Prepared by MERRILL CORPORATION




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Exhibit 10.25  




LOAN AND SECURITY AGREEMENT  


 by and among  


 EN POINTE TECHNOLOGIES SALES, INC.  


 as Borrower,  


 THE LENDERS THAT ARE SIGNATORIES HERETO  


 as the Lenders,  


 and  


 FOOTHILL CAPITAL CORPORATION  


 as the Arranger and Administrative Agent  


 Dated as of December 28, 2001  







 
 
 

TABLE OF CONTENTS    
  



	 
	 	 
	 	 
	 	Page

	1.	 	DEFINITIONS AND CONSTRUCTION	 	1
	

 	
 	

1.1	
 	

Definitions	
 	

1
	

 	
 	

1.2	
 	

Accounting Terms	
 	

18
	

 	
 	

1.3	
 	

Code	
 	

18
	

 	
 	

1.4	
 	

Construction	
 	

18
	

 	
 	

1.5	
 	

Schedules and Exhibits	
 	

18
	

2.	
 	

LOAN AND TERMS OF PAYMENT	
 	

18
	

 	
 	

2.1	
 	

Revolver Advances	
 	

18
	

 	
 	

2.2	
 	

Guaranty Indemnity	
 	

19
	

 	
 	

2.3	
 	

Borrowing Procedures and Settlements	
 	

19
	

 	
 	

2.4	
 	

Payments	
 	

24
	

 	
 	

2.5	
 	

Overadvances	
 	

26
	

 	
 	

2.6	
 	

Interest Rates, Letter of Credit and Guaranty Fees: Rates, Payments, and Calculations	
 	

27
	

 	
 	

2.7	
 	

Cash Management	
 	

28
	

 	
 	

2.8	
 	

Crediting Payments; Float Charge	
 	

29
	

 	
 	

2.9	
 	

Designated Account	
 	

29
	

 	
 	

2.10	
 	

Maintenance of Loan Account; Statements of Obligations	
 	

29
	

 	
 	

2.11	
 	

Fees	
 	

30
	

 	
 	

2.12	
 	

Letters of Credit	
 	

30
	

 	
 	

2.13	
 	

LIBOR Option	
 	

33
	

 	
 	

2.14	
 	

Capital Requirements	
 	

35
	

3.	
 	

CONDITIONS; TERM OF AGREEMENT

	
 	

35
	

 	
 	

3.1	
 	

Conditions Precedent to the Initial Extension of Credit	
 	

35
	

 	
 	

3.2	
 	

Condition Subsequent to the Initial Extension of Credit	
 	

37
	

 	
 	

3.3	
 	

Conditions Precedent to all Extensions of Credit	
 	

38
	

 	
 	

3.4	
 	

Term	
 	

38
	

 	
 	

3.5	
 	

Effect of Termination	
 	

38
	

 	
 	

3.6	
 	

Early Termination by Borrower	
 	

38
	

4.	
 	

CREATION OF SECURITY INTEREST	
 	

40
	

 	
 	

4.1	
 	

Grant of Security Interest	
 	

40
	

 	
 	

4.2	
 	

Negotiable Collateral	
 	

40



i





 

	

 	
 	

4.3	
 	

Collection of Accounts, General Intangibles, and Negotiable Collateral	
 	

40
	

 	
 	

4.4	
 	

Delivery of Additional Documentation Required	
 	

40
	

 	
 	

4.5	
 	

Power of Attorney	
 	

40
	

 	
 	

4.6	
 	

Right to Inspect	
 	

41
	

 	
 	

4.7	
 	

Control Agreements	
 	

41
	

5.	
 	

REPRESENTATIONS AND WARRANTIES

	
 	

41
	

 	
 	

5.1	
 	

No Encumbrances	
 	

41
	

 	
 	

5.2	
 	

Eligible Accounts	
 	

41
	

 	
 	

5.3	
 	

Inventory	
 	

41
	

 	
 	

5.4	
 	

Equipment	
 	

42
	

 	
 	

5.5	
 	

Location of Inventory and Equipment	
 	

42
	

 	
 	

5.6	
 	

Inventory Records	
 	

42
	

 	
 	

5.7	
 	

Location of Chief Executive Office; FEIN	
 	

42
	

 	
 	

5.8	
 	

Due Organization and Qualification; Subsidiaries	
 	

42
	

 	
 	

5.9	
 	

Due Authorization; No Conflict	
 	

42
	

 	
 	

5.10	
 	

Litigation	
 	

43
	

 	
 	

5.11	
 	

No Material Adverse Change	
 	

44
	

 	
 	

5.12	
 	

Fraudulent Transfer	
 	

44
	

 	
 	

5.13	
 	

Employee Benefits	
 	

44
	

 	
 	

5.14	
 	

Environmental Condition	
 	

44
	

 	
 	

5.15	
 	

Brokerage Fees	
 	

44
	

 	
 	

5.16	
 	

Intellectual Property	
 	

44
	

 	
 	

5.17	
 	

Leases	
 	

44
	

 	
 	

5.18	
 	

DDAs	
 	

44
	

 	
 	

5.19	
 	

Complete Disclosure	
 	

45
	

 	
 	

5.20	
 	

Indebtedness	
 	

45
	

6.	
 	

AFFIRMATIVE COVENANTS

	
 	

45
	

 	
 	

6.1	
 	

Accounting System	
 	

45
	

 	
 	

6.2	
 	

Collateral Reporting	
 	

46
	

 	
 	

6.3	
 	

Financial Statements, Reports, Certificates	
 	

46
	

 	
 	

6.4	
 	

Guarantor Tax Returns	
 	

48
	

 	
 	

6.5	
 	

Return	
 	

48
	

 	
 	

6.6	
 	

Maintenance of Properties	
 	

48




ii





 

	

 	
 	

6.7	
 	

Taxes	
 	

48
	

 	
 	

6.8	
 	

Insurance	
 	

48
	

 	
 	

6.9	
 	

Location of Inventory and Equipment	
 	

49
	

 	
 	

6.10	
 	

Compliance with Laws	
 	

49
	

 	
 	

6.11	
 	

Leases	
 	

49
	

 	
 	

6.12	
 	

Existence	
 	

49
	

 	
 	

6.13	
 	

Environmental	
 	

49
	

 	
 	

6.14	
 	

Commercial Tort Claims	
 	

50
	

 	
 	

6.15	
 	

Disclosure Updates	
 	

50
	

7.	
 	

