wwfcreditagmt.htm


    EXHIBIT
      10.1

     

     

     
      
        

      

    

    


    


    CREDIT
      AGREEMENT

    


    


    by
      and among

    


    


    TELTRONICS,
      INC.

    


    as
      Borrower,

    


    


    THE
      LENDERS THAT ARE SIGNATORIES HERETO

    


    as
      the Lenders,

    


    and

    


    WELLS
      FARGO FOOTHILL, INC.

    


    as
      the Arranger and Administrative Agent

    


    


    Dated
      as of May 31, 2007

     

    
      
        

      



     

     

     

     

    


    


    
      
        
          
                  

              BN
              1225807v9         
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

                

                    TABLE
              OF
              CONTENTS    

          

        

      

    

    


    
      	 	 	Page 
	 	 	 
	
              1.

            	
              DEFINITIONS
                AND CONSTRUCTION

            	
              1

            
	 	 	 
	 	
              1.1

            	
              Definitions

            	
              1

            
	 	
              1.2

            	
              Accounting
                Terms

            	
              1

            
	 	
              1.3

            	
              Code

            	
              1

            
	 	
              1.4

            	
              Construction

            	
              1

            
	 	
              1.5

            	
              Schedules
                and Exhibits

            	
              2

            
	 	 	 
	
              2.

            	
              LOAN
                AND TERMS OF PAYMENT

            	
              2

            
	 	 	 
	 	
              2.1

            	
              Revolver
                Advances

            	
              2

            
	 	
              2.2

            	
              Term
                Loan

            	
              2

            
	 	
              2.3

            	
              Borrowing
                Procedures and Settlements

            	
              3

            
	 	
              2.4

            	
              Payments

            	
              7

            
	 	
              2.5

            	
              Overadvances

            	
              10

            
	 	
              2.6

            	
              Interest
                Rates and Letter of Credit Fee:  Rates, Payments, and
                Calculations

            	
              10

            
	 	
              2.7

            	
              Cash
                Management

            	
              12

            
	 	
              2.8

            	
              Crediting
                Payments; Clearance Charge

            	
              13

            
	 	
              2.9

            	
              Designated
                Account

            	
              13

            
	 	
              2.10

            	
              Maintenance
                of Loan Account; Statements of Obligations

            	
              13

            
	 	
              2.11

            	
              Fees

            	
              13

            
	 	
              2.12

            	
              Letters
                of Credit

            	
              13

            
	 	
              2.13

            	
              LIBOR
                Option

            	
              16

            
	 	
              2.14

            	
              Capital
                Requirements

            	
              18

            
	 	 	 	
               

            
	
              3.

            	
              CONDITIONS;
                TERM OF AGREEMENT

            	
              18

            
	 	 	 
	 	
              3.1

            	
              Conditions
                Precedent to the Initial Extension of Credit

            	
              18

            
	 	
              3.2

            	
              Conditions
                Precedent to all Extensions of Credit

            	
              19

            
	 	
              3.3

            	
              Term

            	
              19

            
	 	
              3.4

            	
              Effect
                of Termination

            	
              19

            
	 	
              3.5

            	
              Early
                Termination by Borrower

            	
              19

            
	 	 	 	
               

            
	
              4.

            	
              REPRESENTATIONS
                AND WARRANTIES

            	
              20

            
	 	 	 
	 	
              4.1

            	
              No
                Encumbrances

            	
              20

            
	 	
              4.2

            	
              Eligible
                Accounts

            	
              20

            
	 	
              4.3

            	
              Eligible
                Inventory

            	
              20

            
	 	
              4.4

            	
              Equipment

            	
              20

            
	 	
              4.5

            	
              Location
                of Inventory and Equipment

            	
              20

            
	 	
              4.6

            	
              Inventory
                Records

            	
              20

            
	 	
              4.7

            	
              Jurisdiction
                of Organization; Location of Chief Executive Office; Organizational
                Identification Number; Commercial Tort Claims

            	
              20

            
	 	
              4.8

            	
              Due
                Organization and Qualification; Subsidiaries

            	
              21

            
	 	
              4.9

            	
              Due
                Authorization; No Conflict

            	
              21

            
	 	
              4.10

            	
              Litigation

            	
              22

            
	 	
              4.11

            	
              No
                Material Adverse Change

            	
              22

            
	 	
              4.12

            	
              Fraudulent
                Transfer

            	
              23

            
	 	
              4.13

            	
              Employee
                Benefits

            	
              23

            
	 	
              4.14

            	
              Environmental
                Condition

            	
              23

            
	 	
              4.15

            	
              Intellectual
                Property

            	
              23

            


    

     

    i


    
      
             
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          1225807v9                

      

      
        
        

        
          
            

          

           
            TABLE
              OF CONTENTS

            (continued)

          

           

        

      

      
        
           

        

      

    

    
      	 	 	 	 
	 	 	 	 
	 	 	 	
               Page 

            
	 	 	 	 
	 	
              4.16

            	
              Leases

            	
              23

            
	 	
              4.17

            	
              Deposit
                Accounts and Securities Accounts

            	
              23

            
	 	
              4.18

            	
              Complete
                Disclosure

            	
              23

            
	 	
              4.19

            	
              Indebtedness

            	
              24

            
	 	
              4.20

            	
              Material
                Contracts

            	
              24

            
	 	
              4.21

            	
              Inactive
                Subsidiaries

            	
              24

            
	 	
              4.22

            	
              Active
                Foreign Subsidiaries

            	
              24

            
	 	 	 	
               

            
	
              5.

            	 	
              AFFIRMATIVE
                COVENANTS

            	
              24

            
	 	 	 	 
	 	
              5.1

            	
              Accounting
                System

            	
              24

            
	 	
              5.2

            	
              Collateral
                Reporting

            	
              24

            
	 	
              5.3

            	
              Financial
                Statements, Reports, Certificates

            	
              24

            
	 	
              5.4

            	
              Guarantor
                Reports

            	
              24

            
	 	
              5.5

            	
              Inspection

            	
              25

            
	 	
              5.6

            	
              Maintenance
                of Properties

            	
              25

            
	 	
              5.7

            	
              Taxes

            	
              25

            
	 	
              5.8

            	
              Insurance

            	
              25

            
	 	
              5.9

            	
              Location
                of Inventory and Equipment

            	
              25

            
	 	
              5.10

            	
              Compliance
                with Laws

            	
              26

            
	 	
              5.11

            	
              Leases

            	
              26

            
	 	
              5.12

            	
              Existence

            	
              26

            
	 	
              5.13

            	
              Environmental

            	
              26

            
	 	
              5.14

            	
              Disclosure
                Updates

            	
              26

            
	 	
              5.15

            	
              Control
                Agreements

            	
              26

            
	 	
              5.16

            	
              Formation
                of Subsidiaries

            	
              26

            
	 	
              5.17

            	
              Further
                Assurances

            	
              27

            
	 	
              5.18

            	
              Material
                Contracts

            	
              27

            
	 	
              5.19

            	
              Post
                Closing Covenants

            	
              27

            
	 	 	 	 
	
              6.

            	
              NEGATIVE
                COVENANTS

            	
              27

            
	 	 	 
	 	
              6.1

            	
              Indebtedness

            	
              27

            
	 	
              6.2

            	
              Liens

            	
              28

            
	 	
              6.3

            	
              Restrictions
                on Fundamental Changes

            	
              28

            
	 	
              6.4

            	
              Disposal
                of Assets

            	
              28

            
	 	
              6.5

            	
              Change
                Name

            	
              28

            
	 	
              6.6

            	
              Nature
                of Business

            	
              28

            
	 	
              6.7

            	
              Prepayments
                and Amendments

            	
              28

            
	 	
              6.8

            	
              Change
                of Control

            	
              28

            
	 	
              6.9

            	
              Consignments

            	
              28

            
	 	
              6.10

            	
              Distributions

            	
              28

            
	 	
              6.11

            	
              Accounting
                Methods

            	
              29

            
	 	
              6.12

            	
              Investments

            	
              29

            
	 	
              6.13

            	
              Transactions
                with Affiliates

            	
              29

            
	 	
              6.14

            	
              Use
                of Proceeds

            	
              29

            
	 	
              6.15

            	
              Inventory
                and Equipment with Bailees

            	
              29

            
	 	
              6.16

            	
              Financial
                Covenants

            	
              29

            


    

     

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          TABLE
            OF CONTENTS

          (continued)

        

      

    

    
      	 	 	 	 
	 	 	 	 
	 	 	 	
               Page

            
	 	 	 	
               

            
	
              7.

            	
              EVENTS
                OF DEFAULT

            	
              30

            
	 	 	 
	 	
              7.2

            	
              If
                Borrower or any of its Subsidiaries:

            	
              30

            
	 	 	 	 
	
              8.

            	
              THE
                LENDER GROUP’S RIGHTS AND REMEDIES

            	
              32

            
	 	 	 
	 	
              8.1

            	
              Rights
                and Remedies

            	
              32

            
	 	
              8.2

            	
              Remedies
                Cumulative

            	
              32

            
	 	 	 	
               

            
	
              9.

            	
              TAXES
                AND EXPENSES

            	
              33

            
	 	 	 
	
              10.

            	
              WAIVERS;
                INDEMNIFICATION

            	
              33

            
	 	 	 
	 	
              10.1

            	
              Demand;
                Protest; etc

            	
              33

            
	 	
              10.2

            	
              The
                Lender Group’s Liability for Collateral

            	
              33

            
	 	
              10.3

            	
              Indemnification

            	
              33

            
	 	 	 	 
	
              11.

            	
              NOTICES

            	
              34

            
	 	 	 
	
              12.

            	
              CHOICE
                OF LAW AND VENUE; JURY TRIAL WAIVER

            	
              35

            
	 	 	 
	
              13.

            	
              ASSIGNMENTS
                AND PARTICIPATIONS; SUCCESSORS

            	
              35

            
	 	 	 
	 	
              13.1

            	
              Assignments
                and Participations

            	
              35

            
	 	
              13.2

            	
              Successors

            	
              37

            
	 	 	 	 
	
              14.

            	
              AMENDMENTS;
                WAIVERS

            	
              37

            
	 	 	 
	 	
              14.1

            	
              Amendments
                and Waivers

            	
              37

            
	 	
              14.2

            	
              Replacement
                of Holdout Lender

            	
              38

            
	 	
              14.3

            	
              No
                Waivers; Cumulative Remedies

            	
              39

            
	 	 	 	 
	
              15.

            	
              AGENT;
                THE LENDER GROUP

            	
              39

            
	 	 	 
	 	
              15.1

            	
              Appointment
                and Authorization of Agent

            	
              39

            
	 	
              15.2

            	
              Delegation
                of Duties

            	
              40

            
	 	
              15.3

            	
              Liability
                of Agent

            	
              40

            
	 	
              15.4

            	
              Reliance
                by Agent

            	
              40

            
	 	
              15.5

            	
              Notice
                of Default or Event of Default

            	
              40

            
	 	
              15.6

            	
              Credit
                Decision

            	
              41

            
	 	
              15.7

            	
              Costs
                and Expenses; Indemnification

            	
              41

            
	 	
              15.8

            	
              Agent
                in Individual Capacity

            	
              42

            
	 	
              15.9

            	
              Successor
                Agent

            	
              42

            
	 	
              15.10

            	
              Lender
                in Individual Capacity

            	
              42

            
	 	
              15.11

            	
              Collateral
                Matters

            	
              42

            
	 	
              15.12

            	
              Restrictions
                on Actions by Lenders; Sharing of Payments

            	
              43

            
	 	
              15.13

            	
              Agency
                for Perfection

            	
              44

            
	 	
              15.14

            	
              Payments
                by Agent to the Lenders

            	
              44

            
	 	
              15.15

            	
              Concerning
                the Collateral and Related Loan Documents

            	
              44

            
	 	
              15.16

            	
              Field
                Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
                Other Reports and Information

            	
              44

            
	 	
              15.17

            	
              Several
                Obligations; No Liability

            	
              45

            


    

     

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            OF CONTENTS

          (continued)

        

      

    

    
 

    
      	 	 	 	
               Page

            
	 	 	 	 
	
              16.

            	
              WITHHOLDING
                TAXES

            	
              45

            
	 	 	 
	
              17.

            	
              GENERAL
                PROVISIONS

            	
              47

            
	 	 	
               

            
	 	
              17.1

            	
              Effectiveness

            	
              47

            
	 	
              17.2

            	
              Section
                Headings

            	
              47

            
	 	
              17.3

            	
              Interpretation

            	
              47

            
	 	
              17.4

            	
              Severability
                of Provisions

            	
              47

            
	 	
              17.5

            	
              Bank
                Product Providers

            	
              47

            
	 	
              17.6

            	
              Lender-Creditor
                Relationship

            	
              47

            
	 	
              17.7

            	
              Counterparts;
                Electronic Execution

            	
              47

            
	 	
              17.8

            	
              Revival
                and Reinstatement of Obligations

            	
              48

            
	 	
              17.9

            	
              Confidentiality

            	
              48

            
	 	
              17.10

            	
              Lender
                Group Expenses

            	
              48

            
	 	
              17.11

            	
              USA
                PATRIOT Act

            	
              48

            
	 	
              17.12

            	
              Integration

            	
              49

            
	 	 	 	 


    

     

     

     

     

    iv


    
      
        
                

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            TABLE
              OF CONTENTS

            (continued)

                    Page         
               
    

        

      

    

    
 

    EXHIBITS
      AND SCHEDULES

     

    


    
      	
              Exhibit
                A-1

            	
              Form
                of Assignment and Acceptance

            
	
              Exhibit
                B-1

            	
              Form
                of Borrowing Base Certificate

            
	
              Exhibit
                C-1

            	
              Form
                of Compliance Certificate

            
	
              Exhibit
                D-1

            	
              Form
                of Term Loan Limiter Certificate

            
	
              Schedule
                A-1

            	
              Agent’s
                Account

            
	
              Schedule
                A-2

            	
              Authorized
                Persons

            
	
              Schedule
                C-1

            	
              Commitments

            
	
              Schedule
                D-1

            	
              Designated
                Account

            
	
              Schedule
                E-1

            	
              Eligible
                Inventory Locations

            
	
              Schedule
                P-1

            	
              Permitted
                Holders

            
	
              Schedule
                P-2

            	
              Permitted
                Liens

            
	
              Schedule
                1.1

            	
              Definitions

            
	
              Schedule
                2.7(a)

            	
              Cash
                Management Banks

            
	
              Schedule
                3.1

            	
              Conditions
                Precedent

            
	
              Schedule
                4.5

            	
              Locations
                of Inventory and Equipment

            
	
              Schedule
                4.7(a)

            	
              States
                of Organization

            
	
              Schedule
                4.7(b)

            	
              Chief
                Executive Offices

            
	
              Schedule
                4.7(c)

            	
              Organizational
                Identification Numbers

            
	
              Schedule
                4.7(d)

            	
              Commercial
                Tort Claims

            
	
              Schedule
                4.8(b)

            	
              Capitalization
                of Borrower

            
	
              Schedule
                4.8(c)

            	
              Capitalization
                of Borrower’s Subsidiaries

            
	
              Schedule
                4.10

            	
              Litigation

            
	
              Schedule
                4.14

            	
              Environmental
                Matters

            
	
              Schedule
                4.15

            	
              Intellectual
                Property

            
	
              Schedule
                4.17

            	
              Deposit
                Accounts and Securities Accounts

            
	
              Schedule
                4.19

            	
              Permitted
                Indebtedness

            
	
              Schedule
                4.20

            	
              Material
                Contracts

            
	
              Schedule
                4.22

            	
              Active
                Foreign Subsidiaries

            
	
              Schedule
                5.2

            	
              Collateral
                Reporting

            
	
              Schedule
                5.3

            	
              Financial
                Statements, Reports, and Certificates

            
	
              Schedule
                5.19

            	
              Post
                Closing Covenants

            


    

    


     

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      CREDIT
        AGREEMENT

       

          THIS
        CREDIT
        AGREEMENT (this “Agreement”), is entered into as of May 31,
        2007, by and among the lenders identified on the signature pages hereof (such
        lenders, together with their respective successors and permitted assigns,
        are
        referred to hereinafter each individually as a “Lender” and collectively
        as the “Lenders”), WELLS FARGO FOOTHILL, INC., a
        California corporation, as the arranger and administrative agent for the
        Lenders
        (in such capacity, together with its successors and assigns in such capacity,
        “Agent”), and TELTRONICS, INC., a Delaware corporation
        (“Borrower”).

       

          The
        parties
        agree as follows:

       

      1.  DEFINITIONS
        AND CONSTRUCTION.

      1.1  Definitions.  Capitalized
        terms used in this Agreement shall have the meanings specified therefor on
        Schedule 1.1.

       

      1.2  Accounting
        Terms.  All accounting terms not
        specifically defined herein shall be construed in accordance with
        GAAP.  When used herein, the term “financial statements” shall include
        the notes and schedules thereto.  Whenever the term “Borrower” is used
        in respect of a financial covenant or a related definition, it shall be
        understood to mean Borrower and its Subsidiaries on a consolidated basis,
        unless
        the context clearly requires otherwise.

       

      1.3  Code.  Any
        terms used in this Agreement that are defined in the Code shall be construed
        and
        defined as set forth in the Code unless otherwise defined herein;
provided, however, that to the extent that the Code is used to
        define any term herein and such term is defined differently in different
        Articles of the Code, the definition of such term contained in Article 9
        of the
        Code shall govern.

       

      1.4  Construction.  Unless
        the context of this Agreement or any other Loan Document clearly requires
        otherwise, references to the plural include the singular, references to the
        singular include the plural, the terms “includes” and  “including” are
        not limiting, and the term “or” has, except where otherwise indicated, the
        inclusive meaning represented by the phrase “and/or.”  The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
        or any other Loan Document refer to this Agreement or such other Loan Document,
        as the case may be, as a whole and not to any particular provision of this
        Agreement or such other Loan Document, as the case may be.  Section,
        subsection, clause, and exhibit references herein are to this Agreement unless
        otherwise specified.  Schedule references herein are to the Disclosure
        Statement unless otherwise specified.  Any reference in this Agreement
        or in any other Loan Document to any agreement, instrument, or document shall
        include all alterations, amendments, changes, extensions, modifications,
        renewals, replacements, substitutions, joinders, and supplements, thereto
        and
        thereof, as applicable (subject to any restrictions on such alterations,
        amendments, changes, extensions, modifications, renewals, replacements,
        substitutions, joinders, and supplements set forth herein).  Any
        reference herein or in any other Loan Document to the satisfaction or repayment
        in full of the Obligations shall mean the repayment in full in cash (or,
        in the
        case of Letters of Credit or Bank Products, the cash collateralization or
        support by a standby letter of credit in accordance with the terms hereof)
        of
        all Obligations other than unasserted contingent indemnification Obligations
        and
        other than any Bank Product Obligations that, at such time, are allowed by
        the
        applicable Bank Product Provider to remain outstanding and that are not required
        by the provisions of this Agreement to be repaid or cash
        collateralized.  Any reference herein to any Person shall be construed
        to include such Person’s successors and assigns.  Any requirement of a
        writing contained herein or in any other Loan Document shall be satisfied
        by the
        transmission of a Record and any Record so transmitted shall constitute a
        representation and warranty as to the accuracy and completeness of the
        information contained therein.

       

      
        
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            1225807v9 

        

        
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      1.5  Schedules
        and Exhibits.  All of the schedules and
        exhibits attached to this Agreement and the Disclosure Statement shall be
        deemed
        incorporated herein by reference.

       

      2.  LOAN
        AND TERMS OF PAYMENT.

       

      2.1  Revolver
        Advances.

       

      (a)  Subject
        to the terms and conditions of this Agreement, and during the term of this
        Agreement, each Lender with a Revolver Commitment agrees (severally, not
        jointly
        or jointly and severally) to make advances (“Advances”) to Borrower in an
        amount at any one time outstanding not to exceed such Lender’s Pro Rata Share of
        an amount equal to the lesser of (i) the Maximum Revolver Amount
less the Letter of Credit Usage at such time, and (ii) the
        Borrowing
        Base at such time less the Letter of Credit Usage at such
        time.

       

      (b)  Anything
        to the contrary in this Section 2.1 notwithstanding, Agent shall have the
        right to establish reserves against the Borrowing Base in such amounts, and
        with
        respect to such matters, as Agent in its Permitted Discretion shall deem
        necessary or appropriate, including reserves with respect to (i) sums that
        Borrower or its Subsidiaries are required to pay under any Section of this
        Agreement or any other Loan Document (such as taxes, assessments, insurance
        premiums, or, in the case of leased assets, rents or other amounts payable
        under
        such leases) and has failed to pay, and (ii) amounts owing by Borrower or
        its
        Subsidiaries to any Person to the extent secured by a Lien on, or trust over,
        any of the Collateral (other than a Permitted Lien), which Lien or trust,
        in the
        Permitted Discretion of Agent likely would have a priority superior to the
        Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen,
        carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts
        for
ad valorem, excise, sales, or other taxes where given priority under
        applicable law) in and to such item of the Collateral.

      (c)  Amounts
        borrowed pursuant to this Section 2.1 may be repaid and, subject to the
        terms and conditions of this Agreement, reborrowed at any time during the
        term
        of this Agreement.  The outstanding principal amount of the Advances,
        together with interest accrued thereon, shall be due and payable on the Maturity
        Date or, if earlier, on the date on which they are declared due and payable
        pursuant to the terms of this Agreement.

       

      2.2  Term
        Loan.  Subject to the terms and
        conditions of this Agreement, on the Closing Date each Lender with a Term
        Loan
        Commitment agrees (severally, not jointly or jointly and severally) to make
        term
        loans (collectively, the “Term Loan”) to Borrower in an amount equal to
        such Lender’s Pro Rata Share of the Term Loan Amount.  The principal
        of the Term Loan shall be repaid on the following dates and in the following
        amounts:

       

      
        
          	
                  Date

                	
                  Installment
                    Amount

                
	
                  July
                    1, 2007 and the first day of each month thereafter

                	
                  $97,366.67

                


        

         

      

      The
        outstanding unpaid principal balance and all accrued and unpaid interest
        on the
        Term Loan shall be due and payable on the earliest of (i) the Maturity Date,
        (ii) the date of the acceleration of the Term Loan in accordance with the
        terms
        hereof, and (iii) the date of termination of this Agreement pursuant to
Section 8.1(c).  All principal of, interest on, and other
        amounts payable in respect of the Term Loan shall constitute
        Obligations.  Borrower may make voluntary prepayments of principal
        with respect to the Term Loan from time to time so long as: (i) Borrower
        provides Agent not less than 3 Business Days prior written notice of such
        prepayment, and (ii) the amount of any prepayment is in a minimum amount
        of
        $100,000 and integral multiples thereof, or the remaining principal balance
        of
        the Term Loan, if less.  Any such voluntary 

       

      
        
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      prepayments
        shall be applied to installments due thereunder in the inverse order of their
        maturity.  Amounts repaid under the Term Loan may not be
        reborrowed.  Any voluntary prepayment of the Term Loan made pursuant
        to this Section 2.2 shall be accompanied by accrued interest on the
        principal amount being prepaid to the date of prepayment.

       

      2.3  Borrowing
        Procedures and Settlements.

       

      (a)  Procedure
        for Borrowing.  Each Borrowing shall be made by an
        irrevocable written request by an Authorized Person delivered to
        Agent.  Unless Swing Lender is not obligated to make a Swing Loan
        pursuant to Section 2.3(b) below, such notice must be received by Agent
        no later than 10:00 a.m. (California time) on the Business Day that is the
        requested Funding Date specifying (i) the amount of such Borrowing, and (ii)
        the
        requested Funding Date, which shall be a Business Day; provided,
however, that if Swing Lender is not obligated to make a Swing Loan
        as to
        a requested Borrowing, such notice must be received by Agent no later than
        10:00
        a.m. (California time) on the Business Day prior to the date that is the
        requested Funding Date.  At Agent’s election, in lieu of delivering
        the above-described written request, any Authorized Person may give Agent
        telephonic notice of such request by the required time.  In such
        circumstances, Borrower agrees that any such telephonic notice will be confirmed
        in writing within 24 hours of the giving of such telephonic notice, but the
        failure to provide such written confirmation shall not affect the validity
        of
        the request.

