its
sole credit judgment, approve such orders on a single order approval basis
(“Single Order Approval”).  Factor Sub
Accounts arising under the terms of Credit Lines or Single Order Approvals are
hereinafter referred to as Approved Accounts; Factor Sub 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 Factor Sub 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 Sub.  For purposes of determining Factor Sub’s
Credit Approval hereunder, the account(s) balance due Factor Sub 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 Sub’s 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 Sub,
or if the terms of sale are changed by Client without Factor Sub’s prior
written approval of the new terms, or if the Account is not assigned to Factor
Sub 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 Approval.  If Factor
Sub 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 provides services to a Customer who has outstanding Factor Sub Accounts owed
to Client, and such Customer’s Credit Line and/or outstanding Single Order
Approval(s) have been withdrawn by Factor Sub, and the Factor Sub Accounts
created by such shipment exceed ten percent (10%) of the total amount of
Client’s Factor Sub Accounts outstanding, any Credit Approvals applying to
those Factor Sub Accounts shall be deemed cancelled and all outstanding Factor
Sub Accounts from that Customer are Client Risk Accounts for all purposes.


 


(c)  Factor Sub 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 Sub may have under this
Agreement or otherwise.  In the event
Factor Sub declines to give Credit Approval on any order received by Client
from a Customer and in advising Client of such decline Factor Sub furnishes
Client with information as to the credit standing of the Customer, such
information shall be deemed to have been requested of Factor Sub by Client and
Factor Sub’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 Sub.


 


(d)  Factor Sub 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 Sub has given written
Credit Approval, fails to pay an Account when due solely for any reason other
than a Bona Fide Defense, Factor Sub 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.  Factor
Sub will pay to Client on the Collection Date, the Purchase Price of any
Approved Account that Factor Sub is required to purchase hereunder.


 


(e)  Client shall bear the Credit Risk on all Client Risk
Accounts; Factor Sub shall have full recourse to Client for all Client Risk
Accounts.  Upon demand by Factor Sub,
Client shall pay to Factor Sub the full amount of a Client Risk Account,
together with all expenses incurred by Factor Sub 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 Sub’s books and second, to any Client Risk Account
outstanding on Factor Sub’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 a Factor Sub Account, Factor Sub shall pay
to Client the Purchase Price for such Factor Sub Account, less (i) moneys
remitted, paid, or otherwise advanced by Factor Sub to or on behalf of Client
(including any amounts which Client may reasonably be obligated to pay in the future), (ii) any other
charges provided for by this Agreement or otherwise due Factor Sub by Client,
and (iii) any deductions taken by the Customer in connection with such
Factor Sub Account.  Any and all Purchase
Price paid by Factor Sub hereunder shall be paid in accordance with any
collateral assignment executed by Client and then in effect.


 


(b)   No
discount, credit, allowance or deduction with respect to any Factor Sub Account
in excess of $10,000 shall be granted or approved by Client to any Customer
without the prior written consent of Factor Sub unless such discount, credit,
allowance or deduction is shown on the face of an invoice at the time such
invoice is submitted to Factor Sub. 
Client agrees to give Factor Sub notice of all discounts, credits,
allowances or deductions in excess of $10,000.


 


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


 


2.4  Commission.


 


(a)           For Factor Sub’s
services hereunder, Client shall pay and Factor Sub shall be entitled to
receive a Factoring Commission equal to three-quarters of one percent (0.75%)
of the gross invoice amount of each Factor Sub Account (“Commission”).  The Commission shall be due and payable to
Factor Sub on the date of creation of each Factor Sub Account and shall be
chargeable to Client’s account with Factor


 

















 


Sub.  Factor Sub shall be entitled to receive a
surcharge equal to two percent (2%) of the gross invoice amount of all Factor
Sub Accounts arising out of sales to any Customer that is a
debtor-in-possession.


 


(b)           Factor Sub’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 Sub’s prior written approval.  If Factor Sub 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 Factor Sub 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 hereof 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 Sub, or at Factor Sub’s option, payable by Client on Factor Sub’s demand.  Client shall pay the difference between the
minimum Commissions due hereunder for each Contract Year less the amount of
Commissions actually paid to date for the Contract Year prior to the
termination of this Agreement.