NEGATIVE COVENANTS	
 	

50
	

 	
 	

7.1	
 	

Indebtedness	
 	

50
	

 	
 	

7.2	
 	

Liens	
 	

51
	

 	
 	

7.3	
 	

Restrictions on Fundamental Changes	
 	

51
	

 	
 	

7.4	
 	

Disposal of Assets	
 	

51
	

 	
 	

7.5	
 	

Change Name	
 	

51
	

 	
 	

7.6	
 	

Guarantee	
 	

51
	

 	
 	

7.7	
 	

Nature of Business	
 	

51
	

 	
 	

7.8	
 	

Prepayments and Amendments	
 	

52
	

 	
 	

7.9	
 	

Change of Control	
 	

52
	

 	
 	

7.10	
 	

Consignments	
 	

52
	

 	
 	

7.11	
 	

Distributions	
 	

52
	

 	
 	

7.12	
 	

Accounting Methods	
 	

52
	

 	
 	

7.13	
 	

Investments	
 	

52
	

 	
 	

7.14	
 	

Transactions with Affiliates; Intercompany Transfers	
 	

52
	

 	
 	

7.15	
 	

Suspension	
 	

53
	

 	
 	

7.16	
 	

Use of Proceeds	
 	

53
	

 	
 	

7.17	
 	

Change in Location of Chief Executive Office; Inventory and Equipment with Bailees	
 	

53
	

 	
 	

7.18	
 	

Securities Accounts	
 	

54
	

 	
 	

7.19	
 	

Financial Covenants	
 	

54
	

8.	
 	

EVENTS OF DEFAULT	
 	

54
	

9.	
 	

THE LENDER GROUP'S RIGHTS AND REMEDIES	
 	

56
	

 	
 	

9.1	
 	

Rights and Remedies	
 	

56
	

 	
 	

9.2	
 	

Remedies Cumulative	
 	

57



iii





 

	

10.	
 	

TAXES AND EXPENSES	
 	

58
	

11.	
 	

WAIVERS; INDEMNIFICATION	
 	

58
	

 	
 	

11.1	
 	

Demand; Protest; etc	
 	

58
	

 	
 	

11.2	
 	

The Lender Group's Liability for Collateral	
 	

58
	

 	
 	

11.3	
 	

Indemnification	
 	

58
	

12.	
 	

NOTICES	
 	

59
	

13.	
 	

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER	
 	

60
	

14.	
 	

ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS	
 	

61
	

 	
 	

14.1	
 	

Assignments and Participations	
 	

61
	

 	
 	

14.2	
 	

Successors	
 	

63
	

15.	
 	

AMENDMENTS; WAIVERS	
 	

63
	

 	
 	

15.1	
 	

Amendments and Waivers	
 	

63
	

 	
 	

15.2	
 	

Replacement of Holdout Lender	
 	

64
	

 	
 	

15.3	
 	

No Waivers; Cumulative Remedies	
 	

64
	

16.	
 	

AGENT; THE LENDER GROUP	
 	

64
	

 	
 	

16.1	
 	

Appointment and Authorization of Agent	
 	

64
	

 	
 	

16.2	
 	

Delegation of Duties	
 	

65
	

 	
 	

16.3	
 	

Liability of Agent	
 	

65
	

 	
 	

16.4	
 	

Reliance by Agent	
 	

65
	

 	
 	

16.5	
 	

Notice of Default or Event of Default	
 	

66
	

 	
 	

16.6	
 	

Credit Decision	
 	

66
	

 	
 	

16.7	
 	

Costs and Expenses; Indemnification	
 	

66
	

 	
 	

16.8	
 	

Agent in Individual Capacity	
 	

67
	

 	
 	

16.9	
 	

Successor Agent	
 	

67
	

 	
 	

16.10	
 	

Lender in Individual Capacity	
 	

68
	

 	
 	

16.11	
 	

Withholding Taxes	
 	

68
	

 	
 	

16.12	
 	

Collateral Matters	
 	

69
	

 	
 	

16.13	
 	

Restrictions on Actions by Lenders; Sharing of Payments	
 	

70
	

 	
 	

16.14	
 	

Agency for Perfection	
 	

71
	

 	
 	

16.15	
 	

Payments by Agent to the Lenders	
 	

71
	

 	
 	

16.16	
 	

Concerning the Collateral and Related Loan Documents	
 	

71
	

 	
 	

16.17	
 	

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

71
	

 	
 	

16.18	
 	

Several Obligations; No Liability	
 	

72



iv





 

	

 	
 	

16.19	
 	

Legal Representation of Agent	
 	

72
	

17.	
 	

GENERAL PROVISIONS	
 	

73
	

 	
 	

17.1	
 	

Effectiveness	
 	

73
	

 	
 	

17.2	
 	

Section Headings	
 	

73
	

 	
 	

17.3	
 	

Interpretation	
 	

73
	

 	
 	

17.4	
 	

Severability of Provisions	
 	

73
	

 	
 	

17.5	
 	

Amendments in Writing	
 	

73
	

 	
 	

17.6	
 	

Counterparts; Telefacsimile Execution	
 	

73
	

 	
 	

17.7	
 	

Revival and Reinstatement of Obligations	
 	

73
	

 	
 	

17.8	
 	

Integration	
 	

73
	

 	
 	

17.9	
 	

Effect of Intercreditor Agreement	
 	

73
	

 	
 	

17.10	
 	

Organization of Canadian Affiliate	
 	

74




v






  



 
 

LOAN AND SECURITY AGREEMENT    
  


    THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered
into as of December 28, 2001 between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as
the arranger and administrative agent for the Lenders ("Agent"), and, on the other hand, EN POINTE TECHNOLOGIES
SALES, INC., a Delaware corporation ("Borrower"). 