       

      (b)  Making
        of Swing Loans.  In the case of a request for an Advance and
        so long as either (i) the aggregate amount of Swing Loans made since the
        last
        Settlement Date, minus the amount of Collections or payments applied to Swing
        Loans since the last Settlement Date, plus the amount of the requested Advance
        does not exceed $2,000,000, or (ii) Swing Lender, in its sole discretion,
        shall
        agree to make a Swing Loan notwithstanding the foregoing limitation, Swing
        Lender shall make an Advance in the amount of such Borrowing (any such Advance
        made solely by Swing Lender pursuant to this Section 2.3(b) being
        referred to as a “Swing Loan” and such Advances being referred to
        collectively as “Swing Loans”) available to Borrower on the Funding Date
        applicable thereto by transferring immediately available funds to Borrower’s
        Designated Account.  Each Swing Loan shall be deemed to be an Advance
        hereunder and shall be subject to all the terms and conditions applicable
        to
        other Advances, except that all payments on any Swing Loan shall be payable
        to
        Swing Lender solely for its own account.  Subject to the provisions of
Section 2.3(d)(ii), Swing Lender shall not make and shall not be
        obligated to make any Swing Loan if Swing Lender has actual knowledge that
        (i)
        one or more of the applicable conditions precedent set forth in Section 3
        will not be satisfied on the requested Funding Date for the applicable
        Borrowing, or (ii) the requested Borrowing would exceed the Availability
        on such
        Funding Date.  Swing Lender shall not otherwise be required to
        determine whether the applicable conditions precedent set forth in Section
        3 have been satisfied on the Funding Date applicable thereto prior to
        making
        any Swing Loan.  The Swing Loans shall be secured by the Agent’s
        Liens, constitute Obligations hereunder, and bear interest at the rate
        applicable from time to time to Advances that are Base Rate Loans.

       

      (c)  Making
        of Loans.

       

      (i)  In
        the
        event that Swing Lender is not obligated to make a Swing Loan, then promptly
        after receipt of a request for a Borrowing pursuant to Section 2.3(a),
        Agent shall notify the Lenders, not later than 1:00 p.m. (California time)
        on
        the Business Day immediately preceding the Funding Date applicable thereto,
        by
        telecopy, telephone, or other similar form of transmission, of the requested
        Borrowing.  Each Lender shall make the amount of such Lender’s Pro
        Rata Share of the requested Borrowing available to Agent in immediately
        available funds, to Agent’s Account, not later than 10:00 a.m. (California time)
        on the Funding Date applicable thereto.  After Agent’s receipt of the
        proceeds of such Advances, Agent shall make the proceeds thereof available
        to
        Borrower on the applicable Funding Date by transferring immediately available
        funds equal to such proceeds received by Agent to the Designated Account;
        provided, however, that, subject to the provisions of Section
        2.3(d)(ii), Agent shall not request any Lender to make, and no Lender shall


       

       

      
        
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      have
        the
        obligation to make, any Advance if Agent shall have actual knowledge that
        (1)
        one or more of the applicable conditions precedent set forth in Section 3
        will not be satisfied on the requested Funding Date for the applicable Borrowing
        unless such condition has been waived, or (2) the requested Borrowing would
        exceed the Availability on such Funding Date.

       

      (ii)  Unless
        Agent receives notice from a Lender prior to 9:00 a.m. (California time)
        on the
        date of a Borrowing, that such Lender will not make available as and when
        required hereunder to Agent for the account of Borrower the amount of that
        Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
        made or will make such amount available to Agent in immediately available
        funds
        on the Funding Date and Agent may (but shall not be so required), in reliance
        upon such assumption, make available to Borrower on such date a corresponding
        amount.  If and to the extent any Lender shall not have made its full
        amount available to Agent in immediately available funds and Agent in such
        circumstances has made available to Borrower such amount, that Lender shall
        on
        the Business Day following such Funding Date make such amount available to
        Agent, together with interest at the Defaulting Lender Rate for each day
        during
        such period.  A notice submitted by Agent to any Lender with respect
        to amounts owing under this subsection shall be conclusive, absent manifest
        error.  If such amount is so made available, such payment to Agent
        shall constitute such Lender’s Advance on the date of Borrowing for all purposes
        of this Agreement.  If such amount is not made available to Agent on
        the Business Day following the Funding Date, Agent will notify Borrower of
        such
        failure to fund and, upon demand by Agent, Borrower shall pay such amount
        to
        Agent for Agent’s account, together with interest thereon for each day elapsed
        since the date of such Borrowing, at a rate per annum equal to the interest
        rate
        applicable at the time to the Advances composing such Borrowing.  The
        failure of any Lender to make any Advance on any Funding Date shall not relieve
        any other Lender of any obligation hereunder to make an Advance on such Funding
        Date, but no Lender shall be responsible for the failure of any other Lender
        to
        make the Advance to be made by such other Lender on any Funding
        Date.

       

      (iii)  Agent
        shall not be obligated to transfer to a Defaulting Lender any payments made
        by
        Borrower to Agent for the Defaulting Lender’s benefit, and, in the absence of
        such transfer to the Defaulting Lender, Agent shall transfer any such payments
        to each other non-Defaulting Lender member of the Lender Group ratably in
        accordance with their Commitments (but only to the extent that such Defaulting
        Lender’s Advance was funded by the other members of the Lender Group) or, if so
        directed by Borrower and if no Default or Event of Default had occurred and
        is
        continuing (and to the extent such Defaulting Lender’s Advance was not funded by
        the Lender Group), retain same to be re-advanced to Borrower as if such
        Defaulting Lender had made Advances to Borrower.  Subject to the
        foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrower
        for the account of such Defaulting Lender the amount of all such payments
        received and retained by Agent for the account of such Defaulting
        Lender.  Solely for the purposes of voting or consenting to matters
        with respect to the Loan Documents, such Defaulting Lender shall be deemed
        not
        to be a “Lender” and such Lender’s Commitment shall be deemed to be
        zero.  This Section shall remain effective with respect to such Lender
        until (x) the Obligations under this Agreement shall have been declared or
        shall
        have become immediately due and payable, (y) the non-Defaulting Lenders,
        Agent,
        and Borrower shall have waived such Defaulting Lender’s default in writing, or
        (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance
        and
        pays to Agent all amounts owing by Defaulting Lender in respect
        thereof.  The operation of this Section shall not be construed to
        increase or otherwise affect the Commitment of any Lender, to relieve or
        excuse
        the performance by such Defaulting Lender or any other Lender of its duties
        and
        obligations hereunder, or to relieve or excuse the performance by Borrower
        of
        its duties and obligations hereunder to Agent or to the Lenders other than
        such
        Defaulting Lender.  Any such failure to fund by any Defaulting Lender
        shall constitute a material breach by such Defaulting Lender of this Agreement
        and shall entitle Borrower at its option, upon written notice to Agent, to
        arrange for a substitute Lender to assume the Commitment of such Defaulting
        Lender, such substitute Lender to be acceptable to Agent.  In
        connection with the arrangement of such a substitute Lender, the Defaulting
        Lender shall have no right to refuse to be replaced hereunder, and agrees
        to
        execute and deliver a completed form of Assignment and Acceptance in favor
        of
        the substitute Lender (and agrees that it shall be deemed to have executed
        and
        delivered such document if it fails to do so) subject only to being repaid
        its
        share of the outstanding 

       

       

      
        
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      Obligations
        (other than Bank Product Obligations, but including an assumption of its
        Pro
        Rata Share of the Risk Participation Liability) without any premium or penalty
        of any kind whatsoever; provided, however, that any such
        assumption of the Commitment of such Defaulting Lender shall not be deemed
        to
        constitute a waiver of any of the Lender Groups’ or Borrower’s rights or
        remedies against any such Defaulting Lender arising out of or in relation
        to
        such failure to fund.

       

      (d)  Protective
        Advances and Optional Overadvances.

       

      (i)  Agent
        hereby is authorized by Borrower and the Lenders, from time to time in Agent’s
        sole discretion, (A) after the occurrence and during the continuance of a
        Default or an Event of Default, or (B) at any time that any of the other
        applicable conditions precedent set forth in Section 3 are not satisfied,
        to make Advances to Borrower on behalf of the Lenders that Agent, in its
        Permitted Discretion deems necessary or desirable (1) to preserve or protect
        the
        Collateral, or any portion thereof, (2) to enhance the likelihood of repayment
        of the Obligations
        (other than the Bank Product Obligations), or (3) to pay any other amount
        chargeable to Borrower pursuant to the terms of this Agreement, including
        Lender
        Group Expenses and the costs, fees, and expenses described in Section 9
        (any of the Advances described in this Section 2.3(d)(i) shall be
        referred to as “Protective Advances”).

       

      (ii)  Any
        contrary provision of this Agreement notwithstanding, the Lenders hereby
        authorize Agent or Swing Lender, as applicable, and either Agent or Swing
        Lender, as applicable, may, but is not obligated to, knowingly and
        intentionally, continue to make Advances (including Swing Loans) to Borrower
        notwithstanding that an Overadvance exists or thereby would be created, so
        long
        as (A) after giving effect to such Advances, the outstanding Revolver Usage
        does
        not exceed the Borrowing Base by more than $2,000,000, and (B) after giving
        effect to such Advances, the outstanding Revolver Usage (except for and
        excluding amounts charged to the Loan Account for interest, fees, or Lender
        Group Expenses) does not exceed the Maximum Revolver Amount.  In the
        event Agent obtains actual knowledge that the Revolver Usage exceeds the
        amounts
        permitted by the immediately foregoing provisions, regardless of the amount
        of,
        or reason for, such excess, Agent shall notify the Lenders as soon as
        practicable (and prior to making any (or any additional) intentional
        Overadvances (except for and excluding amounts charged to the Loan Account
        for
        interest, fees, or Lender Group Expenses) unless Agent determines that prior
        notice would result in imminent harm to the Collateral or its value), and
        the
        Lenders with Revolver Commitments thereupon shall, together with Agent, jointly
        determine the terms of arrangements that shall be implemented with Borrower
        intended to reduce, within a reasonable time, the outstanding principal amount
        of the Advances to Borrower to an amount permitted by the preceding
        sentence.  In such circumstances, if any Lender with a Revolver
        Commitment objects to the proposed terms of reduction or repayment of any
        Overadvance, the terms of reduction or repayment thereof shall be implemented
        according to the determination of the Required Lenders.  Each Lender
        with a Revolver Commitment shall be obligated to settle with Agent as provided
        in Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any
        unintentional Overadvances by Agent reported to such Lender, any intentional
        Overadvances made as permitted under this Section 2.3(d)(ii), and any
        Overadvances resulting from the charging to the Loan Account of interest,
        fees,
        or Lender Group Expenses.

       

      (iii)  Each
        Protective Advance and each Overadvance shall be deemed to be an Advance
        hereunder, except that prior to Settlement therefor all payments on the
        Protective Advances shall be payable to Agent solely for its own
        account.  The Protective Advances and Overadvances shall be repayable
        on demand, secured by the Agent’s Liens, constitute Obligations hereunder, and
        bear interest at the rate applicable from time to time to Advances that are
        Base
        Rate Loans.  The provisions of this Section 2.3(d) are for the
        exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended
        to benefit Borrower in any way.

       

      (e)  Settlement.  It
        is agreed that each Lender’s funded portion of the Advances is intended by the
        Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
        Advances.  Such agreement notwithstanding, Agent, Swing Lender, and
        the other Lenders agree (which agreement shall 

       

      
        
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      not
        be
        for the benefit of Borrower) that in order to facilitate the administration
        of
        this Agreement and the other Loan Documents, settlement among the Lenders
        as to
        the Advances, the Swing Loans, and the Protective Advances shall take place
        on a
        periodic basis in accordance with the following provisions:

       

      (i)  Agent
        shall request settlement (“Settlement”) with the Lenders on a weekly
        basis, or on a more frequent basis if so determined by Agent (1) on behalf
        of
        Swing Lender, with respect to the outstanding Swing Loans, (2) for itself,
        with
        respect to the outstanding Protective Advances, and (3) with respect to
        Borrower’s or its Subsidiaries’ Collections or payments received, as to each by
        notifying the Lenders by telecopy, telephone, or other similar form of
        transmission, of such requested Settlement, no later than 2:00 p.m. (California
        time) on the Business Day immediately prior to the date of such requested
        Settlement (the date of such requested Settlement being the “Settlement
        Date”).  Such notice of a Settlement Date shall include a summary
        statement of the amount of outstanding Advances, Swing Loans, and Protective
        Advances for the period since the prior Settlement Date.  Subject to
        the terms and conditions contained herein (including Section
        2.3(c)(iii)):  (y) if a Lender’s balance of the Advances
        (including Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata
        Share of the Advances (including Swing Loans and Protective Advances) as
        of a
        Settlement Date, then Agent shall, by no later than 12:00 p.m. (California
        time)
        on the Settlement Date, transfer in immediately available funds to a Deposit
        Account of such Lender (as such Lender may designate), an amount such that
        each
        such Lender shall, upon receipt of such amount, have as of the Settlement
        Date,
        its Pro Rata Share of the Advances (including Swing Loans and Protective
        Advances), and (z) if a Lender’s balance of the Advances (including Swing Loans
        and Protective Advances) is less than such Lender’s Pro Rata Share of the
        Advances (including Swing Loans and Protective Advances) as of a Settlement
        Date, such Lender shall no later than 12:00 p.m. (California time) on the
        Settlement Date transfer in immediately available funds to the Agent’s Account,
        an amount such that each such Lender shall, upon transfer of such amount,
        have
        as of the Settlement Date, its Pro Rata Share of the Advances (including
        Swing
        Loans and Protective Advances).  Such amounts made available to Agent
        under clause (z) of the immediately preceding sentence shall be applied against
        the amounts of the applicable Swing Loans or Protective Advances and, together
        with the portion of such Swing Loans or Protective Advances representing
        Swing
        Lender’s Pro Rata Share thereof, shall constitute Advances of such
        Lenders.  If any such amount is not made available to Agent by any
        Lender on the Settlement Date applicable thereto to the extent required by
        the
        terms hereof, Agent shall be entitled to recover for its account such amount
        on
        demand from such Lender together with interest thereon at the Defaulting
        Lender
        Rate.

       

      (ii)  In
        determining whether a Lender’s balance of the Advances, Swing Loans, and
        Protective Advances is less than, equal to, or greater than such Lender’s Pro
        Rata Share of the Advances, Swing Loans, and Protective Advances as of a
        Settlement Date, Agent shall, as part of the relevant Settlement, apply to
        such
        balance the portion of payments actually received in good funds by Agent
        with
        respect to principal, interest, fees payable by Borrower and allocable to
        the
        Lenders hereunder, and proceeds of Collateral.  To the extent that a
        net amount is owed to any such Lender after such application, such net amount
        shall be distributed by Agent to that Lender as part of such next
        Settlement.

       

      (iii)  Between
        Settlement Dates, Agent, to the extent Protective Advances or Swing Loans
        are
        outstanding, may pay over to Agent or Swing Lender, as applicable, any
        Collections or payments received by Agent that in accordance with the terms
        of
        this Agreement would be applied to the reduction of the Advances, for
        application to the Protective Advances or Swing Loans.  Between
        Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans
        are
        outstanding, may pay over to Swing Lender any Collections or payments received
        by Agent, that in accordance with the terms of this Agreement would be applied
        to the reduction of the Advances, for application to Swing Lender’s Pro Rata
        Share of the Advances.  If, as of any Settlement Date, Collections or
        payments of Borrower or its Subsidiaries received since the then immediately
        preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of
        the Advances other than to Swing Loans, as provided for in the previous
        sentence, Swing Lender shall pay to Agent for the accounts of the Lenders,
        and
        Agent shall pay to the Lenders, to be applied to the outstanding Advances
        of
        such Lenders, an amount such that each Lender shall, upon receipt of such
        amount, have, as of 

       

      
        
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      such
        Settlement Date, its Pro Rata Share of the Advances.  During the
        period between Settlement Dates, Swing Lender with respect to Swing Loans,
        Agent
        with respect to Protective Advances, and each Lender (subject to the effect
        of
        agreements between Agent and individual Lenders) with respect to the Advances
        other than Swing Loans and Protective Advances, shall be entitled to interest
        at
        the applicable rate or rates payable under this Agreement on the daily amount
        of
        funds employed by Swing Lender, Agent, or the Lenders, as
        applicable.

       

      (f)  Notation.  Agent
        shall record on its books the principal amount of the Advances (or portion
        of
        the Term Loan, as applicable) owing to each Lender, including the Swing Loans
        owing to Swing Lender, and Protective Advances owing to Agent, and the interests
        therein of each Lender, from time to time and such records shall, absent
        manifest error, conclusively be presumed to be correct and
        accurate.

       

      (g)  Lenders’
        Failure to Perform.  All Advances (other than Swing Loans and
        Protective Advances) shall be made by the Lenders contemporaneously and in
        accordance with their Pro Rata Shares.  It is understood that (i) no
        Lender shall be responsible for any failure by any other Lender to perform
        its
        obligation to make any Advance (or other extension of credit) hereunder,
        nor
        shall any Commitment of any Lender be increased or decreased as a result
        of any
        failure by any other Lender to perform its obligations hereunder, and (ii)
        no
        failure by any Lender to perform its obligations hereunder shall excuse any
        other Lender from its obligations hereunder.

       

      2.4  Payments.

       

      (a)  Payments
        by Borrower.

       

      (i)  Except
        as
        otherwise expressly provided herein, all payments by Borrower shall be made
        to
        Agent’s Account for the account of the Lender Group and shall be made in
        immediately available funds, no later than 11:00 a.m. (California time) on
        the
        date specified herein.  Any payment received by Agent later than 11:00
        a.m. (California time) shall be deemed to have been received on the following
        Business Day and any applicable interest or fee shall continue to accrue
        until
        such following Business Day.

       

      (ii)  Unless
        Agent receives notice from Borrower prior to the date on which any payment
        is
        due to the Lenders that Borrower will not make such payment in full as and
        when
        required, Agent may assume that Borrower has made (or will make) such payment
        in
        full to Agent on such date in immediately available funds and Agent may (but
        shall not be so required), in reliance upon such assumption, distribute to
        each
        Lender on such due date an amount equal to the amount then due such
        Lender.  If and to the extent Borrower does not make such payment in
        full to Agent on the date when due, each Lender severally shall repay to
        Agent
        on demand such amount distributed to such Lender, together with interest
        thereon
        at the Defaulting Lender Rate for each day from the date such amount is
        distributed to such Lender until the date repaid.

       

      (b)  Apportionment
        and Application.

       

      (i)  So
        long
        as no Application Event has occurred and is continuing and except as otherwise
        provided with respect to Defaulting Lenders, all principal and interest payments
        shall be apportioned ratably among the Lenders (according to the unpaid
        principal balance of the Obligations to which such payments relate held by
        each
        Lender) and all payments of fees and expenses (other than fees or expenses
        that
        are for Agent’s separate account) shall be apportioned ratably among the Lenders
        having a Pro Rata Share of the type of Commitment or Obligation to which
        a
        particular fee or expense relates.  All payments to be made hereunder
        by Borrower shall be remitted to Agent and all (subject to Section 2.4(b)(iv)
        hereof) such payments, and all proceeds of Collateral received by Agent,
        shall
        be applied, so long as no Application Event has occurred and is continuing,
        to
        reduce the balance of the Advances outstanding and, thereafter, to Borrower
        (to
        be wired to the Designated Account) or such other Person entitled thereto
        under
        applicable law.

       

      
        
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      (ii)  At
        any
        time that an Application Event has occurred and is continuing and except
        as
        otherwise provided with respect to Defaulting Lenders, all payments remitted
        to
        Agent and all proceeds of Collateral received by Agent shall be applied as
        follows:

       

      (A)  first,
        to pay any Lender Group Expenses (including cost or expense reimbursements)
        or
        indemnities then due to Agent under the Loan Documents, until paid in
        full,

       

      (B)  second,
        to pay any fees or premiums then due to Agent under the Loan Documents until
        paid in full,

       

      (C)  third,
        to pay interest due in respect of all Protective Advances until paid in
        full,

       

      (D)  fourth,
        to pay the principal of all Protective Advances until paid in full,

       

      (E)  fifth,
        ratably to pay any Lender Group Expenses (including cost or expense
        reimbursements) or indemnities then due to any of the Lenders under the Loan
        Documents, until paid in full,

       

      (F)  sixth,
        ratably to pay any fees or premiums then due to any of the Lenders under
        the
        Loan Documents until paid in full,

       

      (G)  seventh,
        ratably to pay interest due in respect of the Advances (other than Protective
        Advances), the Swing Loans, and the Term Loan until paid in full,

       

      (H)  eighth,
        ratably (i) to pay the principal of all Swing Loans until paid in full, (ii)
        to
        pay the principal of all Advances until paid in full, (iii) to Agent, to
        be held
        by Agent, for the ratable benefit of Issuing Lender and those Lenders having
        a
        Revolver Commitment, as cash collateral in an amount up to 105% of the Letter
        of
        Credit Usage, (iv) to Agent, to be held by Agent, for the benefit of the
        Bank
        Product Providers, as cash collateral in an amount up to the amount of the
        Bank
        Product Reserve established prior to the occurrence of, and not in contemplation
        of, the subject Application Event, and (v) to pay the outstanding principal
        balance of the Term Loan (in the inverse order of the maturity of the
        installments due thereunder) until the Term Loan is paid in full,

       

      (I)  ninth,
        to pay any other Obligations (including the provision of amounts to Agent,
        to be
        held by Agent, for the benefit of the Bank Product Providers, as cash collateral
        in an amount up to the amount determined by Agent in its Permitted Discretion
        as
        the amount necessary to secure Borrower’s and its Subsidiaries’ obligations in
        respect of Bank Products), and

       

      (J)  tenth,
        to Borrower (to be wired to the Designated Account) or such other Person
        entitled thereto under applicable law.

       

      (iii)  Agent
        promptly shall distribute to each Lender, pursuant to the applicable wire
        instructions received from each Lender in writing, such funds as it may be
        entitled to receive, subject to a Settlement delay as provided in Section
        2.3(e).

       

      (iv)  In
        each
        instance, so long as no Application Event has occurred and is continuing,
        Section 2.4(b)(i) shall not apply to any payment made by Borrower to
        Agent and specified by Borrower to be for the payment of specific Obligations
        then due and payable (or prepayable) under any provision of this
        Agreement.

       

       

      
        
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      (v)  For
        purposes of Section 2.4(b)(ii), “paid in full” means payment of all
        amounts owing under the Loan Documents according to the terms thereof, including
        loan fees, service fees, professional fees, interest (and specifically including
        interest accrued after the commencement of any Insolvency Proceeding), default
        interest, interest on interest, and expense reimbursements, whether or not
        any
        of the foregoing would be or is allowed or disallowed in whole or in part
        in any
        Insolvency Proceeding.

       

      (vi)  In
        the
        event of a direct conflict between the priority provisions of this Section
        2.4 and any other provision contained in any other Loan Document, it is
        the
        intention of the parties hereto that such provisions be read together and
        construed, to the fullest extent possible, to be in concert with each
        other.  In the event of any actual, irreconcilable conflict that
        cannot be resolved as aforesaid, the terms and provisions of this Section
        2.4 shall control and govern.

       

      (c)  Mandatory
        Prepayments.

       

      (i)  If,
        as of
        the last day of any month, (A) the outstanding principal balance of the Term
        Loan on such date exceeds (B) (I) the product of (x) 0.70 times (y) TTM
        Recurring Revenues calculated as of the last month for which financial
        statements have most recently been delivered pursuant to Section 5.3,
        less  (II) the outstanding balance of Maintenance Advances on such
        date (such difference being referred to as the “Loan Limit” and such excess
        being referred to as the “Limiter Excess”), then Borrower shall immediately
        prepay the Obligations in accordance with Section 2.4(d)(ii) in an
        aggregate amount equal to the Limiter Excess.