 


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 Sub
may designate to Client in writing from time to time.


 


2.6           Repurchase Obligation.  Client agrees to repurchase and accept
reconveyance from Factor Sub of any Approved Account in the event that (a) there
occurs a breach of any representation or warranty relating to such Account or
there shall exist a Bona Fide Defense with respect to such Account, (b) Factor
Sub provides Client written notice thereof requesting repurchase of such
Account under this Section 2.6 and (c) Client fails to cure such
breach or Bona Fide Defense, to the reasonable satisfaction of Factor Sub,
within fifteen (15) business days of such notice. Client agrees to repurchase
and accept reconveyance from Factor Sub of any Account that is not an Approved
Account in the event that there occurs a breach of any representation or
warranty relating to such Account or a Dispute with respect to such
Account.  The repurchase price of an
Approved Account shall be paid by Client to Factor Sub on such 15th business
day in an amount equal to the Purchase Price previously paid, if any, by Factor
Sub therefor or by cancellation of Factor Sub’s purchase obligation if payment
has not previously been made by Factor Sub to Client. The repurchase price of
Factor Sub Account that is not an Approved Account shall be paid by Client to
Factor Sub upon demand by Factor Sub in an amount equal to the Purchase Price
previously paid, if any, by Factor Sub therefor or by cancellation of Factor
Sub’s purchase obligation if payment has not previously been made by Factor Sub
to Client.  Interest shall accrue on the
repurchase price from and including the date that Factor Sub originally paid
the Purchase Price for the applicable Account to but excluding the date that
such repurchase price therefor is paid in full at a rate equal the Interest
Rate. All such interest shall be computed for the actual number of days elapsed
on the basis of year consisting of 360 days.


 


Section 3.  Collections.


 


3.1
General. (a)   IT IS THE INTENTION OF THE PARTIES HERETO THAT AS TO
ALL FACTOR SUB 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.


 


3.2 Collections.


 


(a)  Factor Sub 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 Factor Sub Accounts to Factor Sub and to direct such Customers to make
payment of all amounts due or to become due to Client directly to Factor
Sub.  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 Sub
hereunder and so long as Client is not in Default, Factor Sub shall be deemed
to have received any such


 

















 


proceeds of
Factor Sub Accounts in excess of the amount of such proceeds to which Factor
Sub is entitled as the owner of such Factor Sub Accounts as a pure pass-through
for and on account of Client.


 


(b)   Factor Sub, as the
sole and absolute owner of the Factor Sub Accounts, shall have the sole and
exclusive power and authority to collect each such Account, through legal
action or otherwise, and Factor Sub may, in its sole discretion, settle,
compromise, or assign (in whole or in part) any of such Factor Sub 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
Factor Sub Accounts.


 


(c)   Should
Client receive payment of all or any portion of any Factor Sub Account, Client
shall immediately notify Factor Sub of the receipt of such payment, hold such
payment in trust for Factor Sub separate and apart from Client’s own property
and funds, and shall deliver such payment to Factor Sub without delay in the
identical form in which received.  Should
Client receive any check or other payment instrument with respect to any Factor
Sub Account and fail to surrender and deliver to Factor Sub such check or
payment instrument within five (5) days, Factor Sub shall be entitled to
charge Client a Misdirected Payment Fee to compensate Factor Sub 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 a
Factor Sub Account, are returned to or repossessed by Client, such Goods
shall be held by Client in trust for Factor Sub, separate and apart from
Client’s own property and subject to Factor Sub’s sole direction and control.


 


(f) 
Client agrees to notify Factor Sub promptly in writing of any credit loss, or
anticipated credit loss, for Approved Accounts, such notice in any event to be
received by Factor Sub 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 Sub within the 120 day
period shall result in Client assuming the entire Credit Risk on such Factor
Sub Account, and Factor Sub shall be deemed free of any such Credit Risk.


 


Section 4.  Power of
Attorney.