    The
parties agree as follows: 


1.  DEFINITIONS AND CONSTRUCTION.  


    1.1 Definitions. As used in this Agreement, the following terms shall have the following
definitions: 


    "Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account, chattel
paper, or a General Intangible. 


    "Accounts" means all of Borrower's now owned or hereafter acquired right, title, and interest with respect to "accounts" (as that term
is defined in the Code), and any and all supporting obligations in respect thereof. 


    "ACH Transactions" means any cash management or related services (including the Automated Clearing House processing of electronic funds
transfers through the direct Federal Reserve Fedline system) provided by Wells Fargo or its Affiliates for the account of Borrower or its Affiliates. 


    "Additional Documents" has the meaning set forth in  Section 4.4. 



    "Advances" has the meaning set forth in Section 2.1. 


    "Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under
common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether
through the ownership of Stock, by contract, or otherwise; provided, however, that, in any event: (a) any Person which owns directly or
indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other
ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person, (b) each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person, and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person. 


    "Agent" means Foothill, solely in its capacity as agent for the Lenders hereunder, and any successor thereto. 


    "Agent's Account" means an account at a bank designated by Agent from time to time as the account into which Borrower shall make all
payments to Agent for the benefit of the Lender Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other Loan Documents; unless and until Agent
notifies Borrower and the Lender Group to the contrary, Agent's Account shall be that certain deposit account listed on Schedule A-1. 


    "Agent Advances" has the meaning set forth in Section 2.3(e)(i). 


    "Agent's Liens" means the Liens granted by Borrower to Agent for the benefit of the Lender Group under this Agreement or the other Loan
Documents. 


1





 


    "Agent-Related Persons" means Agent together with its Affiliates, officers, directors, employees, and agents. 


    "Agreement" has the meaning set forth in the preamble hereto. 


    "Applicable Prepayment Premium" means, as of any date of determination, an amount equal to (a) during the period of time from
and after the date of the execution and delivery of this Agreement up to the date that is the first anniversary of the Closing Date, 3% times the
Maximum Revolver Amount, (b) during the period of time from and including the date that is the first anniversary of the Closing Date up to the date that is the second anniversary of the Closing
Date, 2% times the Maximum Revolver Amount, and (c) during the period of time from and including the date that is the second anniversary of the
Closing Date up to the Maturity Date, 1% times the Maximum Revolver Amount. If the Obligations are repaid prior to the Maturity Date from the proceeds
of a private or public placement of equity securities or subordinated debt, or the sale of substantially all of the assets, including, without limitation, the Stock, of the Parent or any of its
Subsidiaries, the Applicable Prepayment Premium would be 50% of the Applicable Prepayment Premium that would otherwise be due. There shall be no Applicable Prepayment Premium for early repayments made
during any renewal term, if applicable. 


    "Assignee" has the meaning set forth in Section 14.1. 


    "Assignment and Acceptance" means an Assignment and Acceptance in the form of  Exhibit A-1. 


    "Authorized Person" means any officer or other employee of Borrower or Parent. 



    "Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the
immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Borrower is entitled to borrow as Advances under  Section 2.1 (after giving effect to all
then outstanding Obligations (other than Bank Products Obligations) and all sublimits and reserves
applicable hereunder, including but not limited to the Guaranty Reserve, the Bank Products Reserve, the Service Accounts Reserve and the Availability Block). 



    "Availability Block" means a reserve against Availability equal to $2,500,000, which shall remain in place until Agent determines, in
its sole discretion, to reduce or release it. 


    "Bank Product Agreements" means those certain cash management service agreements entered into from time to time by Borrower or its
Affiliates in connection with any of the Bank Products. 


    "Bank Product Obligations" means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by
Borrower or its Affiliates to Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Borrower is obligated to reimburse to Agent or any
member of the Lender Group as a result of Agent or such member of the Lender Group purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products
provided to Borrower or its Affiliates pursuant to the Bank Product Agreements. 


    "Bank Products" means any service or facility extended to Borrower or its Affiliates by Wells Fargo or any Affiliate of Wells Fargo
including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including
controlled disbursement, accounts or services, or (g) Hedge Agreements. 


    "Bank Product Reserves" means, as of any date of determination, the amount of reserves that Agent has established (based upon Wells
Fargo's or its Affiliate's reasonable determination of the 


2





 



credit exposure in respect of then extant Bank Products) for Bank Products then provided or outstanding. 


    "Bankruptcy Code" means the United States Bankruptcy Code, as in effect from time to time. 


    "Base LIBOR Rate" means the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such
electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at which Dollar deposits are offered to
major banks in the London interbank market on or about 11:00 a.m. (California time) 2 Business Days prior to the commencement of the applicable Interest Period, for a term and in amounts
comparable to the Interest Period and amount of the LIBOR Rate Loan requested by Borrower in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error. 


    "Base Rate" means, the rate of interest announced within Wells Fargo at its principal office in San Francisco, California as its "prime
rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. 



    "Base Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the Base Rate. 


    "Base Rate Margin" means one-half of one percentage point (0.5%) from the Closing Date until the date on which financial
statements are required to be delivered for the fiscal period ending June 30, 2002. On each date on which financial statements are timely delivered under  Section 6.3(a), beginning with the
delivery of financial statements for the fiscal quarter ending June 30, 2002, the Base Rate Margin
shall be reset to be a number of percentage points depending on Borrower's EBITDA for the prior 12 months, measured quarterly, as set forth below: 



	Trailing 12 Month EBITDA
 
	 	Margin over

Base Rate
	 
	Greater than or equal to $6,000,000	 	0.25	%
	Greater than or equal to $4,000,000 but less than $6,000,000	 	0.50	%
	Greater than or equal to $2,000,000 but less than $4,000,000	 	1.00	%
	Less than $2,000,000	 	1.50	%






    If
financial statements are not timely delivered under Section 6.3(a) the Base Rate Margin shall be set on the date such
financial statements are due at 1.50% and shall remain at that rate until the delivery of financial statements that permit the setting of the Base Rate Margin in accordance with the table above. 