       

      (ii)  Immediately
        upon the receipt by Borrower or any of its Subsidiaries of the proceeds of
        any
        voluntary or involuntary sale or disposition by Borrower or any of its
        Subsidiaries of property or assets (including casualty losses or condemnations
        and sales or dispositions which qualify as Permitted Dispositions under clause
        (e) of the definition of Permitted Dispositions, but excluding sales or
        dispositions which qualify as Permitted Dispositions under clauses (a), (b),
        (c), (d), or (f) of the definition of Permitted Dispositions), Borrower shall
        prepay the outstanding principal amount of the Obligations in accordance
        with
Section 2.4(d)(ii) in an amount equal to (1) 50% of the Net Cash
        Proceeds received by Borrower in connection with any sale or disposition
        contemplated under clause (e) of the definition of Permitted Dispositions,
        and
        (2) 100% of the Net Cash Proceeds (including condemnation awards and payments
        in
        lieu thereof) received by such Person in connection with any other such sales
        or
        dispositions, but in either case only to the extent that the aggregate amount
        of
        Net Cash Proceeds received (and not paid to Agent as a prepayment of the
        Obligations) by Borrower or its Subsidiaries for all such sales or dispositions
        shall exceed $50,000 in any fiscal year; provided that, so long as (A) no
        Default or Event of Default shall have occurred and is continuing, (B) Borrower
        shall have given Agent prior written notice of Borrower’s intention to apply
        such monies to the costs of replacement of the properties or assets that
        are the
        subject of such sale or disposition or the cost of purchase or construction
        of
        other assets useful in the business of Borrower or its Subsidiaries, (C)
        the
        monies are held in a cash collateral account in which Agent has a perfected
        first-priority security interest, and (D) Borrower or its Subsidiaries, as
        applicable, complete such replacement, purchase, or construction within 180
        days
        after the initial receipt of such monies, Borrower and its Subsidiaries shall
        have the option to apply such monies to the costs of replacement of the property
        or assets that are the subject of such sale or disposition or the costs of
        purchase or construction of other assets useful in the business of Borrower
        and
        its Subsidiaries unless and to the extent that such applicable period shall
        have
        expired without such replacement, purchase or construction being made or
        completed, in which case, any amounts remaining in the cash collateral account
        shall be paid to Agent and applied in accordance with Section
        2.4(d)(ii).  Nothing contained in this Section
        2.4(c)(ii) shall permit Borrower or any of its Subsidiaries to sell or
        otherwise dispose of any property or assets other than in accordance with
        Section 6.4.

       

      (iii)  Immediately
        upon the receipt by Borrower or any of its Subsidiaries of any Extraordinary
        Receipts, Borrower shall prepay the outstanding principal amount of the
        Obligations in 

       

       

      
        
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      accordance
        with Section 2.4(d)(ii) in an amount equal to 100% of such Extraordinary
        Receipts, net of any reasonable expenses incurred in collecting such
        Extraordinary Receipts.

       

      (iv)  Immediately
        upon the issuance or incurrence by Borrower or any of its Subsidiaries of
        any
        Indebtedness (other than Indebtedness permitted under
Section 6.1(a), (b), (c), (d), (e),
        or (f) ) or the issuance by Borrower or any of its Subsidiaries of any
        shares of its or their Stock (other than in the event that Borrower or any
        Subsidiary of Borrower forms any Subsidiary in accordance with the terms
        hereof,
        the issuance by such Subsidiary of Stock to Borrower or such Subsidiary,
        as
        applicable), Borrower shall prepay the outstanding principal amount of the
        Obligations in accordance with Section 2.4(d)(ii) in an amount equal to
        100% of the Net Cash Proceeds received by such Person in connection with
        such
        issuance or incurrence of Indebtedness and the Applicable Percentage of the
        Net
        Cash Proceeds received by such Person in connection with such issuance of
        Stock.  For purposes of this clause (iv) “Applicable Percentage”
means: (A) 25% of the first $1,000,000 of Net Cash Proceeds from Stock issued
        since the Closing Date, (B) 50% of the next $4,000,000 of Net Cash Proceeds
        from
        Stock issued since the Closing Date, and (C) 75% of any other Net Cash Proceeds
        from Stock issued since the Closing Date.  The provisions of this
Section 2.4(c)(iv) shall not be deemed to be implied consent to any such
        issuance or incurrence otherwise prohibited by the terms and conditions of
        this
        Agreement.

       

      (v)  Within
        10
        days of delivery to Agent and the Lenders of audited annual financial statements
        pursuant to Section 5.3, commencing with the delivery to Agent and the
        Lenders of the financial statements for Borrower’s fiscal year ended December
        31, 2007 or, if such financial statements are not delivered to Agent and
        the
        Lenders on the date such statements are required to be delivered pursuant
        to
Section 5.3, 10 days after the date such statements are required to
        be delivered to Agent and the Lenders pursuant to Section 5.3,
        Borrower shall prepay the outstanding principal amount of the Obligations
        in
        accordance with Section 2.4(d) in an amount equal to 50% of the
        Excess Cash Flow of Borrower and its Subsidiaries for such fiscal
        year.

       

      (d)  Application
        of Payments.

       

      (i)  [intentionally
        deleted]

       

      (ii)  Each
        prepayment pursuant to Section 2.4(c) above shall (A) so long as no
        Application Event shall have occurred and be continuing, be applied,
first, to the outstanding principal amount of the Term Loan until paid
        in full, second, to the outstanding principal amount of the Advances
        (with a corresponding permanent reduction in the Maximum Revolver Amount
        in the
        case of any prepayments made pursuant to Section 2.4(c)(ii)), until paid
        in full, and third, to cash collateralize the Letters of Credit in an
        amount equal to 105% of the then extant Letter of Credit Usage (with a
        corresponding permanent reduction in the Maximum Revolver Amount in the case
        of
        any prepayments made pursuant to Section 2.4(c)(ii)), and (B) if an
        Application Event shall have occurred and be continuing, be applied in the
        manner set forth in Section 2.4(b)(ii).  Each prepayment
        of the Term Loan pursuant to Sections 2.4(c)(i), 2.4(c)(ii),
2.4(c)(iii), and 2.4(c)(iv) shall be applied against the remaining
        installments of principal of the Term Loan in the inverse order of
        maturity.  Each prepayment of the Term Loan pursuant to Section
        2.4(c)(v) shall be applied against the remaining installments of principal
        of the Term Loan on a pro rata basis.

       

      2.5  Overadvances.  If,
        at any time or for any reason, the amount of Obligations owed by Borrower
        to the
        Lender Group pursuant to Section 2.1 or Section 2.12 is greater
        than any of the limitations set forth in Section 2.1 or Section
        2.12, as applicable (an “Overadvance”), Borrower immediately shall
        pay to Agent, in cash, the amount of such excess, which amount shall be used
        by
        Agent to reduce the Obligations in accordance with the priorities set forth
        in
Section 2.4(b).  Borrower promises to pay the Obligations
        (including principal, interest, fees, costs, and expenses) in Dollars in
        full on
        the Maturity Date or, if earlier, on the date on which the Obligations are
        declared due and payable pursuant to the terms of this Agreement.

       

       

      
        
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      2.6  Interest
        Rates and Letter of Credit Fee:  Rates, Payments, and
        Calculations.

       

      (a)  Interest
        Rates.  Except as provided in Section 2.6(c), all
        Obligations (except for undrawn Letters of Credit and except for Bank Product
        Obligations) that have been charged to the Loan Account pursuant to the terms
        hereof shall bear interest on the Daily Balance thereof at a per annum rate
        equal to the Base Rate plus the Base Rate Margin.

       

      To
        the
        extent that interest accrued hereunder at the rate otherwise applicable
        hereunder would be less than the foregoing minimum daily rate, the interest
        rate
        chargeable hereunder for such day automatically shall be deemed increased
        to the
        minimum rate.

       

      (b)  Letter
        of Credit Fee.  Borrower shall pay Agent (for the ratable
        benefit of the Lenders with a Revolver Commitment, subject to any agreements
        between Agent and individual Lenders), a Letter of Credit fee (in addition
        to
        the charges, commissions, fees, and costs set forth in Section 2.12(e))
        which shall accrue at a rate equal to 4.00% per annum times the Daily
        Balance of the undrawn amount of all outstanding Letters of Credit.

       

      (c)  Default
        Rate.  Upon the occurrence and during the continuation of an
        Event of Default (and at the election of Agent or the Required
        Lenders),

      (i)  all
        Obligations (except for undrawn Letters of Credit and except for Bank Product
        Obligations) that have been charged to the Loan Account pursuant to the terms
        hereof shall bear interest on the Daily Balance thereof at a per annum rate
        equal to 2 percentage points above the per annum rate otherwise applicable
        hereunder, and

       

      (ii)  the
        Letter of Credit fee provided for in Section 2.6(b) shall be increased to
        2 percentage points above the per annum rate otherwise applicable
        hereunder.

       

      (d)  Payment.  Except
        as provided to the contrary in Section 2.11, interest, Letter of Credit
        fees, and all other fees payable hereunder shall be due and payable, in arrears,
        on the first day of each month at any time that Obligations or Commitments
        are
        outstanding.  Borrower hereby authorizes Agent, from time to time
        without prior notice to Borrower, to charge all interest and fees (when due
        and
        payable), all Lender Group Expenses (as and when incurred), all charges,
        commissions, fees, and costs provided for in Section 2.12(e) (as and when
        accrued or incurred), all fees and costs provided for in
Section 2.11 (as and when accrued or incurred), and all other
        payments as and when due and payable under any Loan Document (including the
        amounts due and payable with respect to the Term Loan and including any amounts
        due and payable to the Bank Product Providers in respect of Bank Products
        up to
        the amount of the Bank Product Reserve) to the Loan Account, which amounts
        thereafter shall constitute Advances hereunder and shall accrue interest
        at the
        rate then applicable to Advances that are Base Rate Loans.  Any
        interest not paid when due shall be compounded by being charged to the Loan
        Account and shall thereafter constitute Advances hereunder and shall accrue
        interest at the rate then applicable to Advances that are Base Rate
        Loans.

       

      (e)  Computation.  All
        interest and fees chargeable under the Loan Documents shall be computed on
        the
        basis of a 360 day year for the actual number of days elapsed.  In the
        event the Base Rate is changed from time to time hereafter, the rates of
        interest hereunder based upon the Base Rate automatically and immediately
        shall
        be increased or decreased by an amount equal to such change in the Base
        Rate.

       

      (f)  Intent
        to Limit Charges to Maximum Lawful Rate.  In no event shall
        the interest rate or rates payable under this Agreement, plus any other amounts
        paid in connection herewith, exceed the highest rate permissible under any
        law
        that a court of competent jurisdiction shall, in a final determination, deem
        applicable.  Borrower and the Lender Group, in executing and
        delivering this Agreement, intend legally to agree upon the rate or rates
        of
        interest and manner of payment stated within it; provided,
however, that, 

       

       

      
        
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      anything
        contained herein to the contrary notwithstanding, if said rate or rates of
        interest or manner of payment exceeds the maximum allowable under applicable
        law, then, ipso facto, as of the date of this Agreement, Borrower is
        and shall be liable only for the payment of such maximum as allowed by law,
        and
        payment received from Borrower in excess of such legal maximum, whenever
        received, shall be applied to reduce the principal balance of the Obligations
        to
        the extent of such excess.

       

      2.7  Cash
        Management.

       

      (a)  Borrower
        shall and shall cause each of its Subsidiaries to (i) establish and maintain
        cash management services of a type and on terms satisfactory to Agent at
        one or
        more of the banks set forth on Schedule 2.7(a) (each a “Cash
        Management Bank”), and shall request in writing and otherwise take such
        reasonable steps to ensure that all of its and its Subsidiaries’ Account Debtors
        forward payment of the amounts owed by them directly to such Cash Management
        Bank, and (ii) deposit or cause to be deposited promptly, and in any event
        no
        later than the first Business Day after the date of receipt thereof, all
        of
        their Collections (including those sent directly by their Account Debtors
        to
        Borrower or one of its Subsidiaries) into a bank account in Agent’s name (a
“Cash Management Account”) at one of the Cash Management
        Banks.  Except as provided in Schedule 5.19, Borrower shall
        establish the Cash Management Accounts in accordance with the foregoing terms
        of
        this Section 2.7 (a) on or before the Closing Date.

       

      (b)  Each
        Cash
        Management Bank shall establish and maintain Cash Management Agreements with
        Agent and Borrower.  Each such Cash Management Agreement shall
        provide, among other things, that (i) the Cash Management Bank will comply
        with
        any instructions originated by Agent directing the disposition of the funds
        in
        such Cash Management Account without further consent by Borrower or its
        Subsidiaries, as applicable, (ii) the Cash Management Bank has no rights
        of
        setoff or recoupment or any other claim against the applicable Cash Management
        Account other than for payment of its service fees and other charges directly
        related to the administration of such Cash Management Account and for returned
        checks or other items of payment, and (iii) the Cash Management Bank will
        forward, by daily sweep, all amounts in the applicable Cash Management Account
        to the Agent’s Account.

       

      (c)  So
        long
        as no Default or Event of Default has occurred and is continuing, Borrower
        may
        amend Schedule 2.7(a) to add or replace a Cash Management Bank or Cash
        Management Account; provided, however, that (i) such prospective
        Cash Management Bank shall be reasonably satisfactory to Agent, and (ii)
        prior
        to the time of the opening of such Cash Management Account, Borrower (or
        its
        Subsidiary, as applicable) and such prospective Cash Management Bank shall
        have
        executed and delivered to Agent a Cash Management Agreement.  Borrower
        (or its Subsidiaries, as applicable) shall close any of its Cash Management
        Accounts (and establish replacement cash management accounts in accordance
        with
        the foregoing sentence) promptly and in any event within 30 days of notice
        from
        Agent that the creditworthiness of any Cash Management Bank is no longer
        acceptable in Agent’s reasonable judgment, or as promptly as practicable and in
        any event within 60 days of notice from Agent that the operating performance,
        funds transfer, or availability procedures or performance of the Cash Management
        Bank with respect to Cash Management Accounts or Agent’s liability under any
        Cash Management Agreement with such Cash Management Bank is no longer acceptable
        in Agent’s reasonable judgment.

       

      (d)  Each
        Cash
        Management Account shall be a cash collateral account subject to a Control
        Agreement.

       

      2.8  Crediting
        Payments; Clearance Charge.  The receipt
        of any payment item by Agent (whether from transfers to Agent by the Cash
        Management Banks pursuant to the Cash Management Agreements or otherwise)
        shall
        not be considered a payment on account unless such payment item is a wire
        transfer of immediately available federal funds made to the Agent’s Account or
        unless and until such payment item is honored when presented for
        payment.  Should any payment item not be honored when presented for
        payment, then Borrower shall be deemed not to have made such payment and
        interest shall be calculated 

       

       

      
        
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      accordingly.  Anything
        to the contrary contained herein notwithstanding, any payment item shall
        be
        deemed received by Agent only if it is received into the Agent’s Account on a
        Business Day on or before 11:00 a.m. (California time).  If any
        payment item is received into the Agent’s Account on a non-Business Day or after
        11:00 a.m. (California time) on a Business Day, it shall be deemed to have
        been
        received by Agent as of the opening of business on the immediately following
        Business Day.  From and after the Closing Date, Agent shall be
        entitled to charge Borrower for one Business Day of ‘clearance’ at the rate then
        applicable under Section 2.6 to Advances that are Base Rate Loans on all
        Collections that are received by Borrower and its Subsidiaries (regardless
        of
        whether forwarded by the Cash Management Banks to Agent).  This
        across-the-board one Business Day clearance charge on all Collections of
        Borrower and its Subsidiaries is acknowledged by the parties to constitute
        an
        integral aspect of the pricing of the financing of Borrower and shall apply
        irrespective of whether or not there are any outstanding monetary Obligations;
        the effect of such clearance charge being the equivalent of charging interest
        on
        such Collections through the completion of a period ending one Business Day
        after the receipt thereof.  The parties acknowledge and agree that the
        economic benefit of the foregoing provisions of this Section 2.8 shall be
        for the exclusive benefit of Agent.

       

      2.9  Designated
        Account.  Agent is authorized to make
        the Advances and the Term Loan, and Issuing Lender is authorized to issue
        the
        Letters of Credit, under this Agreement based upon telephonic or other
        instructions received from anyone purporting to be an Authorized Person or,
        without instructions, if pursuant to Section 2.6(d).  Borrower
        agrees to establish and maintain the Designated Account with the Designated
        Account Bank for the purpose of receiving the proceeds of the Advances requested
        by Borrower and made by Agent or the Lenders hereunder.  Unless
        otherwise agreed by Agent and Borrower, any Advance, Protective Advance,
        or
        Swing Loan requested by Borrower and made by Agent or the Lenders hereunder
        shall be made to the Designated Account.

       

      2.10  Maintenance
        of Loan Account; Statements of
        Obligations.  Agent shall maintain an
        account on its books in the name of Borrower (the “Loan Account”) on
        which Borrower will be charged with the Term Loan, all Advances (including
        Protective Advances and Swing Loans) made by Agent, Swing Lender, or the
        Lenders
        to Borrower or for Borrower’s account, the Letters of Credit issued by Issuing
        Lender for Borrower’s account, and with all other payment Obligations hereunder
        or under the other Loan Documents (except for Bank Product Obligations),
        including, accrued interest, fees and expenses, and Lender Group
        Expenses.  In accordance with Section 2.8, the Loan Account
        will be credited with all payments received by Agent from Borrower or for
        Borrower’s account, including all amounts received in the Agent’s Account from
        any Cash Management Bank.  Agent shall render statements regarding the
        Loan Account to Borrower, including principal, interest, fees, and including
        an
        itemization of all charges and expenses constituting Lender Group Expenses
        owing, and such statements, absent manifest error, shall be conclusively
        presumed to be correct and accurate and constitute an account stated between
        Borrower and the Lender Group unless, within 30 days after receipt thereof
        by
        Borrower, Borrower shall deliver to Agent written objection thereto describing
        the error or errors contained in any such statements.

       

      2.11  Fees.  Borrower
        shall pay to Agent, as and when due and payable under the terms of the Fee
        Letter, the fees set forth in the Fee Letter.

       

      2.12  Letters
        of Credit.

       

      (a)  Subject
        to the terms and conditions of this Agreement, the Issuing Lender agrees
        to
        issue letters of credit for the account of Borrower (each, an “L/C”) or
        to purchase participations or execute indemnities or reimbursement obligations
        (each such undertaking, an “L/C Undertaking”) with respect to letters of
        credit issued by an Underlying Issuer (as of the Closing Date, the prospective
        Underlying Issuer is to be Wells Fargo) for the account of
        Borrower.  Each request for the issuance of a Letter of Credit, or the
        amendment, renewal, or extension of any outstanding Letter of Credit, shall
        be
        made in writing by an Authorized Person and delivered to the Issuing Lender
        and
        Agent via hand delivery, telefacsimile, or other electronic method of
        transmission reasonably in advance of the requested date of issuance, amendment,
        

       

      
        
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      renewal,
        or extension.  Each such request shall be in form and substance
        satisfactory to the Issuing Lender in its Permitted Discretion and shall
        specify
        (i) the amount of such Letter of Credit, (ii) the date of issuance, amendment,
        renewal, or extension of such Letter of Credit, (iii) the expiration date
        of
        such Letter of Credit, (iv) the name and address of the beneficiary thereof
        (or
        the beneficiary of the Underlying Letter of Credit, as applicable), and (v)
        such
        other information (including, in the case of an amendment, renewal, or
        extension, identification of the outstanding Letter of Credit to be so amended,
        renewed, or extended) as shall be necessary to prepare, amend, renew, or
        extend
        such Letter of Credit.  If requested by the Issuing Lender, Borrower
        also shall be an applicant under the application with respect to any Underlying
        Letter of Credit that is to be the subject of an L/C Undertaking.  The
        Issuing Lender shall have no obligation to issue a Letter of Credit if any
        of
        the following would result after giving effect to the issuance of such requested
        Letter of Credit:

       

      (i)  the
        Letter of Credit Usage would exceed the Borrowing Base less the
        outstanding amount of Advances, or

       

      (ii)  the
        Letter of Credit Usage would exceed $2,000,000, or

       

      (iii)  the
        Letter of Credit Usage would exceed the Maximum Revolver Amount less
the outstanding amount of Advances less the Bank Product Reserve,
        and less the aggregate amount of reserves, if any, established by Agent
        under Section 2.1(b).

       

      Borrower
        and the Lender Group acknowledge and agree that certain Underlying Letters
        of
        Credit may be issued to support letters of credit that already are outstanding
        as of the Closing Date.  Each Letter of Credit (and corresponding
        Underlying Letter of Credit) shall be in form and substance acceptable to
        the
        Issuing Lender (in the exercise of its Permitted Discretion), including the
        requirement that the amounts payable thereunder must be payable in
        Dollars.  If Issuing Lender is obligated to advance funds under a
        Letter of Credit, Borrower immediately shall reimburse such L/C Disbursement
        to
        Issuing Lender by paying to Agent an amount equal to such L/C Disbursement
        not
        later than 11:00 a.m., California time, on the date that such L/C Disbursement
        is made, if Borrower shall have received written or telephonic notice of
        such
        L/C Disbursement prior to 10:00 a.m., California time, on such date, or,
        if such
        notice has not been received by Borrower prior to such time on such date,
        then
        not later than 11:00 a.m., California time, on the Business Day that Borrower
        receives such notice, if such notice is received prior to 10:00 a.m., California
        time, on the date of receipt, and, in the absence of such reimbursement,
        the L/C
        Disbursement immediately and automatically shall be deemed to be an Advance
        hereunder and, initially, shall bear interest at the rate then applicable
        to
        Advances that are Base Rate Loans.  To the extent an L/C Disbursement
        is deemed to be an Advance hereunder, Borrower’s obligation to reimburse such
        L/C Disbursement shall be discharged and replaced by the resulting
        Advance.  Promptly following receipt by Agent of any payment from
        Borrower pursuant to this paragraph, Agent shall distribute such payment
        to the
        Issuing Lender or, to the extent that Lenders have made payments pursuant
        to
Section 2.12(b) to reimburse the Issuing Lender, then to such Lenders and
        the Issuing Lender as their interests may appear.

       

      (b)  Promptly
        following receipt of a notice of L/C Disbursement pursuant to
Section 2.12(a), each Lender with a Revolver Commitment agrees to
        fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing
        subsection on the same terms and conditions as if Borrower had requested
        such
        Advance and Agent shall promptly pay to Issuing Lender the amounts so received
        by it from the Lenders.  By the issuance of a Letter of Credit (or an
        amendment to a Letter of Credit increasing the amount thereof) and without
        any
        further action on the part of the Issuing Lender or the Lenders with Revolver
        Commitments, the Issuing Lender shall be deemed to have granted to each Lender
        with a Revolver Commitment, and each Lender with a Revolver Commitment shall
        be
        deemed to have purchased, a participation in each Letter of Credit, in an
        amount
        equal to its Pro Rata Share of the Risk Participation Liability of such Letter
        of Credit, and each such Lender agrees to pay to Agent, for the account of
        the
        Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing
        Lender under such Letter of Credit.  In consideration and in
        furtherance of the foregoing, each Lender with a Revolver Commitment hereby
        

       

       

      
        
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      absolutely
        and unconditionally agrees to pay to Agent, for the account of the Issuing
        Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by the
        Issuing Lender and not reimbursed by Borrower on the date due as provided
        in
Section 2.12(a), or of any reimbursement payment required to be refunded
        to Borrower for any reason.  Each Lender with a Revolver Commitment
        acknowledges and agrees that its obligation to deliver to Agent, for the
        account
        of the Issuing Lender, an amount equal to its respective Pro Rata Share of
        each
        L/C Disbursement made by the Issuing Lender pursuant to this Section
        2.12(b) shall be absolute and unconditional and such remittance shall be
        made notwithstanding the occurrence or continuation of an Event of Default
        or
        Default or the failure to satisfy any condition set forth in Section
        3.  If any such Lender fails to make available to Agent the amount
        of such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing
        Lender in respect of such Letter of Credit as provided in this Section, such
        Lender shall be deemed to be a Defaulting Lender and Agent (for the account
        of
        the Issuing Lender) shall be entitled to recover such amount on demand from
        such
        Lender together with interest thereon at the Defaulting Lender Rate until
        paid
        in full.