 


4.1 Power
of Attorney.  Client hereby grants to
Factor Sub an irrevocable power of attorney authorizing and permitting Factor
Sub, 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 Sub regarding Factor Sub Accounts;  (b) receive, open and dispose of any
mail addressed to Client and put Factor Sub’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 Factor Sub
Accounts; (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 Sub may designate, however,
Factor Sub shall turn over to Client all such mail not relating to Factor Sub
Accounts; (e) file any Financing Statement deemed necessary or appropriate
by Factor Sub to protect Factor Sub’s interest in and to the Factor Sub
Accounts, 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 Factor Sub Accounts; and (h) to take all actions
necessary and proper in order to carry out this Agreement.  The authority granted to Factor Sub herein is
irrevocable until this Agreement is terminated and all Obligations are fully
satisfied.


 


Section 5.
Client’s Representations, Covenants and Warranties.


 


Section 5.1 Client’s Representations, Covenants and Warranties.  Client represents, warrants and covenants to
Factor Sub 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;


 


(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 is the sole
owner and holder of all Factor Sub Accounts and there is no security interest,
lien, judgment or other encumbrance in or affecting such Factor Sub
Accounts.  At the time of assignment to
Factor, the Account is 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;


 


(d)           Other than those
discounts, allowances and deductions set forth on the face of the invoice at
the time it was assigned to Factor Sub, there are and shall be no set-offs,
allowances, discounts, deductions, counterclaims, or disputes with respect to
any Account.  Client shall inform Factor
Sub, 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 Sub.  If required by Factor Sub,
Client shall submit to Factor Sub credit memos itemized on a separate Schedule
for all returns and allowances made during the previous week.  At Factor Sub’s option, Factor Sub may
require that Client pay Factor Sub for the amount of such credit memos, or in
Factor Sub’s sole and exclusive discretion, Factor Sub may agree to accept the
Schedule of Factor Sub Accounts and apply same to Client’s account;


 


(e)           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 Factor Sub Accounts are maintained which shall
not be changed without giving thirty (30) days prior written notice to Factor
Sub;


 


(f)            Client shall
maintain its books and records in accordance with GAAP and shall reflect on its
books the absolute sale of the Factor Sub Accounts to Factor Sub.  Client shall furnish Factor Sub, upon
request, such information and statements, as Factor Sub 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 Sub, (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 Sub, (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 Sub, (iv) a
certificate from the president or chief financial officer of Client stating
whether any Default has occurred and stating the nature of the Default, and (v) such
other information as Factor Sub may request. 
Client will furnish to Factor Sub upon request a current listing of all
open and unpaid accounts payable. All financial statements and reports furnished
to Factor Sub hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP;


 


(g)           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 Sub upon request
satisfactory proof of payment and compliance with all federal, state and local
tax requirements;


 


(h)           Client will promptly
notify Factor Sub 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;


 


(i)            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 Sub in writing
which could materially adversely affect the properties, business or financial
condition of Client, or any of the Factor Sub Accounts or which is necessary to
disclose in order to keep the foregoing representations and warranties from
being misleading;


 


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


 


(k)           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
Client’s corporate name:


 


Meade

Meade.com
 Coronado


 


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


 


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


 


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


 


(o)           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 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, provided, however, that
the sale of Meade Germany is specifically permitted.


 


(p)           Client will not obtain or attempt to
obtain from any Person other than Factor Sub or FCC, any loans, advances, or
other financial accommodations or indebtedness of any kind, nor will Factor Sub
enter into any direct or indirect guaranty of any obligation of another
Person.  Client will not permit any of
Client’s assets to be subject to any Lien other than a Lien in favor of FCC or
its affiliates.


 


Section 6.  Administration.


 


6.1
Expenses.  Client shall pay all
costs incurred by Factor Sub 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 Sub’s rights hereunder.


 


6.2
Credit Inquiries.  Client
authorizes Factor Sub to disclose such information as Factor Sub deems
appropriate to persons making credit inquiries about Client.


 


6.3 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.


 


Section 7.
Accounting Information.