    "Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35) of ERISA) for which Borrower or any Subsidiary or
ERISA Affiliate of Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the past six years. 



    "Board of Directors" means the board of directors (or comparable managers) of Borrower or any committee thereof duly authorized to act
on behalf of the board. 


    "Books" means Borrower's and the Guarantors' now owned or hereafter acquired books and records (including all of its Records
indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of Borrower's or the Guarantors' Records relating to its or their business operations or financial
condition, and all of its goods or General Intangibles related to such information). 


3





 


    "Borrower" has the meaning set forth in the preamble to this Agreement. 


    "Borrowing" means a borrowing hereunder consisting of Advances made on the same day by the Lenders (or Agent on behalf thereof), or by
Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance. 


    "Borrowing Base" has the meaning set forth in Section 2.1. 


    "Business Day" means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close,
except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which banks are closed for dealings in Dollar deposits in the
London interbank market. 


    "Capital Lease" means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP. 


    "Capitalized Lease Obligation" means any Indebtedness represented by obligations under a Capital Lease. 


    "Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued
by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct
obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody's, (c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's, and (d) certificates of deposit or bankers' acceptances maturing
within 360 days from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2,
or better, from S&P or Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation. 



    "Cash Management Bank" has the meaning set forth in Section 2.7(a). 


    "Cash Management Account" has the meaning set forth in Section 2.7(a). 


    "Cash Management Agreements" means those certain cash management service agreements, in form and substance satisfactory to Agent, each
of which is among Borrower, Agent, and one of the Cash Management Banks. 


    "Change of Control" means (a) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act),
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 10%, or more, of the Stock of Borrower having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members of the Board of Directors do not constitute Continuing Directors. 


    "Closing Date" means the date of the making of the initial Advance (or other extension of credit) hereunder or the date on which Agent
sends Borrower a written notice that each of the conditions precedent set forth in Section 3.1 either have been satisfied or have been waived. 


    "Closing Date Business Plan" means the set of Projections of Borrower for the 1 year period following the Closing Date, on a
month by month basis, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent. 


    "Code" means the California Uniform Commercial Code, as in effect from time to time. 


4





 


    "Collateral" means all of Borrower's personal property and other assets other than real estate, whether now owned or hereafter acquired
or arising and wherever located, including, without limitation, the following types or items of property: 



    (a) Accounts,



    (b) Books,



    (c) Equipment,




    (d) General
Intangibles, 


    (e) Inventory, 


    (f)  Investment
Property, 


    (g) Negotiable
Collateral, 


    (h) money
or other assets of Borrower that now or hereafter come into the possession, custody, or control of any member of the Lender Group, 


    (i)  the
commercial tort claims listed on Schedule 1.1 attached hereto and incorporated herein by this reference,
and 


    (j)  the
proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and any
and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, money, deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. 




    "Collateral Access Agreement" means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman,
processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment or Inventory, in each case, in form and substance satisfactory to Agent. 


    "Collections" means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of Borrower. 


    "Commitment" means, with respect to each Lender, its Revolver Commitment or its Total Commitment, as the context requires, and, with
respect to all Lenders, their Revolver Commitments or their Total Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable
heading on Schedule C-1 or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. 


    "Compliance Certificate" means a certificate substantially in the form of  Exhibit C-1 delivered by the chief financial officer of Borrower to Agent. 



    "Continuing Director" means (a) any member of the Board of Directors who was a director (or comparable manager) of Borrower on
the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an
actual or threatened election contest relating to the election of the directors (or comparable managers) of Borrower (as such terms are used in Rule 14a-11 under the Exchange Act)
and whose initial assumption of office resulted from such contest or the settlement thereof. 


5





 


    "Control Agreement" means a control agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by
Borrower, Agent, and the applicable securities intermediary with respect to a Securities Account or bank with respect to a deposit account. 



    "Daily Balance" means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such
day. 


    "DDA" means any checking or other demand deposit account maintained by Borrower. 


    "Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of
Default. 


    "Defaulting Lender" means any Lender that fails to make any Advance (or other extension of credit) that it is required to make
hereunder on the date that it is required to do so hereunder. 


    "Defaulting Lender Rate" means (a) the Base Rate for the first 3 days from and after the date the relevant payment is
due, and (b) thereafter, at the interest rate then applicable to Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto). 


    "Designated Account" means that certain account at the Designated Account Bank designated as such on  Schedule B-1. 



    "Designated Account Bank" means Wells Fargo Bank, N.A., whose office is located at 111 West Ocean Boulevard, Suite 300, Long Beach,
California 90802, and whose ABA number is 121000248. 


    "Dilution" means, as of any date of determination, a percentage, based upon the experience of the immediately prior 90 days,
that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other items with respect to the Accounts during such period that
Agent reasonably believes have a dilutive effect, by (b) Borrower's Collections with respect to Accounts during such period (excluding extraordinary items)  plus the Dollar amount of clause 
(a). 



    "Dilution Reserve" means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by
one percentage point for each percentage point or fraction thereof by which Dilution is in excess of 5%. 


    "Disbursement Letter" means an instructional letter executed and delivered by Borrower to Agent regarding the extensions of credit to
be made on the Closing Date, the form and substance of which is satisfactory to Agent. 


    "Dollars" or "$" means United States dollars. 


    "Due Diligence Letter" means the due diligence letter sent by Agent's counsel to Borrower, together with Borrower's completed responses
to the inquiries set forth therein, the form and substance of such responses to be satisfactory to Agent. 