       

      (c)  Borrower
        hereby agrees to indemnify, save, defend, and hold the Lender Group harmless
        from any loss, cost, expense, or liability, and reasonable attorneys fees
        incurred by the Lender Group arising out of or in connection with any Letter
        of
        Credit; provided, however, that Borrower shall not be obligated
        hereunder to indemnify for any loss, cost, expense, or liability to the extent
        that it is caused by the gross negligence or willful misconduct of the Issuing
        Lender or any other member of the Lender Group.  Borrower agrees to be
        bound by the Underlying Issuer’s regulations and interpretations of any
        Underlying Letter of Credit or by Issuing Lender’s interpretations of any L/C
        issued by Issuing Lender to or for Borrower’s account, even though this
        interpretation may be different from Borrower’s own, and Borrower understands
        and agrees that the Lender Group shall not be liable for any error, negligence,
        or mistake, whether of omission or commission, in following Borrower’s
        instructions or those contained in the Letter of Credit or any modifications,
        amendments, or supplements thereto.  Borrower understands that the L/C
        Undertakings may require Issuing Lender to indemnify the Underlying Issuer
        for
        certain costs or liabilities arising out of claims by Borrower against such
        Underlying Issuer.  Borrower hereby agrees to indemnify, save, defend,
        and hold the Lender Group harmless with respect to any loss, cost, expense
        (including reasonable attorneys fees), or liability incurred by the Lender
        Group
        under any L/C Undertaking as a result of the Lender Group’s indemnification of
        any Underlying Issuer; provided, however, that Borrower shall not
        be obligated hereunder to indemnify for any loss, cost, expense, or liability
        to
        the extent that it is caused by the gross negligence or willful misconduct
        of
        the Issuing Lender or any other member of the Lender Group.  Borrower
        hereby acknowledges and agrees that neither the Lender Group nor the Issuing
        Lender shall be responsible for delays, errors, or omissions resulting from
        the
        malfunction of equipment in connection with any Letter of Credit.

       

      (d)  Borrower
        hereby authorizes and directs any Underlying Issuer to deliver to the Issuing
        Lender all instruments, documents, and other writings and property received
        by
        such Underlying Issuer pursuant to such Underlying Letter of Credit and to
        accept and rely upon the Issuing Lender’s instructions with respect to all
        matters arising in connection with such Underlying Letter of Credit and the
        related application.

       

      (e)  Any
        and
        all issuance charges, commissions, fees, and costs incurred by the Issuing
        Lender relating to Underlying Letters of Credit shall be Lender Group Expenses
        for purposes of this Agreement and immediately shall be reimbursable by Borrower
        to Agent for the account of the Issuing Lender; it being acknowledged and
        agreed
        by Borrower that, as of the Closing Date, the issuance charge imposed by
        the
        prospective Underlying Issuer is .825% per annum times the undrawn amount
        of
        each Underlying Letter of Credit, that such issuance charge may be changed
        from
        time to time, and that the Underlying Issuer also imposes a schedule of charges
        for amendments, extensions, drawings, and renewals.

       

      (f)  If
        by
        reason of (i) any change after the Closing Date in any applicable law, treaty,
        rule, or regulation or any change in the interpretation or application thereof
        by any Governmental Authority, or (ii) compliance by the Underlying Issuer
        or
        the Lender Group with any direction, request, or requirement (irrespective
        of
        whether having the force of law) of any Governmental Authority or monetary
        authority 

       

      
        
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      including,
        Regulation D of the Federal Reserve Board as from time to time in effect
        (and
        any successor thereto):

       

      (i)  any
        reserve, deposit, or similar requirement is or shall be imposed or modified
        in
        respect of any Letter of Credit issued hereunder, or

       

      (ii)  there
        shall be imposed on the Underlying Issuer or the Lender Group any other
        condition regarding any Underlying Letter of Credit or any Letter of Credit
        issued pursuant hereto, and the result of the foregoing is to increase, directly
        or indirectly, the cost to the Lender Group of issuing, making, guaranteeing,
        or
        maintaining any Letter of Credit or to reduce the amount receivable in respect
        thereof by the Lender Group, then, and in any such case, Agent may, at any
        time
        within a reasonable period after the additional cost is incurred or the amount
        received is reduced, notify Borrower, and Borrower shall pay on demand such
        amounts as Agent may specify to be necessary to compensate the Lender Group
        for
        such additional cost or reduced receipt, together with interest on such amount
        from the date of such demand until payment in full thereof at the rate then
        applicable to Base Rate Loans hereunder.  The determination by Agent
        of any amount due pursuant to this Section, as set forth in a certificate
        setting forth the calculation thereof in reasonable detail, shall, in the
        absence of manifest or demonstrable error, be final and conclusive and binding
        on all of the parties hereto.

       

      2.13  [INTENTIONALLY
        DELETED].

       

      2.14  Capital
        Requirements.  If, after the date
        hereof, any Lender determines that (i) the adoption of or change in any law,
        rule, regulation or guideline regarding capital requirements for banks or
        bank
        holding companies, or any change in the interpretation or application thereof
        by
        any Governmental Authority charged with the administration thereof, or (ii)
        compliance by such Lender or its parent bank holding company with any guideline,
        request, or directive of any such entity regarding capital adequacy (whether
        or
        not having the force of law), has the effect of reducing the return on such
        Lender’s or such holding company’s capital as a consequence of such Lender’s
        Commitments hereunder to a level below that which such Lender or such holding
        company could have achieved but for such adoption, change, or compliance
        (taking
        into consideration such Lender’s or such holding company’s then existing
        policies with respect to capital adequacy and assuming the full utilization
        of
        such entity’s capital) by any amount deemed by such Lender to be material, then
        such Lender may notify Borrower and Agent thereof.  Following receipt
        of such notice, Borrower agrees to pay such Lender on demand the amount of
        such
        reduction of return of capital as and when such reduction is determined,
        payable
        within 90 days after presentation by such Lender of a statement in the amount
        and setting forth in reasonable detail such Lender’s calculation thereof and the
        assumptions upon which such calculation was based (which statement shall
        be
        deemed true and correct absent manifest error).  In determining such
        amount, such Lender may use any reasonable averaging and attribution
        methods.

       

      3.  CONDITIONS;
        TERM OF AGREEMENT.

       

      3.1  Conditions
        Precedent to the Initial Extension of
        Credit.  The obligation of each Lender
        to make its initial extension of credit provided for hereunder, is subject
        to
        the fulfillment, to the satisfaction of Agent and each Lender of each of
        the
        conditions precedent set forth on Schedule 3.1 (the making of such
        initial extension of credit by a Lender being conclusively deemed to be its
        satisfaction or waiver of the conditions precedent).

       

      3.2  Conditions
        Precedent to all Extensions of
        Credit.  The obligation of the Lender
        Group (or any member thereof) to make any Advances hereunder (or to extend
        any
        other credit hereunder) at any time shall be subject to the following conditions
        precedent:

       

      (a)  the
        representations and warranties of Borrower or its Subsidiaries contained
        in this
        Agreement or in the other Loan Documents shall be true and correct in all
        material respects (except that such 

       

       

      
        
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      materiality
        qualifier shall not be applicable to any representations and warranties that
        already are qualified or modified by materiality in the text thereof) on
        and as
        of the date of such extension of credit, as though made on and as of such
        date
        (except to the extent that such representations and warranties relate solely
        to
        an earlier date);

       

      (b)  no
        Default or Event of Default shall have occurred and be continuing on the
        date of
        such extension of credit, nor shall either result from the making
        thereof;

       

      (c)  no
        injunction, writ, restraining order, or other order of any nature restricting
        or
        prohibiting, directly or indirectly, the extending of such credit shall have
        been issued and remain in force by any Governmental Authority against Borrower,
        Agent, or any Lender; and

       

      (d)  no
        Material Adverse Change shall have occurred since March 31, 2007.

       

      3.3  Term.  This
        Agreement shall continue in full force and effect for a term ending on May
        31,
        2012 (the “Maturity Date”).  The foregoing notwithstanding, the
        Lender Group, upon the election of the Required Lenders, shall have the right
        to
        terminate its obligations under this Agreement immediately and without notice
        upon the occurrence and during the continuation of an Event of
        Default.

       

      3.4  Effect
        of Termination.  On the date of
        termination of this Agreement, all Obligations (including contingent
        reimbursement obligations of Borrower with respect to outstanding Letters
        of
        Credit and including all Bank Product Obligations) immediately shall become
        due
        and payable without notice or demand (including the requirement that Borrower
        provide (a) Letter of Credit Collateralization, and (b) Bank Product
        Collateralization).  No termination of this Agreement, however, shall
        relieve or discharge Borrower or its Subsidiaries of their duties, Obligations,
        or covenants hereunder or under any other Loan Document and the Agent’s Liens in
        the Collateral shall remain in effect until all Obligations have been paid
        in
        full and the Lender Group’s obligations to provide additional credit hereunder
        have been terminated.  When this Agreement has been terminated and all
        of the Obligations have been paid in full and the Lender Group’s obligations to
        provide additional credit under the Loan Documents have been terminated
        irrevocably, Agent will, at Borrower’s sole expense, execute and deliver any
        termination statements, lien releases, mortgage releases, re-assignments
        of
        trademarks, discharges of security interests, and other similar discharge
        or
        release documents (and, if applicable, in recordable form) as are reasonably
        necessary to release, as of record, the Agent’s Liens and all notices of
        security interests and liens previously filed by Agent with respect to the
        Obligations.

       

      3.5  Early
        Termination by Borrower.  Borrower has
        the option, at any time upon 30 days prior written notice to Agent, to terminate
        this Agreement and terminate the Commitments hereunder by paying to Agent,
        in
        cash, the Obligations (including (a) providing Letter of Credit
        Collateralization with respect to the then existing Letter of Credit Usage,
        and
        (b) providing Bank Product Collateralization with respect to the then existing
        Bank Products), in full.  If Borrower has sent a notice of termination
        pursuant to the provisions of this Section, then the Commitments shall terminate
        and Borrower shall be obligated to repay the Obligations (including
        (a) providing Letter of Credit Collateralization with respect to the then
        existing Letter of Credit Usage, and (b) providing Bank Product
        Collateralization with respect to the then existing Bank Products), in full,
        on
        the date set forth as the date of termination of this Agreement in such
        notice.

       

      4.  REPRESENTATIONS
        AND WARRANTIES.

       

          In
        order to
        induce the Lender Group to enter into this Agreement, Borrower makes the
        following representations and warranties to the Lender Group which shall
        be
        true, correct, and complete, in all material respects, as of the date hereof,
        and shall be true, correct, and complete, in all material respects, as of
        the
        Closing Date and at and as of the date of the making of each Advance (or
        other
        extension of credit) made thereafter, as though made on and as of the date
        of
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      extent
        that such representations and warranties relate solely to an earlier date)
        and
        such representations and warranties shall survive the execution and delivery
        of
        this Agreement:

       

      4.1  No
        Encumbrances.  Borrower and its
        Subsidiaries have good and indefeasible title to, or a valid leasehold interest
        in, their personal property assets and good and marketable title to, or a
        valid
        leasehold interest in, their Real Property, in each case, free and clear
        of
        Liens except for Permitted Liens.

       

      4.2  Eligible
        Accounts.  As to each Account that is
        identified by Borrower as an Eligible Account in a borrowing base report
        submitted to Agent, such Account is (a) a bona fide existing payment obligation
        of the applicable Account Debtor created by the sale and delivery of Inventory
        or the rendition of services to such Account Debtor in the ordinary course
        of
        Borrower’s business, (b) owed to Borrower without any known defenses, disputes,
        offsets, counterclaims, or rights of return or cancellation, and (c) not
        excluded as ineligible by virtue of one or more of the excluding criteria
        set
        forth in the definition of Eligible Accounts.

       

      4.3  Eligible
        Inventory.  As to each item of Inventory
        that is identified by Borrower as Eligible Inventory in a borrowing base
        report
        submitted to Agent, such Inventory is (a) of good and merchantable quality,
        free
        from known defects, and (b) not excluded as ineligible by virtue of one or
        more
        of the excluding criteria set forth in the definition of Eligible
        Inventory.

       

      4.4  Equipment.  Each material
        item of Equipment of Borrower and its Subsidiaries is used or held for use
        in
        their business and is in good working order, ordinary wear and tear and damage
        by casualty excepted.

       

       

      4.5  Location
        of Inventory and Equipment.  The
        Inventory and Equipment (other than vehicles or Equipment out for repair)
        of
        Borrower and its Subsidiaries are not stored with a bailee, warehouseman,
        or
        similar party and are located only at, or in-transit between, the locations
        identified on Schedule 4.5 (as such Schedule may be updated pursuant to
Section 5.9).

       

      4.6  Inventory
        Records.  Borrower keeps correct and
        accurate records itemizing and describing the type, quality, and quantity
        of its
        and its Subsidiaries’ Inventory and the book value thereof.

       

      4.7  Jurisdiction
        of Organization; Location of Chief Executive Office; Organizational
        Identification Number; Commercial Tort Claims.

       

      (a)  The
        name
        of (within the meaning of Section 9-503 of the Code) and jurisdiction of
        organization of Borrower and each of its Subsidiaries is set forth on
Schedule 4.7(a) (as such Schedule may be updated from time to time to
        reflect changes permitted to be made under Section 6.5).

       

      (b)  The
        chief
        executive office of Borrower and each of its Subsidiaries is located at the
        address indicated on Schedule 4.7(b) (as such Schedule may be updated
        from time to time to reflect changes permitted to be made under Section
        5.9).

       

      (c)  Borrower’s
        and each of its Subsidiaries’ tax identification numbers and organizational
        identification numbers, if any, are identified on Schedule 4.7(c) (as
        such Schedule may be updated from time to time to reflect changes permitted
        to
        be made under Section 6.5).

       

      (d)  As
        of the
        Closing Date, Borrower and its Subsidiaries do not hold any commercial tort
        claims, except as set forth on Schedule 4.7(d).

       

      4.8  Due
        Organization and Qualification; Subsidiaries.

       

       

      
        
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      (a)  Borrower
        is duly organized and existing and in good standing under the laws of the
        jurisdiction of its organization and qualified to do business in any state
        where
        the failure to be so qualified reasonably could be expected to result in
        a
        Material Adverse Change.

       

      (b)  Set
        forth
        on Schedule 4.8(b) (as such Schedule may be updated from time to time to
        reflect changes permitted to be made under Section 5.16), is a complete
        and accurate description of the authorized capital Stock of Borrower, by
        class,
        and, as of the Closing Date, a description of the number of shares of each
        such
        class that are issued and outstanding.  Other than as described on
Schedule 4.8(b), there are no subscriptions, options, warrants, or calls
        relating to any shares of Borrower’s capital Stock, including any right of
        conversion or exchange under any outstanding security or other
        instrument.  Borrower is not subject to any obligation (contingent or
        otherwise) to repurchase or otherwise acquire or retire any shares of its
        capital Stock or any security convertible into or exchangeable for any of
        its
        capital Stock.

       

      (c)  Set
        forth
        on Schedule 4.8(c) (as such Schedule may be updated from time to time to
        reflect changes permitted to be made under Section 5.16), is a complete
        and accurate list of Borrower’s direct and indirect Subsidiaries, showing: (i)
        the jurisdiction of their organization, (ii) the number of shares of each
        class
        of common and preferred Stock authorized for each of such Subsidiaries, and
        (iii) the number and the percentage of the outstanding shares of each such
        class
        owned directly or indirectly by Borrower.  All of the outstanding
        capital Stock of each such Subsidiary has been validly issued and is fully
        paid
        and non-assessable.

       

      (d)  Except
        as
        set forth on Schedule 4.8(c), there are no subscriptions, options,
        warrants, or calls relating to any shares of Borrower’s Subsidiaries’ capital
        Stock, including any right of conversion or exchange under any outstanding
        security or other instrument.  Neither Borrower nor any of its
        Subsidiaries is subject to any obligation (contingent or otherwise) to
        repurchase or otherwise acquire or retire any shares of Borrower’s Subsidiaries’
capital Stock or any security convertible into or exchangeable for any such
        capital Stock.

       

      4.9  Due
        Authorization; No Conflict.

       

      (a)  The
        execution, delivery, and performance by Borrower of this Agreement and the
        Loan
        Documents to which it is a party have been duly authorized by all necessary
        action on the part of Borrower.

       

      (b)  The
        execution, delivery, and performance by Borrower of this Agreement and the
        other
        Loan Documents to which it is a party do not and will not (i) violate any
        provision of federal, state, or local law or regulation applicable to Borrower,
        the Governing Documents of Borrower, or any order, judgment, or decree of
        any
        court or other Governmental Authority binding on Borrower, (ii) conflict
        with,
        result in a breach of, or constitute (with due notice or lapse of time or
        both)
        a default under any Material Contract of Borrower, (iii) result in or require
        the creation or imposition of any Lien of any nature whatsoever upon any
        properties or assets of Borrower, other than Permitted Liens, or (iv) require
        any approval of Borrower’s interestholders or any approval or consent of any
        Person under any Material Contract of Borrower, other than consents or approvals
        that have been obtained and that are still in force and effect.

       

      (c)  Other
        than the filing of financing statements, the recordation of the Mortgages,
        if
        any, and other filings or actions necessary to perfect Liens granted to Agent
        in
        the Collateral, the execution, delivery, and performance by Borrower of this
        Agreement and the other Loan Documents to which Borrower is a party do not
        and
        will not require any registration with, consent, or approval of, or notice
        to,
        or other action with or by, any Governmental Authority, other than consents
        or
        approvals that have been obtained and that are still in force and
        effect.

       

      (d)  This
        Agreement and the other Loan Documents to which Borrower is a party, and
        all
        other documents contemplated hereby and thereby, when executed and delivered
        by
        Borrower will be the 

       

      
        
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      legally
        valid and binding obligations of Borrower, enforceable against Borrower in
        accordance with their respective terms, except as enforcement may be limited
        by
        equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
        or similar laws relating to or limiting creditors’ rights
        generally.

       

      (e)  The
        Agent’s Liens are validly created, perfected (other than (i) in respect of motor
        vehicles and (ii) any Deposit Accounts and Securities Accounts not subject
        to a
        Control Agreement as permitted by Section 6.12, and subject only to the
        filing of financing statements and the recordation of the Mortgages, if any),
        and first priority Liens, subject only to Permitted Liens.

       

      (f)  The
        execution, delivery, and performance by each Guarantor of the Loan Documents
        to
        which it is a party have been duly authorized by all necessary action on
        the
        part of such Guarantor.

       

      (g)  The
        execution, delivery, and performance by each Guarantor of the Loan Documents
        to
        which it is a party do not and will not (i) violate any provision of federal,
        state, or local law or regulation applicable to such Guarantor, the Governing
        Documents of such Guarantor, or any order, judgment, or decree of any court
        or
        other Governmental Authority binding on such Guarantor, (ii) conflict with,
        result in a breach of, or constitute (with due notice or lapse of time or
        both)
        a default under any Material Contract of such Guarantor, (iii) result in
        or
        require the creation or imposition of any Lien of any nature whatsoever upon
        any
        properties or assets of such Guarantor, other than Permitted Liens, or (iv)
        require any approval of such Guarantor’s interestholders or any approval or
        consent of any Person under any Material Contract of such Guarantor, other
        than
        consents or approvals that have been obtained and that are still in force
        and
        effect.

       

      (h)  Other
        than the filing of financing statements, the recordation of the Mortgages,
        if
        any, and other filings or actions necessary to perfect Liens granted to Agent
        in
        the Collateral, the execution, delivery, and performance by each Guarantor
        of
        the Loan Documents to which such Guarantor is a party do not and will not
        require any registration with, consent, or approval of, or notice to, or
        other
        action with or by, any Governmental Authority, other than consents or approvals
        that have been obtained and that are still in force and effect.

       

      (i)  The
        Loan
        Documents to which each Guarantor is a party, and all other documents
        contemplated hereby and thereby, when executed and delivered by such Guarantor
        will be the legally valid and binding obligations of such Guarantor, enforceable
        against such Guarantor in accordance with their respective terms, except
        as
        enforcement may be limited by equitable principles or by bankruptcy, insolvency,
        reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.

       

      4.10  Litigation.  Other
        than those matters disclosed on Schedule 4.10 and other than matters
        arising after the Closing Date that reasonably could not be expected to result
        in a Material Adverse Change, there are no actions, suits, or proceedings
        pending or, to the best knowledge of Borrower, threatened against Borrower
        or
        any of its Subsidiaries.

       

      4.11  No
        Material Adverse Change.  All financial
        statements relating to Borrower and its Subsidiaries that have been delivered
        by
        Borrower to the Lender Group have been prepared in accordance with GAAP (except,
        in the case of unaudited financial statements, for the lack of footnotes
        and
        being subject to year-end audit adjustments) and present fairly in all material
        respects, Borrower’s and its Subsidiaries’ financial condition as of the date
        thereof and results of operations for the period then ended.  There
        has not been a Material Adverse Change with respect to Borrower and its
        Subsidiaries since December 31, 2006.

       

      4.12  Fraudulent
        Transfer.  No transfer of property is being made by
        Borrower or its Subsidiaries and no obligation is being incurred by Borrower
        or
        its Subsidiaries in connection with the transactions contemplated by this
        Agreement or the other Loan Documents with the intent to hinder, delay, or
        defraud either present or future creditors of Borrower or its
        Subsidiaries.

       

       

      
        
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      4.13  Employee
        Benefits.  None of Borrower, any of its
        Subsidiaries, or any of their ERISA Affiliates maintains or contributes to
        any
        Benefit Plan.

       

      4.14  Environmental
        Condition.  Except as set forth on
Schedule 4.14, (a) to Borrower’s knowledge, none of Borrower’s or its
        Subsidiaries’ properties or assets has ever been used by Borrower, its
        Subsidiaries, or by previous owners or operators in the disposal of, or to
        produce, store, handle, treat, release, or transport, any Hazardous Materials,
        where such use, production, storage, handling, treatment, release or transport
        was in violation, in any material respect, of any applicable Environmental
        Law,
        (b) to Borrower’s knowledge, none of Borrower’s or its Subsidiaries’ properties
        or assets has ever been designated or identified in any manner pursuant to
        any
        environmental protection statute as a Hazardous Materials disposal site,
        (c)
        neither Borrower nor any of its Subsidiaries has received notice that a Lien
        arising under any Environmental Law has attached to any revenues or to any
        Real
        Property owned or operated by Borrower or its Subsidiaries, and (d) neither
        Borrower nor its  Subsidiaries has received a summons, citation,
        notice, or directive from the United States Environmental Protection Agency
        or
        any other federal or state governmental agency concerning any action or omission
        by Borrower or its Subsidiaries resulting in the releasing or disposing of
        Hazardous Materials into the environment.

       

      4.15  Intellectual
        Property.  Borrower and its Subsidiaries
        own, or hold licenses in, all trademarks, trade names, copyrights, patents,
        patent rights, and licenses that are necessary to the conduct of its business
        as
        currently conducted, and attached hereto as Schedule 4.15 (as updated
        from time to time) is a true, correct, and complete listing of all material
        patents, patent applications, trademarks, trademark applications, copyrights,
        and copyright registrations as to which Borrower or one of its Subsidiaries
        is
        the owner or is an exclusive licensee; provided, however, that
        Borrower may amend Schedule 4.15 to add additional property so long as
        such amendment occurs by written notice to Agent not less than 10 days before
        the date on which Borrower or any Subsidiary of Borrower acquires any such
        property after the Closing Date.

       

      4.16  Leases.  Borrower
        and its Subsidiaries enjoy peaceful and undisturbed possession under all
        leases
        material to their business and to which they are parties or under which they
        are
        operating, and all of such material leases are valid and subsisting and no
        material default by Borrower or its Subsidiaries exists under any of
        them.