 


7.1  Accounting Statements.  Factor Sub shall provide Client with
information on the Factor Sub Accounts and a monthly reconciliation of the
factoring relationship relating to billing, collection, 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 Sub, in its sole discretion, deems
appropriate.  Factor Sub’s books and
records shall be admissible in evidence without objection as prima facie
evidence of the status of the Factor Sub Accounts and Client’s account with
Factor Sub.  Each statement, report, or
accounting rendered or issued by Factor Sub to Client shall be deemed
conclusively accurate and binding on Client unless within thirty (30) days
after the date of issuance Client notifies Factor Sub to the contrary pursuant
to Section 10 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 Sub’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
Sub’s records would have reported.


 


7.2  Inspections.  Factor Sub 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 8.  Defaults and Remedies.


 


8.1  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 Sub; (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 Factor Sub Accounts 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 Sub is not true and correct in any material respect; (g) Client
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 Client’s financial conditions, business or operations; (i) any
suspension of the operation of Client’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 FCC, LLC, or between Client and Factor Sub, or (o) Client
shall breach any covenant or fail to perform any covenant in any agreement
between Client and FCC, LLC, or between Client and Factor Sub.


 


8.2 Remedies.  (a)  Upon a Default, Factor Sub
may, without demand or notice to Client, exercise all rights and remedies
available to it under this Agreement, under the UCC or otherwise, including
terminating this Agreement and declaring all Obligations immediately due and
payable, provided, however that in the event of a Default described under
clause (c) of Section 8.1, such termination and acceleration shall
automatically occur without any notice, demand or presentment of any kind.


 


(b)           Without notice to or demand upon
Client or any other Person, Factor Sub may make such payments and do such acts
as Factor Sub considers necessary or reasonable to protect its interest in the
Factor Sub Accounts.  Client authorizes
Factor Sub to enter each premises where any books and records are located, take
and maintain possession of the books and records, and to pay, purchase, contest
or compromise any lien which in Factor Sub’s opinion appears to be prior or
superior to its interest and to pay all expenses incurred in connection
therewith.


 

















 


(c)           Factor Sub 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 Sub 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 Sub 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 Sub post or otherwise obtain or procure any bond.  Alternatively, in the event Factor Sub, in
its sole and exclusive discretion, desires to procure and post a bond, Factor
Sub 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
Sub’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 Sub is thereafter, for whatever reason(s), vacated, dissolved
or reversed.


 


8.3  Cumulative Rights; Waivers.  The occurrence of any Default shall entitle
Factor Sub to all of the default rights and remedies (without limiting the
other rights and remedies exercisable by Factor Sub either prior or subsequent
to a Default) as available to a Secured Party under the UCC in effect in any
applicable jurisdiction.  All rights,
remedies and powers granted to Factor Sub in this Agreement, or in any other
instrument or agreement given by Client to Factor Sub or otherwise available to
Factor Sub in equity or at law, are cumulative and may be exercised singularly
or concurrently with such other rights as Factor Sub may have.  These rights may be exercised from time to
time as to all or any part of the Factor Sub Accounts hereunder as Factor Sub
in its discretion may determine.  Factor
Sub and Client expressly intend and agree that each purchase and sale of a
Factor Sub Account pursuant to this Agreement shall be a true purchase and sale
of each such Factor Sub Account.  To the extent that, contrary to such
express intent and agreement, any purchase or sale of Factor Sub Accounts or any
other transaction pursuant to this Agreement is construed to be or
characterized as a loan or financing, then all indebtedness and other
obligations of Client owing to Factor Sub under this Agreement shall be secured
by, and for such purpose Client does hereby grant to Client a security interest
in, all of the Factor Sub Accounts.  Factor shall have all rights and
remedies as a secured creditor under applicable law, in addition to its rights
and remedies hereunder Factor Sub may not be held to have waived its rights and
remedies unless the waiver is in writing and signed by Factor Sub.  A waiver by Factor Sub 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 Sub of one right or remedy shall be deemed an
election, and no waiver by Factor Sub of any default on Client’s part shall be
deemed a continuing waiver.  No delay by
Factor Sub shall constitute a waiver, election or acquiescence by it.


 


Section 9. Term.