    "EBITDA" means, with respect to any fiscal period, the consolidated net earnings (or loss) of Parent and its Subsidiaries,  minus extraordinary gains, plus interest expense, income taxes, and depreciation and amortization for
such period, as determined in accordance with GAAP. 


    "Eligible Accounts" means those Accounts created by Borrower in the ordinary course of its business, that arise out of Borrower's sale
of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made by Borrower in the Loan Documents, and that are not excluded as
ineligible by virtue of one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by
Agent in Agent's
Permitted Discretion to address the results of any audit performed by Agent from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated 


6





 


net of customer deposits and unapplied cash remitted to Borrower. Eligible Accounts shall not include the following: 



    (a) Accounts
that the Account Debtor has failed to pay within 90 days of original invoice date or Accounts with selling terms of more than 60 days,
provided that Agent may, in its sole discretion, designate Accounts with Extended Payment Terms owed by specific Account Debtors (including but not limited to General Electric Corporation) as Eligible
Accounts, provided such Accounts with Extended Payment Terms are not unpaid for more than 30 days past the due date, 


    (b) Accounts
owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under
clause (a) above, 


    (c) Accounts
with respect to which the Account Debtor is an employee, Affiliate, or agent of Borrower, 



    (d) Accounts
arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill
and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional, 


    (e) Accounts
that are not payable in Dollars, 


    (f)  Accounts
with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or (ii) is not
organized under the laws of Canada, the United States or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Agent and is directly drawable by Agent, or (z) the Account is covered by credit
insurance in form, substance, and amount, and by an insurer, satisfactory to Agent, 


    (g) That
portion of Accounts owed by account debtors located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other state that requires a
creditor to file a business activity report or similar document in order to bring suit or otherwise enforce its remedies against such account debtor
in the courts or through any judicial process of such state), unless the Borrower has qualified to do business in such state, or has filed a notice of business activities report with the applicable
division of taxation, the department of revenue, or with such other state offices, as appropriate, for the then-current year, or is exempt from filing requirement; 


    (h) Accounts
with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied, to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC § 3727), or (ii) any
state of the United States (exclusive, however, of (y) Accounts owed by any state that does not have a statutory counterpart to the Assignment of Claims Act, or (z) Accounts owed by any
state that does have a statutory counterpart to the Assignment of Claims Act as to which Borrower has complied to Agent's satisfaction), 


    (i)  Accounts
with respect to which the Account Debtor is a creditor of Borrower, has or has asserted a right of setoff, has disputed its liability, or has made any
claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute, 


    (j)  Accounts
with respect to an Account Debtor whose total obligations owing to Borrower exceed 10% of all Eligible Accounts, to the extent of the obligations owing by
such Account Debtor in excess of such percentage; provided however, such percentage shall be 20% in each case 



7





 


with respect to Accounts owed by the City of Los Angeles, the County of Los Angeles, the State of Minnesota or Deutsche Bank, A.G., and 25% in each case with respect to Accounts owed by IBM
Corporation or Qwest Communications International, Inc. and provided that any such percentage as applied to a particular Account Debtor is subject to reduction by Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates, 


    (k) Accounts
with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which Borrower has
received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor, 


    (l)  Accounts,
the collection of which, Agent, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor's financial condition, 


    (m) Accounts
that are not subject to a valid and perfected first priority Agent's Lien, 


    (n) Accounts
with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account Debtor, 


    (o) Accounts
which constitute Rebate Receivables, or 



    (p) Accounts
that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by Borrower of the
subject contract for goods or services. 




    "Eligible Transferee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and
having total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development
or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States,
(c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its
business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date,
(e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Borrower, and (f) during the continuation of an Event of Default, any other
Person approved by Agent. 


    "Environmental Actions" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials
from (a) any assets, properties, or businesses of Borrower or any predecessor in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which
received Hazardous Materials generated by Borrower or any predecessor in interest. 


    "Environmental Law" means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Borrower, relating to the environment, employee health and safety, or
Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC § 1251 et seq; the Toxic Substances Control
Act, 15 USC, § 2601 et seq; the Clean Air Act, 42 USC § 7401 et seq.; the Safe
Drinking Water Act, 42 USC. § 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. § 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. § 11001 et
seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et seq.; and the 


8





 


Occupational Safety and Health Act, 29 USC. §651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any
state and local or foreign counterparts or equivalents, in each case as amended from time to time. 



    "Environmental Liabilities and Costs" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action. 


    "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. 



    "Equipment" means all of Borrower's, and/or any other Obligor's, as the case may be, now owned or hereafter acquired right, title, and
interest with respect to equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing and any software
embedded in any of the foregoing. 


    "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto. 



    "ERISA Affiliate" means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the
employees of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under
IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service
group of which Borrower is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA
that is a party to an arrangement with Borrower and whose employees are aggregated with the employees of Borrower under IRC Section 414(o). 



    "Event of Default" has the meaning set forth in Section 8. 


    "Excess Availability" means the amount, as of the date any determination thereof is to be made, equal to Availability  minus the aggregate amount, if any, of all
trade payables of Borrower aged in excess of
historical levels with respect thereto and all book overdrafts in excess of historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion. 


    "Exchange Act" means the Securities Exchange Act of 1934, as in effect from time to time. 



    "Extended Payment Terms" means terms of sale permitting payment in excess of 60 days up to 105 days from invoice date. 


    "Fee Letter" means that certain fee letter, dated as of even date herewith, between Borrower and Agent, in form and substance
satisfactory to Agent. 


    "FEIN" means Federal Employer Identification Number. 


    "Foothill" means Foothill Capital Corporation, a California corporation. 


    "Funding Date" means the date on which a Borrowing occurs. 


    "Funding Losses" has the meaning set forth in Section 2.13(b)(ii). 


9





 


    "GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied. 