       

      4.17  Deposit
        Accounts and Securities Accounts.  Set
        forth on Schedule 4.17 is a listing of all of Borrower’s and its
        Subsidiaries’ Deposit Accounts and Securities Accounts, including, with respect
        to each bank or securities intermediary (a) the name and address of such
        Person,
        and (b) the account numbers of the Deposit Accounts or Securities Accounts
        maintained with such Person.

       

      4.18  Complete
        Disclosure.  All factual information
        (taken as a whole) furnished by or on behalf of Borrower or its Subsidiaries
        in
        writing to Agent or any Lender (including all information contained in the
        Schedules hereto or in the other Loan Documents) for purposes of or in
        connection with this Agreement, the other Loan Documents, or any transaction
        contemplated herein or therein is, and all other such factual information
        (taken
        as a whole) hereafter furnished by or on behalf of Borrower or its Subsidiaries
        in writing to Agent or any Lender will be, true and accurate, in all material
        respects, on the date as of which such information is dated or certified
        and not
        incomplete by omitting to state any fact necessary to make such information
        (taken as a whole) not misleading in any material respect at such time in
        light
        of the circumstances under which such information was provided.  On
        the Closing Date, the Closing Date Projections represent, and as of the date
        on
        which any other Projections are delivered to Agent, such additional Projections
        represent Borrower’s good faith estimate of its and its Subsidiaries future
        performance for the periods covered thereby based upon assumptions believed
        by
        Borrower to be reasonable at the time of the delivery thereof to Agent (it
        being
        understood that such projections and forecasts are subject to uncertainties
        and
        contingencies, many of which are beyond the control of Borrower and its
        Subsidiaries and no assurances can be given that such projections or forecasts
        will be realized).

       

      
        
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      4.19  Indebtedness.  Set
        forth on Schedule 4.19 is a true and complete list of all Indebtedness of
        Borrower and its Subsidiaries outstanding immediately prior to the Closing
        Date
        that is to remain outstanding after the Closing Date and such Schedule
        accurately sets forth the aggregate principal amount of such Indebtedness
        and
        the principal terms thereof.

       

      4.20  Material
        Contracts.  Set forth on Schedule 4.20 is a
        description of all Material Contracts of Borrower and its Subsidiaries, showing
        the parties and principal subject matter thereof and amendments and
        modifications thereto; provided, however, that Borrower may amend
Schedule 4.20 to add additional Material Contracts so long as
        such
        amendment occurs by written notice to Agent not less than 5 days after the
        date
        on which Borrower or its Subsidiary enters into such Material Contract after
        the
        Closing Date.  Except for matters which, either individually or in the
        aggregate, could not reasonably be expected to result in a Material Adverse
        Change, each Material Contract (other than those that have expired at the
        end of
        their normal terms) (a) is in full force and effect and is binding upon and
        enforceable against Borrower or its Subsidiary and, to the best of Borrower’s
        knowledge, each other Person that is a party thereto in accordance with its
        terms, (b) has not been otherwise amended or modified (other than amendments
        or
        modifications permitted by Section 6.7(d)), and (c) is not in default due
        to the action or inaction of Borrower or any of its Subsidiaries.

       

      4.21  Inactive
        Subsidiaries.  Except for Teltronics Acquisition’s
        ownership interests in Teltronics Mexico and Teltronics Mexico Service
        Administration, none of the Inactive Subsidiaries has or maintains any assets
        or
        conducts any business operations, except as may be related to the dissolution
        of
        such Inactive Subsidiary or the consolidation or merger of such Inactive
        Subsidiary with the Borrower as permitted under the terms of this
        Agreement.

       

      4.22   Active
        Foreign Subsidiaries.  Teltronics Mexico does not have or
        maintain any assets in excess of $50,000 (including the assets of Teltronics
        Mexico Service Administration).  Teltronics UK does not have or
        maintain any assets in excess of $2,000,000.  Teltronics Canada does
        not have or maintain any assets in excess of $50,000.  Each of the
        Active Foreign Subsidiaries conducts business only to the extent described
        on
Schedule 4.22.

       

      5.  AFFIRMATIVE
        COVENANTS.

       

      Borrower
        covenants and agrees that, until termination of all of the Commitments and
        payment in full of the Obligations, Borrower shall and shall cause each of
        its
        Subsidiaries to do all of the following:

       

      5.1  Accounting
        System.  Maintain a system of accounting
        that enables Borrower to produce financial statements in accordance with
        GAAP
        and maintain records pertaining to the Collateral that contain information
        as
        from time to time reasonably may be requested by Agent.  Borrower also
        shall keep a reporting system that shows all additions, sales, claims, returns,
        and allowances with respect to its and its Subsidiaries’
sales.  Borrower shall also maintain its billing systems/practices as
        approved by Agent prior to the Closing Date and shall only make material
        modifications thereto with notice to, and consent of, Agent.

       

      5.2  Collateral
        Reporting.  Provide Agent (and if so
        requested by Agent, with copies for each Lender) with each of the reports
        set
        forth on Schedule 5.2 at the times specified therein. In addition,
        Borrower agrees to cooperate fully with Agent to facilitate and implement
        a
        system of electronic collateral reporting in order to provide electronic
        reporting of each of the items set forth above.

       

      5.3  Financial
        Statements, Reports,
        Certificates.  Deliver to Agent, with
        copies to each Lender, each of the financial statements, reports, or other
        items
        set forth on Schedule 5.3 at the times specified therein.  In
        addition, Borrower agrees that no Subsidiary of Borrower will have a fiscal
        year
        different from that of Borrower.

       

       

      
        
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      5.4  Guarantor
        Reports.  Cause each Guarantor to
        deliver its annual financial statements at the time when Borrower provides
        its
        audited financial statements to Agent, but only to the extent such Guarantor’s
        financial statements are not consolidated with Borrower’s financial
        statements.

       

      5.5  Inspection.  Permit
        Agent, each Lender, and each of their duly authorized representatives or
        agents
        to visit any of its properties and inspect any of its assets or books and
        records, to examine and make copies of its books and records, and to discuss
        its
        affairs, finances, and accounts with, and to be advised as to the same by,
        its
        officers and employees at such reasonable times and intervals as Agent or
        any
        such Lender may designate and, so long as no Default or Event of Default
        exists,
        with reasonable prior notice to Borrower.

       

      5.6  Maintenance
        of Properties.  Maintain and preserve
        all of its properties which are necessary or useful in the proper conduct
        of its
        business in good working order and condition, ordinary wear, tear, and casualty
        excepted (and except where the failure to do so could not be expected to
        result
        in a Material Adverse Change), and comply at all times with the provisions
        of
        all material leases to which it is a party as lessee, so as to prevent any
        loss
        or forfeiture thereof or thereunder.

       

      5.7  Taxes.  Cause
        all assessments and taxes, whether real, personal, or otherwise, due or payable
        by, or imposed, levied, or assessed against Borrower, its Subsidiaries, or
        any
        of their respective assets to be paid in full, before delinquency or before
        the
        expiration of any extension period, except to the extent that the validity
        of
        such assessment or tax shall be the subject of a Permitted
        Protest.  Borrower will and will cause its Subsidiaries to make timely
        payment or deposit of all tax payments and withholding taxes required of
        it and
        them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,
        state disability, and local, state, and federal income taxes, and will, upon
        request, furnish Agent with proof satisfactory to Agent indicating that Borrower
        and its Subsidiaries have made such payments or deposits.

       

      5.8  Insurance.

       

      (a)  At
        Borrower’s expense, maintain insurance respecting its and its Subsidiaries’
assets wherever located, covering loss or damage by fire, theft, explosion,
        and
        all other hazards and risks as ordinarily are insured against by other Persons
        engaged in the same or similar businesses. Borrower also shall maintain business
        interruption, public liability, and product liability insurance, as well
        as
        insurance against larceny, embezzlement, and criminal
        misappropriation.  All such policies of insurance shall be in such
        amounts and with such insurance companies as are reasonably satisfactory
        to
        Agent. Borrower shall deliver copies of all such policies to Agent with an
        endorsement naming Agent as the sole loss payee (under a satisfactory lender’s
        loss payable endorsement) or additional insured, as appropriate.  Each
        policy of insurance or endorsement shall contain a clause requiring the insurer
        to give not less than 30 days prior written notice to Agent in the event
        of
        cancellation of the policy for any reason whatsoever.

       

      (b)  Borrower
        shall give Agent prompt notice of any loss exceeding $100,000 covered by
        such
        insurance.  So long as no Event of Default has occurred and is
        continuing, Borrower shall have the exclusive right to adjust any losses
        payable
        under any such insurance policies which are less than
        $100,000.  Following the occurrence and during the continuation of an
        Event of Default, or in the case of any losses payable under such insurance
        exceeding $100,000, Agent shall have the exclusive right to adjust any losses
        payable under any such insurance policies, without any liability to Borrower
        whatsoever in respect of such adjustments.

       

      5.9  Location
        of Inventory and Equipment.  Keep
        Borrower’s and its Subsidiaries’ Inventory and Equipment (other than vehicles
        and Equipment out for repair) only at the locations identified on
Schedule 4.5 and their chief executive offices only at the locations
        identified on Schedule 4.7(b); provided, however, that
        Borrower may amend Schedule 4.5 or Schedule 4.7 so long as such
        amendment occurs by written notice to Agent not less than 30 days prior to
        the
        date on which such Inventory or Equipment is moved to such new location or
        such
        chief executive office is relocated, so long as such new location is within
        the


       

       

      
        
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      continental
        United States, and so long as, at the time of such written notification,
        Borrower provides Agent a Collateral Access Agreement with respect
        thereto.

       

      5.10  Compliance
        with Laws.  Comply with the requirements
        of all applicable laws, rules, regulations, and orders of any Governmental
        Authority, other than laws, rules, regulations, and orders the non-compliance
        with which, individually or in the aggregate, could not reasonably be expected
        to result in a Material Adverse Change.

       

      5.11  Leases.  Pay
        when due all rents and other amounts payable under any material leases to
        which
        Borrower or any of its Subsidiaries is a party or by which Borrower’s or any
        such Subsidiaries’ properties and assets are bound, unless such payments are the
        subject of a Permitted Protest.

       

      5.12  Existence.  At
        all times preserve and keep in full force and effect Borrower’s and its
        Subsidiaries, valid existence and good standing and, except as could not
        reasonably be expected to result in a Material Adverse Change, any rights,
        franchises, permits, licenses, accreditations, authorizations, or other
        approvals material to their businesses.

       

      5.13  Environmental.

       

      (a)  Keep
        any
        property either owned or operated by Borrower or its Subsidiaries free of
        any
        Environmental Liens or post bonds or other financial assurances sufficient
        to
        satisfy the obligations or liability evidenced by such Environmental Liens,
        (b)
        comply, in all material respects, with Environmental Laws and provide to
        Agent
        documentation of such compliance which Agent reasonably requests, (c) promptly
        notify Agent of any release of a Hazardous Material in any reportable quantity
        from or onto property owned or operated by Borrower or its Subsidiaries and
        take
        any Remedial Actions required to abate said release or otherwise to come
        into
        compliance with applicable Environmental Law, and (d) promptly, but in any
        event
        within 5 days of its receipt thereof, provide Agent with written notice of
        any
        of the following:  (i) notice that an Environmental Lien has been
        filed against any of the real or personal property of Borrower or its
        Subsidiaries, (ii) commencement of any Environmental Action or notice that
        an
        Environmental Action will be filed against Borrower or its Subsidiaries,
        and
        (iii) notice of a violation, citation, or other administrative order which
        reasonably could be expected to result in a Material Adverse
        Change.

       

      5.14  Disclosure
        Updates.  Promptly and in no event later
        than 5 Business Days after obtaining knowledge thereof, notify Agent if any
        written information, exhibit, or report furnished to the Lender Group contained,
        at the time it was furnished, any untrue statement of a material fact or
        omitted
        to state any material fact necessary to make the statements contained therein
        not misleading in light of the circumstances in which made.  The
        foregoing to the contrary notwithstanding, any notification pursuant to the
        foregoing provision will not cure or remedy the effect of the prior untrue
        statement of a material fact or omission of any material fact nor shall any
        such
        notification have the effect of amending or modifying this Agreement or any
        of
        the Schedules hereto or to the Disclosure Statement.

       

      5.15  Control
        Agreements.  Take all reasonable steps
        in order for Agent to obtain control in accordance with Sections 8-106, 9-104,
        9-105, 9-106, and 9-107 of the Code with respect to (subject to the proviso
        contained in Section 6.12) all of its Securities Accounts, Deposit
        Accounts, electronic chattel paper, investment property, and letter-of-credit
        rights.

       

      5.16  Formation
        of Subsidiaries.  At the time that
        Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires
        any direct or indirect Subsidiary after the Closing Date, Borrower or such
        Guarantor shall (a)  cause such new Subsidiary to provide to Agent a
        joinder to the Guaranty and the Security Agreement, together with such other
        security documents (including Mortgages with respect to any Real Property
        of
        such new Subsidiary), as well as appropriate financing statements (and with
        respect to all property subject to a Mortgage, fixture filings), all in form
        and
        substance satisfactory to Agent (including being 

       

      
        
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      sufficient
        to grant Agent a first priority Lien (subject to Permitted Liens) in and
        to the
        assets of such newly formed or acquired Subsidiary), (b) provide to Agent
        a
        pledge agreement and appropriate certificates and powers or financing
        statements, hypothecating all of the direct or beneficial ownership interest
        in
        such new Subsidiary, in form and substance satisfactory to Agent, and (c)
        provide to Agent all other documentation, including one or more opinions
        of
        counsel satisfactory to Agent, which in its opinion is appropriate with respect
        to the execution and delivery of the applicable documentation referred to
        above
        (including policies of title insurance or other documentation with respect
        to
        all property subject to a Mortgage).  Any document, agreement, or
        instrument executed or issued pursuant to this Section 5.16 shall be a
        Loan Document.

       

      5.17  Further
        Assurances.  At any time upon the request of Agent,
        Borrower shall execute or deliver to Agent, and shall cause its Subsidiaries
        to
        execute or deliver to Agent, any and all financing statements, fixture filings,
        security agreements, pledges, assignments, endorsements of certificates of
        title, mortgages, deeds of trust, opinions of counsel, and all other documents
        (collectively, the “Additional Documents”) that Agent may request in form
        and substance reasonably satisfactory to Agent, to create, perfect, and continue
        perfected or to better perfect the Agent’s Liens in all of the properties and
        assets of Borrower and its Subsidiaries (whether now owned or hereafter arising
        or acquired, tangible or intangible, real or personal), to create and perfect
        Liens in favor of Agent in any Real Property acquired by Borrower or its
        Subsidiaries after the Closing Date, and in order to fully consummate all
        of the
        transactions contemplated hereby and under the other Loan
        Documents.  To the maximum extent permitted by applicable law,
        Borrower authorizes Agent to execute any such Additional Documents in Borrower’s
        or its Subsidiary’s name, as applicable, and authorizes Agent to file such
        executed Additional Documents in any appropriate filing office.

       

      5.18  Material
        Contracts.  Contemporaneously with the delivery of each
        Compliance Certificate pursuant hereto, provide Agent with copies of (a)
        each
        Material Contract entered into since the delivery of the previous Compliance
        Certificate, and (b) each amendment or modification of any Material Contract
        entered into since the delivery of the previous Compliance
        Certificate.

       

      5.19  Post
        Closing Covenants. Borrower shall, and shall cause
        its Subsidiaries to, satisfy each of the covenants set forth on
Schedule 5.19 within the prescribed time periods set forth on such
        Schedule.

       

      6.  NEGATIVE
        COVENANTS.

       

      Borrower
        covenants and agrees that, until termination of all of the Commitments and
        payment in full of the Obligations, Borrower will not and will not permit
        any of
        its Subsidiaries to do any of the following:

       

      6.1  Indebtedness.  Create,
        incur, assume, suffer to exist, guarantee, or otherwise become or remain,
        directly or indirectly, liable with respect to any Indebtedness,
        except:

       

      (a)  Indebtedness
        evidenced by this Agreement and the other Loan Documents, together with
        Indebtedness owed to Underlying Issuers with respect to Underlying Letters
        of
        Credit,

       

      (b)  Indebtedness
        set forth on Schedule 4.19 and any Refinancing Indebtedness in respect of
        such Indebtedness,

       

      (c)  Permitted
        Purchase Money Indebtedness and any Refinancing Indebtedness in respect of
        such
        Indebtedness,

       

      (d)  endorsement
        of instruments or other payment items for deposit,

       

      (e)  unsecured,
        subordinated Indebtedness that does not exceed $100,000 per issuance or $500,000
        outstanding at any one time in the aggregate, that has been issued on terms
        and
        conditions (including all economic and subordination terms, and the absence
        of
        covenants) satisfactory to Lender, and

       

      
        
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      (f)  Indebtedness
        composing Permitted Investments.

       

      6.2  Liens.  Create,
        incur, assume, or suffer to exist, directly or indirectly, any Lien on or
        with
        respect to any of its assets, of any kind, whether now owned or hereafter
        acquired, or any income or profits therefrom, except for Permitted
        Liens.

       

      6.3  Restrictions
        on Fundamental Changes.

       

      (a)  Other
        than a Permitted Merger, enter into any merger, consolidation, reorganization,
        or recapitalization, or reclassify its Stock,

       

      (b)  Liquidate,
        wind up, or dissolve itself (or suffer any liquidation or dissolution),
        or

       

      (c)  Suspend
        or go out of a substantial portion of its or their business.

       

      6.4  Disposal
        of Assets.  Other than Permitted
        Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
        dispose of (or enter into an agreement to convey, sell, lease, license, assign,
        transfer, or otherwise dispose of) any of Borrower’s or its Subsidiaries
        assets.

       

      6.5  Change
        Name.  Change Borrower’s or any of its
        Subsidiaries’ name, organizational identification number, state of organization
        or organizational identity; provided, however, that Borrower or
        any of its Subsidiaries may change their names upon at least 30 days prior
        written notice to Agent of such change and so long as, at the time of such
        written notification, Borrower or its Subsidiary provides any financing
        statements necessary to perfect and continue perfected the Agent’s
        Liens.

       

      6.6  Nature
        of Business.  Make any change in the
        nature of its or their business as described in Schedule 6.6 or acquire
        any properties or assets that are not reasonably related to the conduct of
        such
        business activities.

       

      6.7  Prepayments
        and Amendments.  Except in connection
        with Refinancing Indebtedness permitted by Section 6.1,

       

      (a)  optionally
        prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
        of
        Borrower or its Subsidiaries, other than (i) the Obligations in accordance
        with
        this Agreement, or (ii) Permitted Intercompany Advances so
        long  as any such prepayment, redemption, defeasance, or purchase is
        permitted under the terms of the Intercompany Subordination Agreement;
provided, however, that Borrower may prepay the Dove Indebtedness
        after December 31, 2007 or the Tri-Link Indebtedness at any time, in each
        case
        so long (x) no Default or Event of Default exists or would exist after giving
        effect to such prepayment and (y) Borrower would have Required Availability
        after giving effect to such prepayment,

       

      (b)  make
        any
        payment on account of Indebtedness that has been contractually subordinated
        in
        right of payment if such payment is not permitted at such time under the
        subordination terms and conditions, or

       

      (c)  directly
        or indirectly, amend, modify, alter, increase, or change any of the terms
        or
        conditions of (i) any agreement, instrument, document, indenture, or other
        writing evidencing  or concerning Indebtedness permitted under
Section 6.1(b), (c), (e), or (f), or (ii) any other
        Material Contract except to the extent that such amendment, modification,
        alteration, increase, or change could not, individually or in the aggregate,
        reasonably be expected to result in a Material Adverse Change.

       

      6.8  Change
        of Control.  Cause, permit, or suffer,
        directly or indirectly, any Change of Control.

       

       

      
        
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      6.9  Consignments.  Consign
        any of its or their Inventory or sell any of its or their Inventory on bill
        and
        hold, sale or return, sale on approval, or other conditional terms of
        sale.

       

      6.10  Distributions.  Make
        any distribution or declare or pay any dividends (in cash or other property,
        other than common Stock) on, or purchase, acquire, redeem, or retire any
        of
        Borrower’s Stock, of any class, whether now or hereafter outstanding;
provided, however, that Borrower may pay dividends in respect of
        the Preferred B Stock in an aggregate amount not to exceed (a) $69,000 in
        any
        fiscal quarter so long as no Default or Event of Default exists or would
        exist
        after giving effect thereto, plus (b), once during any consecutive 12 month
        period, an additional $69,000 so long as (i) no Default or Event of Default
        exists or would exist after giving effect thereto, and (ii) after giving
        effect
        to such dividend Borrower would have Excess Availability and Qualified Cash
        of
        at least $1,000,000.

       

      6.11  Accounting
        Methods.  Modify or change its fiscal
        year or its method of accounting (other than as may be required to conform
        to
        GAAP).

       

      6.12  Investments.  Except
        for Permitted Investments, directly or indirectly, make or acquire any
        Investment or incur any liabilities (including contingent obligations) for
        or in
        connection with any Investment; provided, however, that (a)
        Borrower shall not have Permitted Investments (other than in the Cash Management
        Accounts) in Deposit Accounts or Securities Accounts in an aggregate amount
        in
        excess of $10,000 at any one time, unless Borrower and the applicable securities
        intermediary or bank have entered into Control Agreements governing such
        Permitted Investments in order to perfect (and further establish) the Agent’s
        Liens in such Permitted Investments, and (b) Teltronics Mexico, Teltronics
        UK
        and Teltronics Canada shall not have Permitted Investments in Deposit Accounts
        or Securities Accounts in an aggregate amount in excess of $20,000, $400,000
        and
        $15,000, respectively, at any one time. Subject to the foregoing proviso,
        and
        except as provided in Schedule 5.19 ̧ Borrower shall not and shall not
        permit its Subsidiaries to establish or maintain any Deposit Account or
        Securities Account unless Agent shall have received a Control Agreement in
        respect of such Deposit Account or Securities Account.

       

      6.13  Transactions
        with Affiliates.  Directly or indirectly
        enter into or permit to exist any transaction with any Affiliate of Borrower
        or
        any of its Subsidiaries except for:

       

      (a)  transactions
        (other the payment of management, consulting, monitoring, or advisory fees)
        between Borrower or its Subsidiaries, on the one hand, and any Affiliate
        of
        Borrower or its Subsidiaries, on the other hand, so long as such transactions
        (i) are upon fair and reasonable terms, (ii) are fully disclosed to
        Agent if they involve one or more payments by Borrower or its Subsidiaries
        in
        excess of $100,000 for any single transaction or series of transactions,
        and
        (iii) are no less favorable to Borrower or its Subsidiaries, as applicable,
        than would be obtained in an arm’s length transaction with a non-Affiliate;
        and

       

      (b)  the
        payment of reasonable fees, compensation, or employee benefit arrangements
        to,
        and any indemnity provided for the benefit of, outside directors of Borrower
        in
        the ordinary course of business and consistent with industry
        practice.

       

      (c)  Permitted
        Intercompany Advances.

       

      6.14  Use
        of Proceeds.  Use the proceeds of the
        Advances and the Term Loan for any purpose other than (a) on the Closing
        Date,
        (i) to repay, in full, the outstanding principal, accrued interest, and accrued
        fees and expenses owing to Existing Lender, and (ii) to pay transactional
        fees,
        costs, and expenses incurred in connection with this Agreement, the other
        Loan
        Documents, and the transactions contemplated hereby and thereby, and (b)
        thereafter, consistent with the terms and conditions hereof, for its lawful
        and
        permitted purposes.

       

      
        
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      6.15  Inventory
        and Equipment with Bailees.  Store the
        Inventory or Equipment of Borrower or its Subsidiaries at any time now or
        hereafter with a bailee, warehouseman, or similar party.