 


9.1
Term.   This Agreement may be
terminated upon forty-five (45) days prior written notice from Factor Sub 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

  	
   

  



 
















 


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

  	
   

  






 


Prior
to any termination of this Agreement becoming effective, Client shall pay any
minimum annual Commission that remains unpaid for the Contract Year in which
this Agreement is terminated, in addition to the Prepayment Penalty noted
above.  Notwithstanding anything herein
to the contrary, Factor Sub may terminate this Agreement i) at any time without
notice after the occurrence of a Default, or ii) assuming no Default by Client,
Factor Sub may terminate this Agreement at any time by giving not less than
forty-five days notice.  Notwithstanding
payment in full of all Obligations by Client, any such notice of termination is
conditioned on Client’s delivery, to Factor Sub, of a general release in a form
reasonably satisfactory to Factor Sub. 
Client understands that this provision constitutes a waiver of its
rights under § 9-513 of the UCC.  Factor
Sub shall not be required to record any terminations or satisfactions of any of
Factor Sub’s liens until Client has executed and delivered to Factor Sub said
general release and Client shall have no authority to do so without Factor
Sub’s express written consent.  Any
termination of this Agreement shall not affect Factor Sub’s ownership of the
Factor Sub 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 for any reason.


 


Section 10.  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 11. Attorney’s Fees.  Client agrees to reimburse Factor Sub upon
demand for all reasonable attorney’s fees, court costs and other expenses
incurred by Factor Sub in the preparation, negotiation and enforcement of this
Agreement and protecting or enforcing its interest in the Factor Sub Accounts,
or in the representation of Factor Sub in connection with any bankruptcy case
or insolvency proceeding involving Client, or any Factor Sub 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 Sub
shall also have the right to charge Client’s account with Factor Sub
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
Sub 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.


 


Section 12.  Indemnity.  Client hereby indemnifies and agrees to hold
harmless and defend Factor Sub 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 Sub at any time and from time to
time in any way connected with this Agreement. 
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 Sub.


 


Section 13.  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 14.  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
Sub.  Notwithstanding anything
herein to the contrary, the Factor Sub 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 Sub, to treat such
assignee, transferee or participant as 
“Factor Sub” for all purposes hereunder


 


Section 15.  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 California in which Factor has a 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 Factor Sub
Accounts or any other relationship between Factor Sub 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 16.  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 17. Miscellaneous.


 


(a)                                  Client acknowledges
that there is no, and it will not seek or attempt to establish any, fiduciary
relationship between Factor Sub and Client, and Client waives any right to
assert, now or in the future, the existence or creation of any fiduciary
relationship between Factor Sub 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 Sub’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 Sub by Client under this
Agreement.  Upon the formation of any
such entity, Factor Sub 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 new UCC Financing Statement with
the appropriate secretary of state or UCC filing office.  Factor Sub 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 Sub shall
have the right to notify the successor entity’s Customers of Factor Sub’s lien
rights, its right to collect all Factor Sub Accounts, and to notify any new
factor or lender who has sought to procure a competing lien, of Factor Sub’s
rights in such successor entity’s assets.


 


(d)                                 Client
expressly authorizes Factor Sub 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 a Factor Sub Account.


 


(e)                                  INTENTIONALLY RESERVED


 


(f)                                    Client shall indemnify Factor
Sub from any loss arising out of the assertion of any Avoidance Claim.  Client shall notify Factor Sub 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 Sub may require in order to
enable Factor Sub 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).


 


Section 18.                                      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 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 19.  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 20.                                   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 18 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 18 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.

  
	
   

  	
   

  	
   

  
	
   

  	
  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 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]


 

















 


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


 


 


	
   

  	
  FCC Factor Subsidiary II, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/Robert S. Yasuda

  
	
   

  	
  Name:

  	
  Robert S. Yasuda

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MEADE INSTRUMENTS CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/Steven G. Murdock

  
	
   

  	
            Steven G.
  Murdock, President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Client address through February 28, 2009:

  
	
   

  	
  6001 Oak Canyon

  
	
   

  	
  Irvine, CA 92618

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Client address after February 28,
  2009:

  
	
   

  	
  27 Hubble

  
	
   

  	
  Irvine, CA 
  92618

  
	
   

  	
   

  
	
   

  	
  Attention: 

  	
  John A. Elwood

  
					



 

















 


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)

  



 
















 


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.