    "General Intangibles" means all of Borrower's now owned or hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, money, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims), and any and all supporting obligations in respect
thereof, and any other personal property other than goods, Accounts, Investment Property, and Negotiable Collateral. 


    "Governing Documents" means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other
organizational documents of such Person. 


    "Governmental Authority" means any federal, state, local, or other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body. 


    "Guarantor" means each of En Pointe Technologies, Inc., En Pointe Technologies Ventures, Inc., and En Pointe Technologies
Canada, Inc. and "Guarantors" means two or more of those Persons. 


    "Guaranties" means those certain secured continuing guaranties executed and delivered by each Guarantor in favor of Agent, for the
benefit of the Lender Group, in form and substance satisfactory to Agent, and "Guaranty" means any one of them. 


    "Guaranty Indemnity" has the meaning set forth in Section 2.2. 


    "Guaranty Reserve" means a reserve against Availability equal at any time to the lesser of the IBMCC Obligations or $22,000,000. 



    "Hazardous Materials" means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable
laws or regulations as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or any other formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources,
(c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels
of polychlorinated biphenyls in excess of 50 parts per million. 


    "Hedge Agreement" means any and all transactions, agreements, or documents now existing or hereafter entered into between Borrower or
its Affiliates and Wells Fargo or its Affiliates, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Borrower's or its Subsidiaries' exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices. 


    "IBMCC" means IBM Credit Corporation. 


    "IBMCC Agreement" means that certain Agreement for Inventory Financing between IBMCC and Borrower, of even date herewith, as amended,
modified and supplemented from time to time. 


10





 


    "IBMCC Obligations" has the meaning set forth in the Intercreditor Agreement. 


    "Indebtedness" means, as to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of such Person under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person,
irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person for the deferred purchase price of assets (other than trade debt incurred in the ordinary
course of business and repayable in accordance with customary trade practices), and (f) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person. 


    "Indemnified Liabilities" has the meaning set forth in Section 11.3. 



    "Indemnified Person" has the meaning set forth in Section 11.3. 


    "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any
other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief. 



    "Intangible Assets" means, with respect to any Person, that portion of the book value of all of such Person's assets that would be
treated as intangibles under GAAP. 


    "Intercreditor Agreement" means that certain Intercreditor and Subordination Agreement of even date herewith between Agent and IBMCC. 


    "Interest Period" means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan
and ending 1, 2, 3 or 6 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business
Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate
from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day,
(d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end
of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, 3 or 6 months after the date on which the Interest Period began, as
applicable, and (e) Borrower may not elect an Interest Period which will end after the Maturity Date. 


    "Inventory" means, with respect to Borrower, and/or any other Obligor, as the case may be, all of such Person's now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods held for sale or lease or to be furnished under a contract of service, goods that are leased by such Person as lessor,
goods that are furnished by such Person under a contract of service, and raw materials, work in process, or materials used or consumed in such Person's business. 



    "Investment" means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of
loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business,
and (b) bona fide Accounts arising in the ordinary course of business consistent with past practices), purchases or other acquisitions for
consideration of Indebtedness or 


11





 


Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. 


    "Investment Property" means all of Borrower's now owned or hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting obligations in respect thereof. 


    "IRC" means the Internal Revenue Code of 1986, as in effect from time to time. 



    "Issuing Lender" means Foothill or any other Lender that, at the request of Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12. 


    "L/C" has the meaning set forth in Section 2.12(a). 


    "L/C Disbursement" means a payment made by the Issuing Lender pursuant to a Letter of Credit. 



    "L/C Undertaking" has the meaning set forth in Section 2.12(a). 


    "Lender" and "Lenders" have the respective meanings set forth in the preamble to this
Agreement, and shall include any other Person made a party to this Agreement in accordance with the provisions of Section 14.1. 


    "Lender Group" means, individually and collectively, each of the Lenders (including the Issuing Lender) and Agent. 



    "Lender Group Expenses" means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by
Borrower under any of the Loan Documents that are paid or incurred by the Lender Group, (b) fees or charges paid or incurred by Agent in connection with the Lender Group's transactions with
Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic Collateral appraisals or
business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement), real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the disbursement of funds to Borrower (by wire transfer or otherwise), (d) charges paid or incurred by Agent resulting
from the dishonor of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and charges (and up to the amount of any limitation) contained in this
Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or the Lender Group's relationship with Borrower or any guarantor of the Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or in exercising rights or remedies under the Loan Documents),
or defending the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral. 



    "Lender-Related Person" means, with respect to any Lender, such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, and agents of such Lender. 


12





 


    "Letter of Credit" means an L/C or an L/C Undertaking, as the context requires. 


    "Letter of Credit Usage" means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit  plus 100% of the amount of outstanding
time drafts accepted by an Underlying Issuer as a result of drawings under Underlying Letters of Credit.
 


    "LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i). 


    "LIBOR Notice" means a written notice in the form of Exhibit L-1. 


    "LIBOR Option" has the meaning set forth in Section 2.13(a). 


    "LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period,  by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage. 


    "LIBOR Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the LIBOR Rate. 


    "LIBOR Rate Margin" means two and three-fourths percentage points (2.75%) from the Closing Date until the date on which financial
statements are required to be delivered for the fiscal period ending June 30, 2002. On each date on which financial statements are timely delivered under  Section 6.3(a), beginning with the
delivery of financial statements for the fiscal quarter ending June 30, 2002, the LIBOR Rate Margin
shall be reset to be a number of percentage points depending on Borrower's EBITDA for the prior 12 months, measured quarterly, as set forth below: 



	Trailing 12 Month EBITDA
 
	 	Margin over

Base LIBOR

Rate
	 
	Greater than or equal to $6,000,000	 	2.50	%
	Greater than or equal to $4,000,000 but less than $6,000,000	 	2.75	%
	Greater than or equal to $2,000,000 but less than $4,000,000	 	3.25	%
	Less than $2,000,000	 	3.75	%






    If
financial statements are not timely delivered under Section 6.3(a) the LIBOR Rate Margin shall be set on the date such
financial statements are due at 3.75% and shall remain at that rate until the delivery of financial statements that permit the setting of the LIBOR Rate Margin in accordance with the table above. 