       

      6.16  Financial
        Covenants.

       

      (a)  Minimum
        EBITDA.  Fail to achieve EBITDA, measured on a quarter-end
        basis, of at least the required amount set forth in the following table for
        the
        applicable period set forth opposite thereto:

       

      
        	
                Required
                  Amount

              	
                Applicable
                  Period

              
	
                $603,000

              	
                For
                  the 3 month period ending 8/31/07

              
	
                $1,385,000

              	
                For
                  the 6 month period ending 11/30/07

              
	
                $2,323,000

              	
                For
                  the 9 month period ending 2/29/08

              
	
                $3,350,000

              	
                For
                  the 12 month period ending 5/31/08

              
	
                $3,481,000

              	
                For
                  the 12 month period ending 8/31/08

              
	
                $3,513,000

              	
                For
                  the 12 month period ending 11/30/08

              
	
                $3,492,000

              	
                For
                  the 12 month period ending 2/28/09

              
	
                $3,495,000

              	
                For
                  the 12 month period ending 5/31/09

              
	
                $3,498,000

              	
                For
                  the 12 month period ending 8/31/09

              
	
                $3,501,000

              	
                For
                  the 12 month period ending 11/30/09, and for the 12 month periods
                  ending
                  on the last day of each February, May, August and November
                  thereafter

              


      

      


      (b)  Minimum
        Fixed Charge Coverage Ratio.  Have a Fixed Charge Coverage
        Ratio, measured on a quarter-end basis, of less than the required ratio set
        forth in the following table for the 12 month period set forth opposite
        thereto:

       

      
        	
                Applicable
                  Ratio

              	
                Fiscal
                  Quarter Ending

              
	
                0.50:1.0

              	
                For
                  the 3 month period ending 8/31/07

              
	
                0.70:1.0

              	
                For
                  the 6 month period ending 11/30/07

              
	
                0.80:1.0

              	
                For
                  the 9 month period ending 2/29/08

              
	
                0.90:1.0

              	
                For
                  the 12 month period ending 5/31/08

              
	
                0.90:1.0

              	
                For
                  the 12 month period ending 8/31/08

              


      

       

       

      
        
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                1.00:1.0

              	
                For
                  the 12 month period ending 11/30/08

              
	
                1.00:1.0

              	
                For
                  the 12 month period ending 2/28/09

              
	
                1.10:1.0

              	
                For
                  the 12 month period ending 5/31/09

              
	
                1.20:1.0

              	
                For
                  the 12 month period ending 8/31/09

              
	
                1.20:1.0

              	
                For
                  the 12 month period ending 11/30/09, and for the 12 month periods
                  ending
                  on the last day of each February, May, August and November
                  thereafter

              


      

      


      (c)  Capital
        Expenditures.  Make Capital Expenditures in any fiscal year
        in excess of the amount set forth in the following table for the applicable
        period:

       

      
        	
                Fiscal
                  Year 2007

              	
                Fiscal
                  Year 2008

              	
                Fiscal
                  Year 2009

              	
                Fiscal
                  Year 2010

              	
                Fiscal
                  Year 2011

              
	
                $840,000

              	
                $600,000

              	
                $600,000

              	
                $600,000

              	
                $600,000

              


      

      


      7.  EVENTS
        OF DEFAULT.

       

      Any
        one
        or more of the following events shall constitute an event of default (each,
        an
“Event of Default”) under this Agreement:

       

      7.1  If
        Borrower fails to pay when due and payable, or when declared due and payable,
        (a) all or any portion of the Obligations consisting of interest, fees, or
        charges due the Lender Group, reimbursement of Lender Group Expenses, or
        other
        amounts (other than any portion thereof constituting principal) constituting
        Obligations (including any portion thereof that accrues after the commencement
        of an Insolvency Proceeding, regardless of whether allowed or allowable in
        whole
        or in part as a claim in any such Insolvency Proceeding), and such failure
        continues for a period of 3 Business Days, or (b) all or any portion of the
        principal of the Obligations;

       

      7.2  If
        Borrower or any of its Subsidiaries:

       

      (a)  fails
        to
        perform or observe any covenant or other agreement contained in any of
Sections 2.7, 5.2, 5.3, 5.4, 5.5, 5.8,
5.12, 5.14, 5.16,  5.17,
5.19
        and
6.1 through 6.16 of this Agreement or Section 6 of the Security
        Agreement;

       

      (b)  fails
        to
        perform or observe any covenant or other agreement contained in any of
Sections 5.6, 5.7, 5.9, 5.10, 5.11 and
5.15 of this Agreement and such
        failure continues for a period of 10 days
        after the earlier of (i) the date on which such failure shall first become
        known
        to any officer of Borrower or (ii) written notice thereof is given to
        Borrower by Agent; or

       

      (c)  fails
        to
        perform or observe any covenant or other agreement contained in this Agreement,
        or in any of the other Loan Documents, in each case, other than any such
        covenant or agreement that is the subject of another provision of this
Section 7 (in which event such other provision of this Section 7
        shall govern), and such failure continues for a period of 20 days after the
        earlier of (i) the date on which such failure shall first become known to
        any
        officer of Borrower or (ii) written notice thereof is given to Borrower by
        Agent;

       

       

      
        
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      7.3  If
        any
        material portion of Borrower’s or any of its Subsidiaries’ assets is attached,
        seized, subjected to a writ or distress warrant, or is levied upon, or comes
        into the possession of any third Person and the same is not discharged before
        the earlier of 30 days after the date it first arises or 5 days prior to
        the
        date on which such property or asset is subject to forfeiture by Borrower
        or the
        applicable Subsidiary;

       

      7.4  If
        an
        Insolvency Proceeding is commenced by Borrower or any of its
        Subsidiaries;

       

      7.5  If
        an
        Insolvency Proceeding is commenced against Borrower or any of its Subsidiaries
        and any of the following events occur: (a) Borrower or such Subsidiary consents
        to the institution of such Insolvency Proceeding against it, (b) the petition
        commencing the Insolvency Proceeding is not timely controverted, (c) the
        petition commencing the Insolvency Proceeding is not dismissed within 60
        calendar days of the date of the filing thereof, (d) an interim trustee is
        appointed to take possession of all or any substantial portion of the properties
        or assets of, or to operate all or any substantial portion of the business
        of,
        Borrower or any of its Subsidiaries, or (e) an order for relief shall have
        been
        issued or entered therein;

       

      7.6  If
        Borrower or any of its Subsidiaries is enjoined, restrained, or in any way
        prevented by court order from continuing to conduct all or any material part
        of
        its business affairs;

       

      7.7  If
        any
        judgment, order, or award involving $100,000 or more on an individual basis,
        or
        resulting in judgments, orders, or awards involving $150,000 or more in the
        aggregate (except to the extent fully covered by insurance pursuant to which
        the
        insurer has accepted liability therefor in writing) shall be entered or filed
        against Borrower or any of its Subsidiaries or with respect to any of their
        respective assets, and the same is not released, discharged, bonded against,
        or
        stayed pending appeal before the earlier of 30 days after the date it first
        arises or 5 days prior to the date on which such asset is subject to being
        forfeited by Borrower or the applicable Subsidiary;

       

      7.8  If
        there
        is a default in one or more agreements to which Borrower or any of its
        Subsidiaries is a party with one or more third Persons relative to Borrower’s or
        any of its Subsidiaries’ Indebtedness involving an aggregate amount of $100,000
        or more, and such default (i) occurs at the final maturity of the obligations
        thereunder, or (ii) results in a right by such third Person(s), irrespective
        of
        whether exercised, to accelerate the maturity of Borrower’s or the applicable
        Subsidiary’s obligations thereunder;

       

      7.9  If
        any
        warranty, representation, statement, or Record made herein or in any other
        Loan
        Document or delivered to Agent or any Lender in connection with this Agreement
        or any other Loan Document proves to be untrue in any material respect (except
        that such materiality qualifier shall not be applicable to any representations
        and warranties that already are qualified or modified by materiality in the
        text
        thereof) as of the date of issuance or making or deemed making
        thereof;

       

      7.10  If
        the
        obligation of any Guarantor under the Guaranty is limited or terminated by
        operation of law or by such Guarantor, or any such Guarantor becomes the
        subject
        of an Insolvency Proceeding;

       

      7.11  If
        the
        Security Agreement or any other Loan Document that purports to create a Lien,
        shall, for any reason, fail or cease to create a valid and perfected and,
        except
        to the extent permitted by the terms hereof or thereof, first priority Lien
        on
        or security interest in the Collateral covered hereby or thereby, except
        as a
        result of a disposition of the applicable Collateral in a transaction permitted
        under this Agreement; or

       

      7.12  Any
        provision of any Loan Document shall at any time for any reason be declared
        to
        be null and void, or the validity or enforceability thereof shall be contested
        by Borrower or its Subsidiaries, or a proceeding shall be commenced by Borrower
        or its Subsidiaries, or by any Governmental Authority having jurisdiction
        over
        Borrower or its Subsidiaries, seeking to establish the invalidity or
        unenforceability thereof, or Borrower or its Subsidiaries shall deny that
        Borrower or its Subsidiaries has any liability or obligation purported to
        be
        created under any Loan Document

       

       

      
        
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      7.13  Borrower
        shall have Excess Availability and Qualified Cash of less than $1,000,000
        upon
        making any scheduled payment in respect of the Dove Indebtedness.

       

      8.  THE
        LENDER GROUP’S RIGHTS AND REMEDIES.

       

      8.1  Rights
        and Remedies.  Upon the occurrence, and
        during the continuation, of an Event of Default, the Required Lenders (at
        their
        election but without notice of their election and without demand) may authorize
        and instruct Agent to do any one or more of the following on behalf of the
        Lender Group (and Agent, acting upon the instructions of the Required Lenders,
        shall do the same on behalf of the Lender Group), all of which are authorized
        by
        Borrower:

       

      (a)  Declare
        all or any portion of the Obligations, whether evidenced by this Agreement,
        by
        any of the other Loan Documents, or otherwise, immediately due and
        payable;

       

      (b)  Cease
        advancing money or extending credit to or for the benefit of Borrower under
        this
        Agreement, under any of the Loan Documents, or under any other agreement
        between
        Borrower and the Lender Group;

       

      (c)  Terminate
        this Agreement and any of the other Loan Documents as to any future liability
        or
        obligation of the Lender Group, but without affecting any of the Agent’s Liens
        in the Collateral and without affecting the Obligations; and

       

      (d)  The
        Lender Group shall have all other rights and remedies available at law or
        in
        equity or pursuant to any other Loan Document.

       

      The
        foregoing to the contrary notwithstanding, upon the occurrence of any Event
        of
        Default described in Section 7.4 or Section 7.5, in addition to
        the remedies set forth above, without any notice to Borrower or any other
        Person
        or any act by the Lender Group, the Commitments shall automatically terminate
        and the Obligations then outstanding, together with all accrued and unpaid
        interest thereon and all fees and all other amounts due under this Agreement
        and
        the other Loan Documents, shall automatically and immediately become due
        and
        payable, without presentment, demand, protest, or notice of any kind, all
        of
        which are expressly waived by Borrower.

       

      8.2  Remedies
        Cumulative.  The rights and remedies of
        the Lender Group under this Agreement, the other Loan Documents, and all
        other
        agreements shall be cumulative.  The Lender Group shall have all other
        rights and remedies not inconsistent herewith as provided under the Code,
        by
        law, or in equity.  No exercise by the Lender Group of one right or
        remedy shall be deemed an election, and no waiver by the Lender Group of
        any
        Event of Default shall be deemed a continuing waiver.  No delay by the
        Lender Group shall constitute a waiver, election, or acquiescence by
        it.

       

      9.  TAXES
        AND EXPENSES.

       

          If
        Borrower
        or its Subsidiaries fail to pay any monies (whether taxes, assessments,
        insurance premiums, or, in the case of leased properties or assets, rents
        or
        other amounts payable under such leases) due to third Persons, or fails to
        make
        any deposits or furnish any required proof of payment or deposit, all as
        required under the terms of this Agreement, then, Agent, in its sole discretion
        and without prior notice to Borrower, may do any or all of the
        following:  (a) make payment of the same or any part thereof, (b) set
        up such reserves against the Borrowing Base or the Maximum Revolver Amount
        as
        Agent deems necessary to protect the Lender Group from the exposure created
        by
        such failure, or (c) in the case of the failure to comply with Section
        5.8 hereof, obtain and maintain insurance policies of the type described
        in
Section 5.8 and take any action with respect to such policies as Agent
        deems prudent.  Any such amounts paid by Agent shall constitute Lender
        Group Expenses and any such payments shall not constitute an agreement by
        the
        Lender 

       

      
        
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      Group
        to
        make similar payments in the future or a waiver by the Lender Group of any
        Event
        of Default under this Agreement.  Agent need not inquire as to, or
        contest the validity of, any such expense, tax, or Lien and the receipt of
        the
        usual official notice for the payment thereof shall be conclusive evidence
        that
        the same was validly due and owing.

       

      10.  WAIVERS;
        INDEMNIFICATION.

       

      10.1  Demand;
        Protest; etc.  Borrower waives demand,
        protest, notice of protest, notice of default or dishonor, notice of payment
        and
        nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
        or renewal of documents, instruments, chattel paper, and guarantees at any
        time
        held by the Lender Group on which Borrower may in any way be
        liable.

       

      10.2  The
        Lender Group’s Liability for
        Collateral.  Borrower hereby agrees
        that:  (a) so long as Agent complies with its obligations, if
        any, under the Code, the Lender Group shall not in any way or manner be liable
        or responsible for:  (i) the safekeeping of the Collateral, (ii) any
        loss or damage thereto occurring or arising in any manner or fashion from
        any
        cause, (iii) any diminution in the value thereof, or (iv) any act or default of
        any carrier, warehouseman, bailee, forwarding agency, or other Person, and
        (b)
        all risk of loss, damage, or destruction of the Collateral shall be borne
        by
        Borrower.

       

      10.3  Indemnification.  Borrower
        shall pay, indemnify, defend, and hold the Agent-Related Persons, the
        Lender-Related Persons, and each Participant (each, an “Indemnified
        Person”) harmless (to the fullest extent permitted by law) from and against
        any and all claims, demands, suits, actions, investigations, proceedings,
        liabilities, fines, costs, penalties, and damages, and all reasonable fees
        and
        disbursements of attorneys, experts, or consultants and all other costs and
        expenses actually incurred in connection therewith or in connection with
        the
        enforcement of this indemnification (as and when they are incurred and
        irrespective of whether suit is brought), at any time asserted against, imposed
        upon, or incurred by any of them (a) in connection with or as a result of
        or
        related to the execution, delivery, enforcement, performance, or administration
        (including any restructuring or workout with respect hereto) of this Agreement,
        any of the other Loan Documents, or the transactions contemplated hereby
        or
        thereby or the monitoring of Borrower’s and its Subsidiaries’ compliance with
        the terms of the Loan Documents, (b) with respect to any investigation,
        litigation, or proceeding related to this Agreement, any other Loan Document,
        or
        the use of the proceeds of the credit provided hereunder (irrespective of
        whether any Indemnified Person is a party thereto), or any act, omission,
        event,
        or circumstance in any manner related thereto, and (c) in connection with
        or arising out of any presence or release of Hazardous Materials at, on,
        under,
        to or from any assets or properties owned, leased or operated by Borrower
        or any
        of its Subsidiaries or any Environmental Actions, Environmental Liabilities
        and
        Costs or Remedial Actions related in any way to any such assets or properties
        of
        Borrower or any of its Subsidiaries (each and all of the foregoing, the
“Indemnified Liabilities”).  The foregoing to the contrary
        notwithstanding, Borrower shall have no obligation to any Indemnified Person
        under this Section 10.3 with respect to any Indemnified Liability that a
        court of competent jurisdiction finally determines to have resulted from
        the
        gross negligence or willful misconduct of such Indemnified
        Person.  This provision shall survive the termination of this
        Agreement and the repayment of the Obligations.  If any Indemnified
        Person makes any payment to any other Indemnified Person with respect to
        an
        Indemnified Liability as to which Borrower was required to indemnify the
        Indemnified Person receiving such payment, the Indemnified Person making
        such
        payment is entitled to be indemnified and reimbursed by Borrower with respect
        thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
        APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES
        WHICH
        IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION
        OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

       

      11.  NOTICES.

       

      
        
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          Unless
        otherwise provided in this Agreement, all notices or demands by Borrower
        or
        Agent to the other relating to this Agreement or any other Loan Document
        shall
        be in writing and (except for financial statements and other informational
        documents which may be sent by first-class mail, postage prepaid) shall be
        personally delivered or sent by registered or certified mail (postage prepaid,
        return receipt requested), overnight courier, electronic mail (at such email
        addresses as Borrower or Agent, as applicable, may designate to each other
        in
        accordance herewith), or telefacsimile to Borrower or Agent, as the case
        may be,
        at its address set forth below:

      


      
        	
                If
                  to Borrower:

              	
                TELTRONICS,
                  INC.

              
	 	
                2150
                  Whitfield Industrial Way

              
	 	
                Sarasota,
                  Florida  34243-4046

              
	 	
                Attn:
                  Ewen Cameron, President and Chief Executive Officer

              
	 	
                Fax
                  No. __________________

              
	 	 
	
                with
                  copies to:

              	
                TELTRONICS,
                  INC.

              
	 	
                2150
                  Whitfield Industrial Way

              
	 	
                Sarasota,
                  Florida  34243-4046

              
	 	
                Attn:
                  Russell R. Lee III, Vice President of Finance

              
	 	
                Fax
                  No. __________________

              
	 	 
	 	
                BLAIR
                  & ROACH, LLP

              
	 	
                2645
                  Sheridan Drive

              
	 	
                Tonawanda,
                  New York  14150

              
	 	
                Attn:
                  John N. Blair, Esq.

              
	 	
                Fax
                  No.: 716.834.9197

              
	 	 
	
                If
                  to Agent:

              	
                WELLS
                  FARGO FOOTHILL, INC.

              
	 	
                One
                  Boston Place

              
	 	
                Suite
                  1800

              
	 	
                Boston,
                  Massachusetts 02108

              
	 	
                Attn:
                  Business Finance Division Manager

              
	 	
                Fax
                  No.:  617.523.1697

              
	 	 
	
                with
                  copies to:

              	
                BUCHALTER
                  NEMER

              
	 	
                1000
                  Wilshire Boulevard, Suite 1500

              
	 	
                Los
                  Angeles, California  90017

              
	 	
                Attn:  Robert
                  J. Davidson, Esq.

              
	 	
                Fax
                  No.:  213.891.5692

                 

              


      

       

          Agent
        and
        Borrower may change the address at which they are to receive notices hereunder,
        by notice in writing in the foregoing manner given to the other
        party.  All notices or demands sent in accordance with this Section
        11, other than notices by Agent in connection with enforcement rights
        against the Collateral under the provisions of the Code, shall be deemed
        received on the earlier of the date of actual receipt or 3 Business Days
        after
        the deposit thereof in the mail.  Borrower acknowledges and agrees
        that notices sent by the Lender Group in connection with the exercise of
        enforcement rights against Collateral under the provisions of the Code shall
        be
        deemed sent when deposited in the mail or personally delivered, or, where
        permitted by law, transmitted by telefacsimile or any other method set forth
        above.

       

      12.  CHOICE
        OF LAW AND VENUE; JURY TRIAL WAIVER.

       

      
        
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      (a)  THE
        VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
        PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER
        LOAN
        DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
        AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS
        ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
        UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
        OF
        NEW YORK.

       

      (b)  THE
        PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
        THIS
        AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY
        IN THE
        STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED
        IN
        THE BOROUGH  OF MANHATTAN, STATE OF NEW YORK; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL
        OR
        OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
        JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
        OR
        OTHER PROPERTY MAY BE FOUND.  BORROWER AND EACH MEMBER OF THE LENDER
        GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
        MAY
        HAVE TO ASSERT THE DOCTRINE OF FORUMNONCONVENIENS OR TO
        OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
        THIS
SECTION 12(b).

       

      (c)  BORROWER
        AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS
        TO A
        JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
        OF
        THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
        CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON
        LAW OR
        STATUTORY CLAIMS.  BORROWER AND EACH MEMBER OF THE LENDER GROUP
        REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
        WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
        COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
        FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

       

      13.  ASSIGNMENTS
        AND PARTICIPATIONS; SUCCESSORS.

       

      13.1  Assignments
        and Participations.

       

      (a)  Any
        Lender may assign and delegate to one or more assignees (each an
“Assignee”) that are Eligible Transferees all or any portion of the
        Obligations, the Commitments and the other rights and obligations of such
        Lender
        hereunder and under the other Loan Documents, in a minimum amount (unless
        waived
        by the Agent) of $5,000,000 (except such minimum amount shall not apply to
        (x)
        an assignment or delegation by any Lender to any other Lender or an Affiliate
        of
        any Lender or (y) a group of new Lenders, each of whom is an Affiliate of
        each
        other or a fund or account managed by any such new Lender or an Affiliate
        of
        such new Lender to the extent that the aggregate amount to be assigned to
        all
        such new Lenders is at least $5,000,000); provided, however, that
        Borrower and Agent may continue to deal solely and directly with such Lender
        in
        connection with the interest so assigned to an Assignee until (i) written
        notice
        of such assignment, together with payment instructions, addresses, and related
        information with respect to the Assignee, have been given to Borrower and
        Agent
        by such Lender and the Assignee, (ii) such Lender and its Assignee have
        delivered to Borrower and Agent an Assignment and Acceptance and Agent has
        notified the assigning Lender of its receipt thereof in accordance with
Section 13.1(b), and (iii) unless waived by the Agent, the assigning
        Lender or Assignee has paid to Agent for Agent’s separate account a processing
        fee in the amount of $3,500.  Anything contained herein to the
        contrary notwithstanding, the payment of any fees shall 

       

       

      
        
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      not
        be
        required and the Assignee need not be an Eligible Transferee if such assignment
        is in connection with any merger, consolidation, sale, transfer, or other
        disposition of all or any substantial portion of the business or loan portfolio
        of the assigning Lender.

       

      (b)  From
        and
        after the date that Agent notifies the assigning Lender (with a copy to
        Borrower) that it has received an executed Assignment and Acceptance and,
        if
        applicable, payment of the required processing fee, (i) the Assignee thereunder
        shall be a party hereto and, to the extent that rights and obligations hereunder
        have been assigned to it pursuant to such Assignment and Acceptance, shall
        have
        the rights and obligations of a Lender under the Loan Documents, and (ii)
        the
        assigning Lender shall, to the extent that rights and obligations hereunder
        and
        under the other Loan Documents have been assigned by it pursuant to such
        Assignment and Acceptance, relinquish its rights (except with respect to
        Section 10.3 hereof) and be released from any future obligations under
        this Agreement (and in the case of an Assignment and Acceptance covering
        all or
        the remaining portion of an assigning Lender’s rights and obligations under this
        Agreement and the other Loan Documents, such Lender shall cease to be a party
        hereto and thereto), and such assignment shall effect a novation among Borrower,
        the assigning Lender, and the Assignee; provided, however, that
        nothing contained herein shall release any assigning Lender from obligations
        that survive the termination of this Agreement, including such assigning
        Lender’s obligations under Section 15 and Section 17.9(a) of this
        Agreement.

       

      (c)  By
        executing and delivering an Assignment and Acceptance, the assigning Lender
        thereunder and the Assignee thereunder confirm to and agree with each other
        and
        the other parties hereto as follows:  (i) other than as provided in
        such Assignment and Acceptance, such assigning Lender makes no representation
        or
        warranty and assumes no responsibility with respect to any statements,
        warranties or representations made in or in connection with this Agreement
        or
        the execution, legality, validity, enforceability, genuineness, sufficiency
        or
        value of this Agreement or any other Loan Document furnished pursuant hereto,
        (ii) such assigning Lender makes no representation or warranty and assumes
        no
        responsibility with respect to the financial condition of Borrower or the
        performance or observance by Borrower of any of its obligations under this
        Agreement or any other Loan Document furnished pursuant hereto, (iii) such
        Assignee confirms that it has received a copy of this Agreement, together
        with
        such other documents and information as it has deemed appropriate to make
        its
        own credit analysis and decision to enter into such Assignment and Acceptance,
        (iv) such Assignee will, independently and without reliance upon Agent, such
        assigning Lender or any other Lender, and based on such documents and
        information as it shall deem appropriate at the time, continue to make its
        own
        credit decisions in taking or not taking action under this Agreement, (v)
        such
        Assignee appoints and authorizes Agent to take such actions and to exercise
        such
        powers under this Agreement as are delegated to Agent, by the terms hereof,
        together with such powers as are reasonably incidental thereto, and (vi)
        such
        Assignee agrees that it will perform all of the obligations which by the
        terms
        of this Agreement are required to be performed by it as a Lender.