 


“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 a Factor Sub 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 Sub provided that delivery is completed while such Credit Line
or Single Order Approval remains in effect and such Factor Sub Account has not
been charged back to the Client.


 


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


 


“Bona Fide Defense” means, with respect to any Factor Sub
Account and the applicable Customer, (a) any bona fide legal defense which
is valid and has been asserted by such Customer in good faith to the payment,
in whole or in part, of such Factor Sub Account by such Customer resulting from
a breach by Client of its contract with, its representations and warranties
(express or implied) at the time made to, or its other obligations (if any)
owing to, such Customer in connection with such Factor Sub Account, including
with respect to price, delivery, quantity, quality or any other material terms
of the sale or service transaction, as applicable, (b) any counterclaim or
set-off against Client unrelated to the specific Factor Sub Account, (c) the
breach of any representation or warranty at the time made by Client to Factor
Sub with respect to such Factor Sub Account, whether intentionally or unintentionally,
or (d) any allowance, credit, acceptance of a return or other dilution or
modification with respect to such Factor Sub Account made or granted after
Credit Approval thereof by Factor Sub that is not authorized under the
Agreement.  “Bona Fide Defense” shall
exclude (i) a Customer’s financial inability to pay or its discharge in
bankruptcy or under other debtor protection law, (ii) illegality or
defense as a result of a change in applicable law and (iii) excused
payment as a consequence of enemy attack, civil commotion, strikes, lockouts,
the act or restraint of public authorities, acts of God or force majeure.  A Factor Sub Account that is subject to a
dispute and nonpayment by the applicable Customer shall be deemed to be a
subject to a Bona Fide Defense unless Factor Sub reasonably determines
otherwise in good faith based on the information then available to it (a “Good
Faith Determination”).  Any determination
made by Factor Sub as to any such dispute and nonpayment may change in light of
information subsequently available to it. 
Client shall promptly provide Factor Sub with such further information
as Factor shall request concerning such dispute and non-payment.


 


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


 

















 


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


 


“Collection Date” means (a) for payments received by Factor
in payment of Factored Accounts, the date a check, draft or other item
representing payment on an invoice is posted to Factor ‘s account plus four (4) 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.


 


 “Commission” has the meaning ascribed
thereto in Section 2.4 (a) 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 Sub 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 8 of this Agreement.


 


“Dispute or Disputed Account” means any claim, whether or not
provable, bona fide, or with or without support, made by a Customer as a basis
for refusing to pay an Account, either in whole or in part, including 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.


 


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


 


“Factor
Sub Accounts” means those Accounts arising from Customers that Factor Sub
identifies to  Client in writing from
time to time as acceptable Customers.


 


“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.


 


“FCC” means FCC, LLC, a Florida limited liability company doing
business as First Capital Western Region, LLC.


 


“Financing Statement” means each UCC financing statement naming
the Factor Sub 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.


 


“Interest
Rate” means (a)   Client will
pay Factor Sub or, at Factor Sub’s option, Factor Sub 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 shall the Interest Rate be less than 7.75%.  The Interest Rate may not be the lowest or
best rate at 


 

















 


which
Factor Sub calculates interest or extends credit.  The 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 Sub) 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 Sub’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 Sub that,
in Factor Sub’s reasonable judgment, accurately reflects such London Interbank
Offered Rate).


 


“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.


 


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


 


“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 Sub within five (5) days following the date of receipt by
Client.


 


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


 


“Obligations”
means all present and future obligations owing by Client to Factor Sub,
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 without limitation, Commissions,
Ledger Debt, fees and expenses and any amounts due to Factor under any guaranty
issued by Client.


 


“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”),


 


“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 Sub’s Commission.


 


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


 


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


 

















 


“Termination Fee” means the fee payable to Factor Sub pursuant
to Section 9.1 hereof.


 


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