    "License Agreement" means a license agreement or consent from Supply Access, Inc., in form and substance satisfactory to Lender,
permitting Lender use of the intellectual property described therein. 


    "Lien" means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset,
whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of
some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes. 



    "Loan Account" has the meaning set forth in Section 2.10. 


    "Loan Documents" means this Agreement, the Bank Product Agreements, the Cash Management Agreements, the Control Agreements, the
Disbursement Letter, the Due Diligence Letter, the Fee Letter, the Guaranties, the Letters of Credit, the Officers' Certificate, the Stock Pledge Agreement, the Trademark Security Agreement, any note
or notes executed by Borrower in connection with this 


13





 


Agreement and payable to a member of the Lender Group, the Intercreditor Agreement, and any other agreement entered into, now or in the future, by Borrower and the Lender Group in connection with this
Agreement. 


    "Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of Borrower, (b) a material impairment of Borrower's ability to perform its obligations under the Loan Documents to which it is a party
or of the Lender Group's ability to enforce the Obligations or realize upon the Collateral, or (c) a material impairment of the enforceability or priority of the Agent's Liens with respect to
the Collateral as a result of an action or failure to act on the part of Borrower. 


    "Maturity Date" has the meaning set forth in Section 3.4. 


    "Maximum Revolver Amount" means $30,000,000. 


    "Negotiable Collateral" means all of Borrower's now owned and hereafter acquired right, title, and interest with respect to letters of
credit, letter of credit rights, instruments, promissory notes, drafts, documents, and chattel paper (including electronic chattel paper and tangible chattel paper), and any and all supporting
obligations in respect thereof. 


    "Non-Offset Agreement" means an agreement between Borrower and IBM Corporation providing that IBM Corporation will not
reduce its payments as an Account Debtor of Borrower on account of amounts owed by the Borrower to IBMCC under the IBMCC Agreement or otherwise. 


    "Obligations" means (a) all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of
the Bankruptcy Code, would have accrued), contingent reimbursement obligations with respect to outstanding Letters of Credit, an amount equal to the IBMCC Obligations as defined under the terms of the
Intercreditor Agreement (whether contingent or liquidated), premiums, liabilities (including all amounts charged to Borrower's Loan Account pursuant hereto), obligations, fees (including the fees
provided for in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by
Borrower to the Lender Group pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications,
renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. 


    "Obligors" means Borrower and any Guarantors. 


    "Officers' Certificate" means the representations and warranties of officers form submitted by Agent to Borrower, together with
Borrower's completed responses to the inquiries set forth therein, the form and substance of such responses to be satisfactory to Agent. 


    "Originating Lender" has the meaning set forth in Section 14.1(e). 


    "Overadvance" has the meaning set forth in Section 2.5. 


    "Parent" means En Pointe Technologies, Inc. 


    "Participant" has the meaning set forth in Section 14.1(e). 


    "Pay-Out Amount" shall have the meaning given in the Intercreditor Agreement. 


14





 


    "Permitted Discretion" means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment. 


    "Permitted Dispositions" means, with respect to Borrower, and/or any other Obligor, as the case may be, (a) sales or other
dispositions by such Person or its Affiliates of Equipment that is substantially worn, damaged, obsolete or underutilized in the ordinary course of such Person's business, (b) sales by such
Person or its Affiliates of Inventory to buyers in the ordinary course of business, (c) the use or transfer of money or Cash Equivalents by such Person or its Affiliates in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents, and (d) the licensing by such Person or its Affiliates, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of such Person's business. 


    "Permitted Investments" means (a) investments in Cash Equivalents, (b) investments in negotiable instruments for
collection, (c) advances made in connection with purchases of goods or services in the ordinary course of business, (d) certificates of deposit provided as performance bonds or as
security for the payment of sales taxes, and (e) investments by Parent or its Subsidiaries in an amount not exceeding $2,000,000 in cash and $3,000,000 in Parent's stock (and in no event
exceeding $5,000,000 in the aggregate) per fiscal year, provided, however that before and after giving effect to such investment, Excess Availability
exceeds $5,000,000. 


    "Permitted Liens" means (a) Liens held by Agent for the benefit of Agent and the Lenders, (b) Liens for unpaid taxes that
either (i) are not yet delinquent, or (ii) do not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c) Liens set forth on  Schedule P-1,
(d) the interests of lessors under operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as such Lien attaches only to the asset purchased or acquired and the proceeds
thereof, (f) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not
in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising from
deposits made in connection with obtaining worker's compensation or other unemployment insurance, (h) Liens or deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of business and not in connection with the borrowing of money, (i) Liens granted as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary
course of business, (j) Liens resulting from any judgment or award that is not an Event of Default hereunder, (k) Liens with respect to any real property, (l) any Liens permitted
under the Intercreditor Agreement, and (m) Liens on any property or assets not comprising the Collateral. 


    "Permitted Protest" means the right of Borrower or its Affiliates to protest any Lien (other than any such Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation
is established on the Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Borrower or its Affiliate, as applicable, in good
faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Agent's Liens. 


15







 
    "Permitted Purchase Money Indebtedness" means, as of any date of determination, Purchase Money Indebtedness incurred after the Closing
Date in an aggregate principal amount outstanding at any one time, for all Obligors, not in excess of $3,000,000. 


    "Person" means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political
subdivisions thereof. 


    "Projections" means Borrower's forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow
statements, all prepared on a basis consistent with Borrower's historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. 