       

      (d)  Immediately
        upon Agent’s receipt of the required processing fee, if applicable, and delivery
        of notice to the assigning Lender pursuant to Section 13.1(b), this
        Agreement shall be deemed to be amended to the extent, but only to the extent,
        necessary to reflect the addition of the Assignee and the resulting adjustment
        of the Commitments arising therefrom.  The Commitment allocated to
        each Assignee shall reduce such Commitments of the assigning Lender pro
        tanto.

       

      (e)  Any
        Lender may at any time sell to one or more commercial banks, financial
        institutions, or other Persons (a “Participant”) participating interests
        in all or any portion of its Obligations, its Commitment, and the other rights
        and interests of that Lender (the “Originating Lender”) hereunder and
        under the other Loan Documents; provided, however, that (i) the
        Originating Lender shall remain a “Lender” for all purposes of this Agreement
        and the other Loan Documents and the Participant receiving the participating
        interest in the Obligations, the Commitments, and the other rights and interests
        of the Originating Lender hereunder shall not constitute a “Lender” hereunder or
        under the other Loan Documents and the Originating Lender’s obligations under
        this Agreement shall remain unchanged, (ii) the Originating Lender shall
        remain


       

       

      
        
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      solely
        responsible for the performance of such obligations, (iii) Borrower, Agent,
        and
        the Lenders shall continue to deal solely and directly with the Originating
        Lender in connection with the Originating Lender’s rights and obligations under
        this Agreement and the other Loan Documents, (iv) no Lender shall transfer
        or
        grant any participating interest under which the Participant has the right
        to
        approve any amendment to, or any consent or waiver with respect to, this
        Agreement or any other Loan Document, except to the extent such amendment
        to, or
        consent or waiver with respect to this Agreement or of any other Loan Document
        would (A) extend the final maturity date of the Obligations hereunder in
        which such Participant is participating, (B) reduce the interest rate
        applicable to the Obligations hereunder in which such Participant is
        participating, (C) release all or substantially all of the Collateral or
        guaranties (except to the extent expressly provided herein or in any of the
        Loan
        Documents) supporting the Obligations hereunder in which such Participant
        is
        participating, (D) postpone the payment of, or reduce the amount of, the
        interest or fees payable to such Participant through such Lender, or (E)
        change
        the amount or due dates of scheduled principal repayments or prepayments
        or
        premiums, and (v) all amounts payable by Borrower hereunder shall be determined
        as if such Lender had not sold such participation, except that, if amounts
        outstanding under this Agreement are due and unpaid, or shall have been declared
        or shall have become due and payable upon the occurrence of an Event of Default,
        each Participant shall be deemed to have the right of set off in respect
        of its
        participating interest in amounts owing under this Agreement to the same
        extent
        as if the amount of its participating interest were owing directly to it
        as a
        Lender under this Agreement.  The rights of any Participant only shall
        be derivative through the Originating Lender with whom such Participant
        participates and no Participant shall have any rights under this Agreement
        or
        the other Loan Documents or any direct rights as to the other Lenders, Agent,
        Borrower, the Collections of Borrower or its Subsidiaries, the Collateral,
        or
        otherwise in respect of the Obligations.  No Participant shall have
        the right to participate directly in the making of decisions by the Lenders
        among themselves.

       

      (f)  In
        connection with any such assignment or participation or proposed assignment
        or
        participation, a Lender may, subject to the provisions of Section
        17.9,  disclose all documents and information which it now or
        hereafter may have relating to Borrower and its Subsidiaries and their
        respective businesses.

       

      (g)  Any
        other
        provision in this Agreement notwithstanding, any Lender may at any time create
        a
        security interest in, or pledge, all or any portion of its rights under and
        interest in this Agreement in favor of any Federal Reserve Bank in accordance
        with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation
        31 CFR
§203.24, and such Federal Reserve Bank may enforce such pledge or security
        interest in any manner permitted under applicable law.

       

      13.2  Successors.  This
        Agreement shall bind and inure to the benefit of the respective successors
        and
        assigns of each of the parties; provided, however, that Borrower
        may not assign this Agreement or any rights or duties hereunder without the
        Lenders’ prior written consent and any prohibited assignment shall be absolutely
        void ab initio.  No consent to assignment by the Lenders
        shall release Borrower from its Obligations.  A Lender may assign this
        Agreement and the other Loan Documents and its rights and duties hereunder
        and
        thereunder pursuant to Section 13.1 hereof and, except as expressly
        required pursuant to Section 13.1 hereof, no consent or approval by
        Borrower is required in connection with any such assignment.

       

      14.  AMENDMENTS;
        WAIVERS.

       

      14.1  Amendments
        and Waivers.  No amendment or waiver of
        any provision of this Agreement or any other Loan Document (other than Bank
        Product Agreements or the Fee Letter), and no consent with respect to any
        departure by Borrower therefrom, shall be effective unless the same shall
        be in
        writing and signed by the Required Lenders (or by Agent at the written request
        of the Required Lenders) and Borrower and then any such waiver or consent
        shall
        be effective, but only in the specific instance and for the specific purpose
        for
        which given; provided, however, that no such waiver, amendment, or
        consent shall, unless in writing and signed by all of the Lenders directly
        affected thereby and Borrower, do any of the following:

       

      
        
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      (a)  increase
        or extend any Commitment of any Lender,

       

      (b)  postpone
        or delay any date fixed by this Agreement or any other Loan Document for
        any
        payment of principal, interest, fees, or other amounts due hereunder or under
        any other Loan Document,

       

      (c)  reduce
        the principal of, or the rate of interest on, any loan or other extension
        of
        credit hereunder, or reduce any fees or other amounts payable hereunder or
        under
        any other Loan Document,

       

      (d)  change
        the Pro Rata Share that is required to take any action hereunder,

       

      (e)  amend
        or
        modify this Section or any provision of this Agreement providing for consent
        or
        other action by all Lenders,

       

      (f)  other
        than as permitted by Section 15.11, release Agent’s Lien in and to any of
        the Collateral,

       

      (g)  change
        the definition of “Required Lenders” or “Pro Rata Share”,

       

      (h)  contractually
        subordinate any of the Agent’s Liens,

       

      (i)  other
        than in connection with a merger, liquidation, dissolution or sale of such
        Person expressly permitted by the terms hereof or the other Loan Documents,
        release Borrower or any Guarantor from any obligation for the payment of
        money,

       

      (j)  amend
        any
        of the provisions of Section 2.4(b)(i) or (ii),

       

      (k)  change
        the definition of Borrowing Base or the definitions of Eligible Accounts,
        Eligible Inventory, Maximum Revolver Amount, Term Loan Amount, or change
        Section 2.1(b), or

       

      (l)  amend
        any
        of the provisions of Section 15.

       

      and,
        provided further, however, that no amendment, waiver or consent
        shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender,
        as applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
        Lender, as applicable, under this Agreement or any other Loan
        Document.  The foregoing notwithstanding, any amendment, modification,
        waiver, consent, termination, or release of, or with respect to, any provision
        of this Agreement or any other Loan Document that relates only to the
        relationship of the Lender Group among themselves, and that does not affect
        the
        rights or obligations of Borrower, shall not require consent by or the agreement
        of Borrower.

       

      14.2  Replacement
        of Holdout Lender.

       

      (a)  If
        any
        action to be taken by the Lender Group or Agent hereunder requires the unanimous
        consent, authorization, or agreement of all Lenders, and a Lender (“Holdout
        Lender”) fails to give its consent, authorization, or agreement, then Agent,
        upon at least 5 Business Days prior irrevocable notice to the Holdout Lender,
        may permanently replace the Holdout Lender with one or more substitute Lenders
        (each, a “Replacement Lender”), and the Holdout Lender shall have no
        right to refuse to be replaced hereunder.  Such notice to replace the
        Holdout Lender shall specify an effective date for such replacement, which
        date
        shall not be later than 15 Business Days after the date such notice is
        given.

       

      (b)  Prior
        to
        the effective date of such replacement, the Holdout Lender and each Replacement
        Lender shall execute and deliver an Assignment and Acceptance, subject only
        to
        the Holdout Lender being repaid its share of the outstanding Obligations
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      the
        Risk
        Participation Liability) without any premium or penalty of any kind
        whatsoever.  If the Holdout Lender shall refuse or fail to execute and
        deliver any such Assignment and Acceptance prior to the effective date of
        such
        replacement, the Holdout Lender shall be deemed to have executed and delivered
        such Assignment and Acceptance.  The replacement of any Holdout Lender
        shall be made in accordance with the terms of Section
        13.1.  Until such time as the Replacement Lenders shall have
        acquired all of the Obligations, the Commitments, and the other rights and
        obligations of the Holdout Lender hereunder and under the other Loan Documents,
        the Holdout Lender shall remain obligated to make the Holdout Lender’s Pro Rata
        Share of Advances and to purchase a participation in each Letter of Credit,
        in
        an amount equal to its Pro Rata Share of the Risk Participation Liability
        of
        such Letter of Credit.

       

      14.3  No
        Waivers; Cumulative Remedies.  No
        failure by Agent or any Lender to exercise any right, remedy, or option under
        this Agreement or any other Loan Document, or delay by Agent or any Lender in
        exercising the same, will operate as a waiver thereof.  No waiver by
        Agent or any Lender will be effective unless it is in writing, and then only
        to
        the extent specifically stated.  No waiver by Agent or any Lender on
        any occasion shall affect or diminish Agent’s and each Lender’s rights
        thereafter to require strict performance by Borrower of any provision of
        this
        Agreement.  Agent’s and each Lender’s rights under this Agreement and
        the other Loan Documents will be cumulative and not exclusive of any other
        right
        or remedy that Agent or any Lender may have.

       

      15.  AGENT;
        THE LENDER GROUP.

       

      15.1  Appointment
        and Authorization of Agent.  Each Lender
        hereby designates and appoints WFF as its representative under this Agreement
        and the other Loan Documents and each Lender hereby irrevocably authorizes
        Agent
        to execute and deliver each of the other Loan Documents on its behalf and
        to
        take such other action on its behalf under the provisions of this Agreement
        and
        each other Loan Document and to exercise such powers and perform such duties
        as
        are expressly delegated to Agent by the terms of this Agreement or any other
        Loan Document, together with such powers as are reasonably incidental
        thereto.  Agent agrees to act as such on the express conditions
        contained in this Section 15.  The provisions of this
Section 15 are solely for the benefit of Agent and the Lenders, and
        Borrower and its Subsidiaries shall have no rights as a third party beneficiary
        of any of the provisions contained herein.  Any provision to the
        contrary contained elsewhere in this Agreement or in any other Loan Document
        notwithstanding, Agent shall not have any duties or responsibilities, except
        those expressly set forth herein, nor shall Agent have or be deemed to have
        any
        fiduciary relationship with any Lender, and no implied covenants, functions,
        responsibilities, duties, obligations or liabilities shall be read into this
        Agreement or any other Loan Document or otherwise exist against Agent; it
        being
        expressly understood and agreed that the use of the word “Agent” is for
        convenience only, that WFF is merely the representative of the Lenders, and
        only
        has the contractual duties set forth herein.  Except as expressly
        otherwise provided in this Agreement, Agent shall have and may use its sole
        discretion with respect to exercising or refraining from exercising any
        discretionary rights or taking or refraining from taking any actions that
        Agent
        expressly is entitled to take or assert under or pursuant to this Agreement
        and
        the other Loan Documents.  Without limiting the generality of the
        foregoing, or of any other provision of the Loan Documents that provides
        rights
        or powers to Agent, Lenders agree that Agent shall have the right to exercise
        the following powers as long as this Agreement remains in effect:  (a)
        maintain, in accordance with its customary business practices, ledgers and
        records reflecting the status of the Obligations, the Collateral, the
        Collections of Borrower and its Subsidiaries, and related matters, (b) execute
        or file any and all financing or similar statements or notices, amendments,
        renewals, supplements, documents, instruments, proofs of claim, notices and
        other written agreements with respect to the Loan Documents, (c) make Advances,
        for itself or on behalf of Lenders as provided in the Loan Documents, (d)
        exclusively receive, apply, and distribute the Collections of Borrower and
        its
        Subsidiaries as provided in the Loan Documents, (e) open and maintain such
        bank
        accounts and cash management arrangements as Agent deems necessary and
        appropriate in accordance with the Loan Documents for the foregoing purposes
        with respect to the Collateral and the Collections of Borrower and its
        Subsidiaries, (f) perform, exercise, and enforce any and all other rights
        and remedies of the Lender Group with respect to Borrower or its Subsidiaries,
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      Borrower
        and its Subsidiaries, or otherwise related to any of same as provided in
        the
        Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent
        may
        deem necessary or appropriate for the performance and fulfillment of its
        functions and powers pursuant to the Loan Documents.

       

      15.2  Delegation
        of Duties.  Agent may execute any of its
        duties under this Agreement or any other Loan Document by or through agents,
        employees or attorneys in fact and shall be entitled to advice of counsel
        concerning all matters pertaining to such duties.  Agent shall not be
        responsible for the negligence or misconduct of any agent or attorney in
        fact
        that it selects as long as such selection was made without gross negligence
        or
        willful misconduct.

       

      15.3  Liability
        of Agent.  None of the Agent-Related
        Persons shall (a) be liable for any action taken or omitted to be taken by
        any
        of them under or in connection with this Agreement or any other Loan Document
        or
        the transactions contemplated hereby (except for its own gross negligence
        or
        willful misconduct), or (b) be responsible in any manner to any of the Lenders
        for any recital, statement, representation or warranty made by Borrower or
        any
        of its Subsidiaries or Affiliates, or any officer or director thereof, contained
        in this Agreement or in any other Loan Document, or in any certificate, report,
        statement or other document referred to or provided for in, or received by
        Agent
        under or in connection with, this Agreement or any other Loan Document, or
        the
        validity, effectiveness, genuineness, enforceability or sufficiency of this
        Agreement or any other Loan Document, or for any failure of Borrower or its
        Subsidiaries or any other party to any Loan Document to perform its obligations
        hereunder or thereunder.  No Agent-Related Person shall be under any
        obligation to any Lender to ascertain or to inquire as to the observance
        or
        performance of any of the agreements contained in, or conditions of, this
        Agreement or any other Loan Document, or to inspect the books and records
        or
        properties of Borrower or its Subsidiaries.

       

      15.4  Reliance
        by Agent.  Agent shall be entitled to
        rely, and shall be fully protected in relying, upon any writing, resolution,
        notice, consent, certificate, affidavit, letter, telegram, telefacsimile
        or
        other electronic method of transmission, telex or telephone message, statement
        or other document or conversation believed by it to be genuine and correct
        and
        to have been signed, sent, or made by the proper Person or Persons, and upon
        advice and statements of legal counsel (including counsel to Borrower or
        counsel
        to any Lender), independent accountants and other experts selected by
        Agent.  Agent shall be fully justified in failing or refusing to take
        any action under this Agreement or any other Loan Document unless Agent shall
        first receive such advice or concurrence of the Lenders as it deems appropriate
        and until such instructions are received, Agent shall act, or refrain from
        acting, as it deems advisable.  If Agent so requests, it shall first
        be indemnified to its reasonable satisfaction by the Lenders against any
        and all
        liability and expense that may be incurred by it by reason of taking or
        continuing to take any such action.  Agent shall in all cases be fully
        protected in acting, or in refraining from acting, under this Agreement or
        any
        other Loan Document in accordance with a request or consent of the requisite
        Lenders and such request and any action taken or failure to act pursuant
        thereto
        shall be binding upon all of the Lenders.

       

      15.5  Notice
        of Default or Event of Default.  Agent
        shall not be deemed to have knowledge or notice of the occurrence of any
        Default
        or Event of Default, except with respect to defaults in the payment of
        principal, interest, fees, and expenses required to be paid to Agent for
        the
        account of the Lenders and, except with respect to Events of Default of which
        Agent has actual knowledge, unless Agent shall have received written notice
        from
        a Lender or Borrower referring to this Agreement, describing such Default
        or
        Event of Default, and stating that such notice is a “notice of
        default.”  Agent promptly will notify the Lenders of its receipt of
        any such notice or of any Event of Default of which Agent has actual
        knowledge.  If any Lender obtains actual knowledge of any Event of
        Default, such Lender promptly shall notify the other Lenders and Agent of
        such
        Event of Default.  Each Lender shall be solely responsible for giving
        any notices to its Participants, if any.  Subject to Section
        15.4, Agent shall take such action with respect to such Default or Event
        of
        Default as may be requested by the Required Lenders in accordance with
Section 8; provided, however, that unless and until Agent
        has received any such request, Agent may (but shall not be obligated to)
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      action,
        or refrain from taking such action, with respect to such Default or Event
        of
        Default as it shall deem advisable.

       

      15.6  Credit
        Decision.  Each Lender acknowledges that
        none of the Agent-Related Persons has made any representation or warranty
        to it,
        and that no act by Agent hereinafter taken, including any review of the affairs
        of Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute
        any representation or warranty by any Agent-Related Person to any
        Lender.  Each Lender represents to Agent that it has, independently
        and without reliance upon any Agent-Related Person and based on such documents
        and information as it has deemed appropriate, made its own appraisal of and
        investigation into the business, prospects, operations, property, financial
        and
        other condition and creditworthiness of Borrower or any other Person party
        to a
        Loan Document, and all applicable bank regulatory laws relating to the
        transactions contemplated hereby, and made its own decision to enter into
        this
        Agreement and to extend credit to Borrower.  Each Lender also
        represents that it will, independently and without reliance upon any
        Agent-Related Person and based on such documents and information as it shall
        deem appropriate at the time, continue to make its own credit analysis,
        appraisals and decisions in taking or not taking action under this Agreement
        and
        the other Loan Documents, and to make such investigations as it deems necessary
        to inform itself as to the business, prospects, operations, property, financial
        and other condition and creditworthiness of Borrower or any other Person
        party
        to a Loan Document.  Except for notices, reports, and other documents
        expressly herein required to be furnished to the Lenders by Agent, Agent
        shall
        not have any duty or responsibility to provide any Lender with any credit
        or
        other information concerning the business, prospects, operations, property,
        financial and other condition or creditworthiness of Borrower or any other
        Person party to a Loan Document that may come into the possession of any
        of the
        Agent-Related Persons.

       

      15.7  Costs
        and Expenses; Indemnification.  Agent
        may incur and pay Lender Group Expenses to the extent Agent reasonably deems
        necessary or appropriate for the performance and fulfillment of its functions,
        powers, and obligations pursuant to the Loan Documents, including court costs,
        attorneys fees and expenses, fees and expenses of financial accountants,
        advisors, consultants, and appraisers, costs of collection by outside collection
        agencies, auctioneer fees and expenses, and costs of security guards or
        insurance premiums paid to maintain the Collateral, whether or not Borrower
        is
        obligated to reimburse Agent or Lenders for such expenses pursuant to this
        Agreement or otherwise.  Agent is authorized and directed to deduct
        and retain sufficient amounts from the Collections of Borrower and its
        Subsidiaries received by Agent to reimburse Agent for such out-of-pocket
        costs
        and expenses prior to the distribution of any amounts to Lenders.  In
        the event Agent is not reimbursed for such costs and expenses by Borrower
        or its
        Subsidiaries, each Lender hereby agrees that it is and shall be obligated
        to pay
        to Agent such Lender’s Pro Rata Share thereof.  Whether or not the
        transactions contemplated hereby are consummated, the Lenders shall indemnify
        upon demand the Agent-Related Persons (to the extent not reimbursed by or
        on
        behalf of Borrower and without limiting the obligation of Borrower to do
        so),
        according to their Pro Rata Shares, from and against any and all Indemnified
        Liabilities; provided, however, that no Lender shall be liable for
        the payment to any Agent-Related Person of any portion of such Indemnified
        Liabilities resulting solely from such Person’s gross negligence or willful
        misconduct nor shall any Lender be liable for the obligations of any Defaulting
        Lender in failing to make an Advance or other extension of credit
        hereunder.  Without limitation of the foregoing, each Lender shall
        reimburse Agent upon demand for such Lender’s Pro Rata Share of any costs or out
        of pocket expenses (including attorneys, accountants, advisors, and consultants
        fees and expenses) incurred by Agent in connection with the preparation,
        execution, delivery, administration, modification, amendment, or enforcement
        (whether through negotiations, legal proceedings or otherwise) of, or legal
        advice in respect of rights or responsibilities under, this Agreement, any
        other
        Loan Document, or any document contemplated by or referred to herein, to
        the
        extent that Agent is not reimbursed for such expenses by or on behalf of
        Borrower.  The undertaking in this Section shall survive the payment
        of all Obligations hereunder and the resignation or replacement of
        Agent.

       

      15.8  Agent
        in Individual Capacity.  WFF and its
        Affiliates may make loans to, issue letters of credit for the account of,
        accept
        deposits from, acquire equity interests in, and generally engage in any kind
        of
        banking, trust, financial advisory, underwriting, or other business with
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      Affiliates
        and any other Person party to any Loan Documents as though WFF were not Agent
        hereunder, and, in each case, without notice to or consent of the other members
        of the Lender Group.  The other members of the Lender Group
        acknowledge that, pursuant to such activities, WFF or its Affiliates may
        receive
        information regarding Borrower or its Affiliates or any other Person party
        to
        any Loan Documents that is subject to confidentiality obligations in favor
        of
        Borrower or such other Person and that prohibit the disclosure of such
        information to the Lenders, and the Lenders acknowledge that, in such
        circumstances (and in the absence of a waiver of such confidentiality
        obligations, which waiver Agent will use its reasonable best efforts to obtain),
        Agent shall not be under any obligation to provide such information to
        them.  The terms “Lender” and “Lenders” include WFF in its individual
        capacity.

       

      15.9  Successor
        Agent.  Agent may resign as Agent upon
        45 days notice to the Lenders (unless such notice is waived by the Required
        Lenders).  If Agent resigns under this Agreement, the Required Lenders
        shall appoint a successor Agent for the Lenders.  If no successor
        Agent is appointed prior to the effective date of the resignation of Agent,
        Agent may appoint, after consulting with the Lenders, a successor
        Agent.  If Agent has materially breached or failed to perform any
        material provision of this Agreement or of applicable law, the Required Lenders
        may agree in writing to remove and replace Agent with a successor Agent from
        among the Lenders.  In any such event, upon the acceptance of its
        appointment as successor Agent hereunder, such successor Agent shall succeed
        to
        all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent and the retiring Agent’s appointment, powers,
        and duties as Agent shall be terminated.  After any retiring Agent’s
        resignation hereunder as Agent, the provisions of this Section 15 shall
        inure to its benefit as to any actions taken or omitted to be taken by it
        while
        it was Agent under this Agreement.  If no successor Agent has accepted
        appointment as Agent by the date which is 45 days following a retiring Agent’s
        notice of resignation, the retiring Agent’s resignation shall nevertheless
        thereupon become effective and the Lenders shall perform all of the duties
        of
        Agent hereunder until such time, if any, as the Lenders appoint a successor
        Agent as provided for above.

       

      15.10  Lender
        in Individual Capacity.  Any Lender and
        its respective Affiliates may make loans to, issue letters of credit for
        the
        account of, accept deposits from, acquire equity interests in and generally
        engage in any kind of banking, trust, financial advisory, underwriting, or
        other
        business with Borrower and its Subsidiaries and Affiliates and any other
        Person
        party to any Loan Documents as though such Lender were not a Lender hereunder
        without notice to or consent of the other members of the Lender
        Group.  The other members of the Lender Group acknowledge that,
        pursuant to such activities, such Lender and its respective Affiliates may
        receive information regarding Borrower or its Affiliates or any other Person
        party to any Loan Documents that is subject to confidentiality obligations
        in
        favor of Borrower or such other Person and that prohibit the disclosure of
        such
        information to the Lenders, and the Lenders acknowledge that, in such
        circumstances (and in the absence of a waiver of such confidentiality
        obligations, which waiver such Lender will use its reasonable best efforts
        to
        obtain), such Lender shall not be under any obligation to provide such
        information to them.

       

      15.11  Collateral
        Matters.

       

      (a)  The
        Lenders hereby irrevocably authorize Agent, at its option and in its sole
        discretion, to release any Lien on any Collateral (i) upon the termination
        of
        the Commitments and payment and satisfaction in full by Borrower of all
        Obligations, (ii) constituting property being sold or disposed of if a release
        is required or desirable in connection therewith and if Borrower certifies
        to
        Agent that the sale or disposition is permitted under Section 6.4 of this
        Agreement or the other Loan Documents (and Agent may rely conclusively on
        any
        such certificate, without further inquiry), (iii) constituting property in
        which
        Borrower or its Subsidiaries owned no interest at the time the Agent’s Lien was
        granted nor at any time thereafter, or (iv) constituting property leased to
        Borrower or its Subsidiaries under a lease that has expired or is terminated
        in
        a transaction permitted under this Agreement.  Except as provided
        above, Agent will not execute and deliver a release of any Lien on any
        Collateral without the prior written authorization of (y) if the release
        is of
        all or substantially all of the Collateral, all of the Lenders, or (z)
        otherwise, the Required Lenders.  Upon request by 

       

      
        
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      Agent
        or
        Borrower at any time, the Lenders will confirm in writing Agent’s authority to
        release any such Liens on particular types or items of Collateral pursuant
        to
        this Section 15.11; provided, however, that (1) Agent shall
        not be required to execute any document necessary to evidence such release
        on
        terms that, in Agent’s opinion, would expose Agent to liability or create any
        obligation or entail any consequence other than the release of such Lien
        without
        recourse, representation, or warranty, and (2) such release shall not in
        any
        manner discharge, affect, or impair the Obligations or any Liens (other than
        those expressly being released) upon (or obligations of Borrower in respect
        of)
        all interests retained by Borrower, including, the proceeds of any sale,
        all of
        which shall continue to constitute part of the Collateral.

       

      (b)  Agent
        shall have no obligation whatsoever to any of the Lenders to assure that
        the
        Collateral exists or is owned by Borrower or its Subsidiaries or is cared
        for,
        protected, or insured or has been encumbered, or that the Agent’s Liens have
        been properly or sufficiently or lawfully created, perfected, protected,
        or
        enforced or are entitled to any particular priority, or to exercise at all
        or in
        any particular manner or under any duty of care, disclosure or fidelity,
        or to
        continue exercising, any of the rights, authorities and powers granted or
        available to Agent pursuant to any of the Loan Documents, it being understood
        and agreed that in respect of the Collateral, or any act, omission, or event
        related thereto, subject to the terms and conditions contained herein, Agent
        may
        act in any manner it may deem appropriate, in its sole discretion given Agent’s
        own interest in the Collateral in its capacity as one of the Lenders and
        that
        Agent shall have no other duty or liability whatsoever to any Lender as to
        any
        of the foregoing, except as otherwise provided herein.

       

      15.12  Restrictions
        on Actions by Lenders; Sharing of Payments.

       

      (a)  Each
        of
        the Lenders agrees that it shall not, without the express written consent
        of
        Agent, and that it shall, to the extent it is lawfully entitled to do so,
        upon
        the written request of Agent, set off against the Obligations, any amounts
        owing
        by such Lender to Borrower or its Subsidiaries or any deposit accounts of
        Borrower or its Subsidiaries now or hereafter maintained with such
        Lender.  Each of the Lenders further agrees that it shall not, unless
        specifically requested to do so in writing by Agent, take or cause to be
        taken
        any action, including, the commencement of any legal or equitable proceedings
        to
        enforce any Loan Document against Borrower or any Guarantor or to foreclose
        any
        Lien on, or otherwise enforce any security interest in, any of the
        Collateral.

       

      (b)  If,
        at
        any time or times any Lender shall receive (i) by payment, foreclosure, setoff,
        or otherwise, any proceeds of Collateral or any payments with respect to
        the
        Obligations, except for any such proceeds or payments received by such Lender
        from Agent pursuant to the terms of this Agreement, or (ii) payments from
        Agent in excess of such Lender’s Pro Rata Share of all such distributions by
        Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
        and
        with such endorsements as may be required to negotiate the same to Agent,
        or in
        immediately available funds, as applicable, for the account of all of the
        Lenders and for application to the Obligations in accordance with the applicable
        provisions of this Agreement, or (B) purchase, without recourse or warranty,
        an
        undivided interest and participation in the Obligations owed to the other
        Lenders so that such excess payment received shall be applied ratably as
        among
        the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by
        the
        purchasing party is thereafter recovered from it, those purchases of
        participations shall be rescinded in whole or in part, as applicable, and
        the
        applicable portion of the purchase price paid therefor shall be returned
        to such
        purchasing party, but without interest except to the extent that such purchasing
        party is required to pay interest in connection with the recovery of the
        excess
        payment.

       

      15.13  Agency
        for Perfection.  Agent hereby appoints
        each other Lender as its agent (and each Lender hereby accepts such appointment)
        for the purpose of perfecting the Agent’s Liens in assets which, in accordance
        with Article 8 or Article 9, as applicable, of the Code can be perfected
        only by
        possession or control.  Should any Lender obtain possession or control
        of any such Collateral, such Lender shall notify Agent thereof, and, promptly
        upon Agent’s request therefor shall deliver possession or control of such
        Collateral to Agent or in accordance with Agent’s instructions.

       

      
        
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      15.14  Payments
        by Agent to the Lenders.  All payments
        to be made by Agent to the Lenders shall be made by bank wire transfer of
        immediately available funds pursuant to such wire transfer instructions as
        each
        party may designate for itself by written notice to
        Agent.  Concurrently with each such payment, Agent shall identify
        whether such payment (or any portion thereof) represents principal, premium,
        fees, or interest of the Obligations.

       

      15.15  Concerning
        the Collateral and Related Loan
        Documents.  Each member of the Lender
        Group authorizes and directs Agent to enter into this Agreement and the other
        Loan Documents.  Each member of the Lender Group agrees that any
        action taken by Agent in accordance with the terms of this Agreement or the
        other Loan Documents relating to the Collateral and the exercise by Agent
        of its
        powers set forth therein or herein, together with such other powers that
        are
        reasonably incidental thereto, shall be binding upon all of the
        Lenders.

       

      15.16  Field
        Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
        Other
        Reports and Information.  By becoming a party to this
        Agreement, each Lender:

       

      (a)  is
        deemed
        to have requested that Agent furnish such Lender, promptly after it becomes
        available, a copy of each field audit or examination report respecting Borrower
        or its Subsidiaries (each a “Report” and collectively, “Reports”)
        prepared by or at the request of Agent, and Agent shall so furnish each Lender
        with such Reports,

       

      (b)  expressly
        agrees and acknowledges that Agent does not (i) make any representation or
        warranty as to the accuracy of any Report, and (ii) shall not be liable for
        any
        information contained in any Report,

       

      (c)  expressly
        agrees and acknowledges that the Reports are not comprehensive audits or
        examinations, that Agent or other party performing any audit or examination
        will
        inspect only specific information regarding Borrower and its Subsidiaries
        and
        will rely significantly upon Borrower’s and its Subsidiaries’ books and records,
        as well as on representations of Borrower’s personnel,

       

      (d)  agrees
        to
        keep all Reports and other material, non-public information regarding Borrower
        and its Subsidiaries and their operations, assets, and existing and contemplated
        business plans in a confidential manner in accordance with Section 17.9,
        and

       

      (e)  without
        limiting the generality of any other indemnification provision contained
        in this
        Agreement, agrees:  (i) to hold Agent and any other Lender preparing a
        Report harmless from any action the indemnifying Lender may take or fail
        to take
        or any conclusion the indemnifying Lender may reach or draw from any Report
        in
        connection with any loans or other credit accommodations that the indemnifying
        Lender has made or may make to Borrower, or the indemnifying Lender’s
        participation in, or the indemnifying Lender’s purchase of, a loan or loans of
        Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent,
        and
        any such other Lender preparing a Report harmless from and against, the claims,
        actions, proceedings, damages, costs, expenses, and other amounts (including,
        attorneys fees and costs) incurred by Agent and any such other Lender preparing
        a Report as the direct or indirect result of any third parties who might
        obtain
        all or part of any Report through the indemnifying Lender.

       

      In
        addition to the foregoing:  (x) any Lender may from time to time
        request of Agent in writing that Agent provide to such Lender a copy of any
        report or document provided by Borrower or its Subsidiaries to Agent that
        has
        not been contemporaneously provided by Borrower or such Subsidiary to such
        Lender, and, upon receipt of such request, Agent promptly shall provide a
        copy
        of same to such Lender, (y) to the extent that Agent is entitled, under any
        provision of the Loan Documents, to request additional reports or information
        from Borrower or its Subsidiaries, any Lender may, from time to time, reasonably
        request Agent to exercise such right as specified in such Lender’s notice to
        Agent, whereupon Agent promptly shall request of Borrower 

       

      
        
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      the
        additional reports or information reasonably specified by such Lender, and,
        upon
        receipt thereof from Borrower or such Subsidiary, Agent promptly shall provide
        a
        copy of same to such Lender, and (z) any time that Agent renders to Borrower
        a
        statement regarding the Loan Account, Agent shall send a copy of such statement
        to each Lender.

       

      15.17  Several
        Obligations; No
        Liability.  Notwithstanding that certain
        of the Loan Documents now or hereafter may have been or will be executed
        only by
        or in favor of Agent in its capacity as such, and not by or in favor of the
        Lenders, any and all obligations on the part of Agent (if any) to make any
        credit available hereunder shall constitute the several (and not joint)
        obligations of the respective Lenders on a ratable basis, according to their
        respective Commitments, to make an amount of such credit not to exceed, in
        principal amount, at any one time outstanding, the amount of their respective
        Commitments.  Nothing contained herein shall confer upon any Lender
        any interest in, or subject any Lender to any liability for, or in respect
        of,
        the business, assets, profits, losses, or liabilities of any other
        Lender.  Each Lender shall be solely responsible for notifying its
        Participants of any matters relating to the Loan Documents to the extent
        any
        such notice may be required, and no Lender shall have any obligation, duty,
        or
        liability to any Participant of any other Lender.  Except as provided
        in Section 15.7, no member of the Lender Group shall have any liability
        for the acts of any other member of the Lender Group.  No Lender shall
        be responsible to Borrower or any other Person for any failure by any other
        Lender to fulfill its obligations to make credit available hereunder, nor
        to
        advance for it or on its behalf in connection with its Commitment, nor to
        take
        any other action on its behalf hereunder or in connection with the financing
        contemplated herein.

       

      16.  WITHHOLDING
        TAXES.

       

      (a)  All
        payments made by Borrower hereunder or under any note or other Loan Document
        will be made without setoff, counterclaim, or other defense.  In
        addition, all such payments will be made free and clear of, and without
        deduction or withholding for, any present or future Taxes, and in the event
        any
        deduction or withholding of Taxes is required, Borrower shall comply with
        the
        penultimate sentence of this Section 16(a).  “Taxes”
shall mean, any taxes, levies, imposts, duties, fees, assessments
        or other
        charges of whatever nature now or hereafter imposed by any jurisdiction or
        by
        any political subdivision or taxing authority thereof or therein with respect
        to
        such payments (but excluding any tax imposed by any jurisdiction or by any
        political subdivision or taxing authority thereof or therein measured by
        or
        based on the net income or net profits of any Lender) and all interest,
        penalties or similar liabilities with respect thereto.  If any Taxes
        are so levied or imposed, Borrower agrees to pay the full amount of such
        Taxes
        and such additional amounts as may be necessary so that every payment of
        all
        amounts due under this Agreement, any note, or Loan Document, including any
        amount paid pursuant to this Section 16(a) after withholding or deduction
        for or on account of any Taxes, will not be less than the amount provided
        for
        herein; provided, however, that Borrower shall not be required to increase
        any
        such amounts if the increase in such amount payable results from Agent’s or such
        Lender’s own willful misconduct or gross negligence (as finally determined by a
        court of competent jurisdiction).  Borrower will furnish to Agent as
        promptly as possible after the date the payment of any Tax is due pursuant
        to
        applicable law certified copies of tax receipts evidencing such payment by
        Borrower.

       

      (b)  If
        a
        Lender claims an exemption from United States withholding tax, Lender agrees
        with and in favor of Agent and Borrower, to deliver to Agent:

       

      (i)  if
        such
        Lender claims an exemption from United States withholding tax pursuant to
        its
        portfolio interest exception, (A) a statement of the Lender, signed under
        penalty of perjury, that it is not a (I) a “bank” as described in Section
        881(c)(3)(A) of the IRC, (II) a 10% shareholder of Borrower (within the meaning
        of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation
        related to Borrower within the meaning of Section 864(d)(4) of the IRC, and
        (B)
        a properly completed and executed IRS Form W-8BEN, before receiving its first
        payment under this Agreement and at any other time reasonably requested by
        Agent
        or Borrower;

       

      
        
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      (ii)  if
        such
        Lender claims an exemption from, or a reduction of, withholding tax under
        a
        United States tax treaty, properly completed and executed IRS Form W-8BEN
        before
        receiving its first payment under this Agreement and at any other time
        reasonably requested by Agent or Borrower;

       

      (iii)  if
        such
        Lender claims that interest paid under this Agreement is exempt from United
        States withholding tax because it is effectively connected with a United
        States
        trade or business of such Lender, two properly completed and executed copies
        of
        IRS Form W-8ECI before receiving its first payment under this Agreement and
        at
        any other time reasonably requested by Agent or Borrower; or

       

      (iv)  such
        other form or forms, including IRS Form W-9, as may be required under the
        IRC or
        other laws of the United States as a condition to exemption from, or reduction
        of, United States withholding or backup withholding tax before receiving
        its
        first payment under this Agreement and at any other time reasonably requested
        by
        Agent or Borrower.

       

      Lender
        agrees promptly to notify Agent and Borrower of any change in circumstances
        which would modify or render invalid any claimed exemption or
        reduction.

       

      (c)  If
        a
        Lender claims an exemption from withholding tax in a jurisdiction other than
        the
        United States, Lender agrees with and in favor of Agent and Borrower, to
        deliver
        to Agent any such form or forms, as may be required under the laws of such
        jurisdiction as a condition to exemption from, or reduction of, foreign
        withholding or backup withholding tax before receiving its first payment
        under
        this Agreement and at any other time reasonably requested by Agent or
        Borrower.

      Lender
        agrees promptly to notify Agent and Borrower of any change in circumstances
        which would modify or render invalid any claimed exemption or
        reduction.

       

      (d)  If
        any
        Lender claims exemption from, or reduction of, withholding tax and such Lender
        sells, assigns, grants a participation in, or otherwise transfers all or
        part of
        the Obligations of Borrower to such Lender, such Lender agrees to notify
        Agent
        and Borrower of  the percentage amount in which it is no longer the
        beneficial owner of Obligations of Borrower to such Lender.  To the
        extent of such percentage amount, Agent and Borrower will treat such Lender’s
        documentation provided pursuant to Sections 16(b) or 16(c) as no longer
        valid.  With respect to such percentage amount, Lender may provide new
        documentation, pursuant to Sections 16(b) or 16(c), if
        applicable.

       

      (e)  If
        any
        Lender is entitled to a reduction in the applicable withholding tax, Agent
        may
        withhold from any interest payment to such Lender an amount equivalent to
        the
        applicable withholding tax after taking into account such
        reduction.  If the forms or other documentation required by
subsection (b) or (c) of this Section 16 are not delivered to
        Agent, then Agent may withhold from any interest payment to such Lender not
        providing such forms or other documentation an amount equivalent to the
        applicable withholding tax.

       

      (f)  If
        the
        IRS or any other Governmental Authority of the United States or other
        jurisdiction asserts a claim that Agent did not properly withhold tax from
        amounts paid to or for the account of any Lender due to a failure on the
        part of
        the Lender (because the appropriate form was not delivered, was not properly
        executed, or because such Lender failed to notify Agent of a change in
        circumstances which rendered the exemption from, or reduction of, withholding
        tax ineffective, or for any other reason) such Lender shall indemnify and
        hold
        Agent harmless for all amounts paid, directly or indirectly, by Agent, as
        tax or
        otherwise, including penalties and interest, and including any taxes imposed
        by
        any jurisdiction on the amounts payable to Agent under this Section 16,
        together with all costs and expenses (including attorneys fees and
        expenses).  The obligation of the Lenders under this subsection shall
        survive the payment of all Obligations and the resignation or replacement
        of
        Agent.

       

       

      
        
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      17.  GENERAL
        PROVISIONS.

       

      17.1  Effectiveness.  This
        Agreement shall be binding and deemed effective when executed by Borrower,
        Agent, and each Lender whose signature is provided for on the signature pages
        hereof.

       

      17.2  Section
        Headings.  Headings and numbers have
        been set forth herein for convenience only.  Unless the contrary is
        compelled by the context, everything contained in each Section applies equally
        to this entire Agreement.

       

      17.3  Interpretation.  Neither
        this Agreement
        nor any
        uncertainty or ambiguity herein shall be construed against the Lender Group
        or
        Borrower, whether under any rule of construction or otherwise.  On the
        contrary, this Agreement has been reviewed by all parties and shall be construed
        and interpreted according to the ordinary meaning of the words used so as
        to
        accomplish fairly the purposes and intentions of all parties
        hereto.

       

      17.4  Severability
        of Provisions.  Each provision of this
        Agreement shall be severable from every other provision of this Agreement
        for
        the purpose of determining the legal enforceability of any specific
        provision.

       

      17.5  Bank
        Product Providers.  Each Bank Product
        Provider shall be deemed a party hereto for purposes of any reference in
        a Loan
        Document to the parties for whom Agent is acting; it being understood and
        agreed
        that the rights and benefits of such Bank Product Provider under the Loan
        Documents consist exclusively of such Bank Product Provider’s right to share in
        payments and collections out of the Collateral as more fully set forth herein.
        In connection with any such distribution of payments and collections, Agent
        shall be entitled to assume no amounts are due to any Bank Product Provider
        unless such Bank Product Provider has notified Agent in writing of the amount
        of
        any such liability owed to it prior to such distribution.

       

      17.6  Debtor-Creditor
        Relationship.  The relationship between
        the Lenders and Agent, on the one hand, and Borrower, on the other hand,
        is
        solely that of creditor and debtor.  No member of the Lender Group has
        (or shall be deemed to have) any fiduciary relationship or duty to Borrower
        arising out of or in connection with, and there is no agency or joint venture
        relationship between the members of the Lender Group, on the one hand, and
        Borrower, on the other hand, by virtue of any Loan Document or any transaction
        contemplated therein.

       

      17.7  Counterparts;
        Electronic Execution.  This Agreement
        may be executed in any number of counterparts and by different parties on
        separate counterparts, each of which, when executed and delivered, shall
        be
        deemed to be an original, and all of which, when taken together, shall
        constitute but one and the same Agreement.  Delivery of an executed
        counterpart of this Agreement by telefacsimile or other electronic method
        of
        transmission shall be equally as effective as delivery of an original executed
        counterpart of this Agreement.  Any party delivering an executed
        counterpart of this Agreement by telefacsimile or other electronic method
        of
        transmission also shall deliver an original executed counterpart of this
        Agreement but the failure to deliver an original executed counterpart shall
        not
        affect the validity, enforceability, and binding effect of this
        Agreement.  The foregoing shall apply to each other Loan Document
mutatis mutandis.

       

      17.8  Revival
        and Reinstatement of Obligations.  If
        the incurrence or payment of the Obligations by Borrower or Guarantor or
        the
        transfer to the Lender Group of any property should for any reason subsequently
        be declared to be void or voidable under any state or federal law relating
        to
        creditors’ rights, including provisions of the Bankruptcy Code relating to
        fraudulent conveyances, preferences, or other voidable or recoverable payments
        of money or transfers of property (each, a “Voidable Transfer”), and if
        the Lender Group is required to repay or restore, in whole or in part, any
        such
        Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
        then, as to any such Voidable Transfer, or the amount thereof that the Lender
        Group is required or elects to repay or restore, and as to all reasonable
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      fees
        of
        the Lender Group related thereto, the liability of Borrower or Guarantor
        automatically shall be revived, reinstated, and restored and shall exist
        as
        though such Voidable Transfer had never been made.

       

      17.9  Confidentiality.

       

      (a)  Agent
        and
        Lenders each individually (and not jointly or jointly and severally) agree
        that
        material, non-public information regarding Borrower and its Subsidiaries,
        their
        operations, assets, and existing and contemplated business plans shall be
        treated by Agent and the Lenders in a confidential manner, and shall not
        be
        disclosed by Agent and the Lenders to Persons who are not parties to this
        Agreement, except:  (i) to attorneys for and other advisors,
        accountants, auditors, and consultants to any member of the Lender Group,
        (ii)
        to Subsidiaries and Affiliates of any member of the Lender Group (including
        the
        Bank Product Providers), provided that any such Subsidiary or Affiliate shall
        have agreed to receive such information hereunder subject to the terms of
        this
Section 17.9, (iii) as may be required by statute, decision, or judicial
        or administrative order, rule, or regulation, (iv) as may be agreed to in
        advance by Borrower or as requested or required by any Governmental Authority
        pursuant to any subpoena or other legal process, (v) as to any such information
        that is or becomes generally available to the public (other than as a result
        of
        prohibited disclosure by Agent or the Lenders), (vi) in connection with any
        assignment, participation  or pledge of any Lender’s interest under
        this Agreement, provided that any such assignee, participant, or pledgee
        shall
        have agreed in writing to receive such information hereunder subject to the
        terms of this Section, and (vii) in connection with any litigation or other
        adversary proceeding involving parties hereto which such litigation or adversary
        proceeding involves claims related to the rights or duties of such parties
        under
        this Agreement or the other Loan Documents.  The provisions of this
Section 17.9(a) shall survive for 2 years after the payment in full of
        the Obligations.

       

      (b)  Anything
        in this Agreement to the contrary notwithstanding, Agent may provide information
        concerning the terms and conditions of this Agreement and the other Loan
        Documents to loan syndication and pricing reporting services.

       

      17.10  Lender
        Group Expenses.  Borrower agrees to pay
        any and all Lender Group Expenses promptly after demand therefor by Agent
        and
        agrees that its obligations contained in this Section 17.10 shall survive
        payment or satisfaction in full of all other Obligations.

       

      17.11  USA
        PATRIOT Act.  Each Lender that is
        subject to the requirements of the USA Patriot Act (Title 111 of Pub. L.
        107-56
        (signed into law October 26, 2001)) (the “Act”) hereby notifies the
        Borrower that pursuant to the requirements of the Act, it is required to
        obtain,
        verify and record information that identifies the Borrower, which information
        includes the name and address of the Borrower and other information that
        will
        allow such Lender to identify the Borrower in accordance with the
        Act.

       

      17.12  Integration.  This
        Agreement, together with the other Loan Documents, reflects the entire
        understanding of the parties with respect to the transactions contemplated
        hereby and shall not be contradicted or qualified by any other agreement,
        oral
        or written, before the date hereof.

       

      [Signature
        pages to follow.]

       

       


      
        
          
               

                

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      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be
        executed and delivered as of the date first above written.

       

      

 

      
        


        
          	 	
                  TELTRONICS,
                    INC.,

                  a
                    Delaware corporation

                
	 	
                   

                   

                   

                
	 	
                  By:

                	
                  /s/
                    Ewen R. Cameron

                
	 	
                  Name:

                	
                  Ewen
                    R. Cameron

                
	 	
                  Title:

                	
                  President

                


        

         

        

 

      


      
        
          
             S-1

            Credit
              Agreement

                    
                        BN 1225807v9
        
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

      
 

      
        


        
          	 	
                  WELLS
                    FARGO FOOTHILL, INC.,

                  a
                    California corporation, as Agent and as a lender

                
	 	
                   

                   

                   

                
	 	
                  By:

                	
                  /s/
                    Alexander E. Hechler

                
	 	
                  Name:

                	
                  Alexander
                    E. Hechler

                
	 	
                  Title:

                	
                  Vice
                    President

                


        

        




       

       

       

       

       

       

      
 

      
         S-2

        Credit
          Agreement

                
                    BN 1225807v9