    "Pro Rata Share" means: 



    (a) with
respect to a Lender's obligation to make Advances and receive payments of principal, interest, fees, costs, and expenses with respect thereto, the percentage
obtained by dividing (i) such Lender's Revolver Commitment, by (ii) the aggregate Revolver Commitments of all Lenders, 


    (b) with
respect to a Lender's obligation to participate in Letters of Credit, to reimburse the Issuing Lender, and to receive payments of fees with respect thereto,
the percentage obtained by dividing (i) such Lender's Revolver Commitment, by (ii) the aggregate Revolver Commitments of all Lenders, and 



    (c) with
respect to all other matters (including the indemnification obligations arising under Section 16.7), the
percentage obtained by dividing (i) such Lender's Total Commitment, by (ii) the aggregate amount of Total Commitments of all Lenders; provided,
however, that, in each case, in the event all Commitments have been terminated, Pro Rata Share shall be determined according to the Commitments in effect immediately prior to
such termination. 




    "Purchase Money Indebtedness" means Indebtedness (other than the Obligations, but including Capitalized Lease Obligations), incurred at
the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof. 


    "Rebate Receivables" means any amounts owed to Borrower by a direct distribution vendor or manufacturer of products sold by Borrower as
an incentive to sell products offered by said distributor and/or manufacturer, and/or a reimbursement of funds charged by Borrower's distribution vendors at the time of initial purchase. 



    "Record" means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is
retrievable in perceivable form. 


    "Remedial Action" means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in
any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and
maintenance activities, or (d) conduct any other actions authorized by 42 USC § 9601. 


    "Report" has the meaning set forth in Section 16.17. 


    "Required Availability" means Excess Availability and unrestricted cash and Cash Equivalents in an amount of not less than $4,000,000. 


    "Required Lenders" means, at any time, (a) Agent, and (b) at least two Lenders (i) whose Pro Rata Shares aggregate
662/3% of the Total Commitments, or if the Commitments have been terminated irrevocably, 662/3% of the Obligations (other than Bank Product Obligations) then outstanding
and (ii) who each have at least $5,000,000 in Total Commitments. 


16





 


    "Reserve Percentage" means, on any day, for any Lender, the maximum percentage prescribed by the Board of Governors of the Federal
Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date
with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities") of that Lender, but so long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero. 


    "Revolver Commitment" means, with respect to each Lender, its Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1
or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of  Section 14.1. 


    "Revolver Usage" means, as of any date of determination, the sum of (a) the then extant amount of outstanding Advances,  plus (b) the then extant amount of the
Letter of Credit Usage. 


    "Risk Participation Liability" means, as to each Letter of Credit, all reimbursement obligations of Borrower to the Issuing Lender with
respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by the Issuing Lender to
the Underlying Issuer to the extent not reimbursed by Borrower, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with
respect thereto. 


    "SEC" means the United States Securities and Exchange Commission and any successor thereto. 


    "Securities Account" means a "securities account" as that term is defined in the Code. 


    "Service Accounts Reserve" means a reserve against Availability equal at any time to the amount of Accounts outstanding generated by
services rendered, provided that Agent may not institute such reserve until 90 days after the Closing Date and may institute such reserve if Borrower fails to implement and maintain
commercially reasonable procedures to evidence such Accounts that Agent, in its reasonable discretion, deems satisfactory. 


    "Settlement" has the meaning set forth in Section 2.3(f)(i). 


    "Settlement Date" has the meaning set forth in Section 2.3(f)(i). 



    "Solvent" means, with respect to any Person on a particular date, that such Person is not insolvent (as such term is defined in the
Uniform Fraudulent Transfer Act). 


    "Stock" means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act). 


    "Stock Pledge Agreement" means a stock pledge agreement, in form and substance satisfactory to Agent, executed and delivered by Parent
as a Guarantor and pursuant to its Guaranty, to Agent with respect to the pledge of the Stock of Borrower owned by such Guarantor. 


    "Subsidiary" of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership,
limited liability company, or other entity. 


    "Swing Lender" means Foothill or any other Lender that, at the request of Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become the Swing Lender hereunder. 


    "Swing Loan" has the meaning set forth in Section 2.3(d)(i). 


    "Tangible Net Worth" means, as of any date of determination, the result of (a) Borrower's total stockholder's equity,  minus (b) the sum of (i) all
Intangible Assets of Borrower, (ii) all of Borrower's prepaid expenses, and (iii) all amounts
due to Borrower from Affiliates. 


17





 


    "Taxes" has the meaning set forth in Section 16.11. 


    "Total Commitment" means, with respect to each Lender, its Total Commitment, and, with respect to all Lenders, their Total Commitments,
in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 attached
hereto or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of  Section 14.1. 


    "Trademark Security Agreement" means a trademark security agreement executed and delivered by Borrower and Agent, the form and
substance of which is satisfactory to Agent. 


    "Underlying Issuer" means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit or
executed the Intercreditor Agreement at the request of the Issuing Lender for the benefit of Borrower. 


    "Underlying Letter of Credit" means a letter of credit that has been issued by an Underlying Issuer. 


    "Voidable Transfer" has the meaning set forth in Section 17.7. 


    "Wells Fargo" means Wells Fargo Bank, National Association, a national banking association. 


    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 Affiliates 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. 


    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 term "including" is 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, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents 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 to any
Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a
Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein. 


    1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement 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, the Availability Block and the Guaranty 



18





 


Reserve, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing
Base," as of any date of determination, shall mean the result of: 



    (x) the lesser of



     (i) 85%
of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve;  provided however, that Advances against Eligible Accounts with
respect to Accounts with Extended Payment Terms shall not exceed $2,000,000 at any time,
and 


    (ii) an
amount equal to 662/3% of Borrower's Collections with respect to Accounts for the immediately preceding 90 day period,  minus




    (y) the
sum of (i) the Bank Products Reserve, the Availability Block, the Service Accounts Reserve and the Guaranty Reserve, and (ii) the aggregate amount
of reserves, if any, established by Agent under Section 2.1(b). 




    (b) Anything
to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish
reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to
(i) sums that Borrower is required to pay (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 under any
Section of this Agreement or any other Loan Document, (ii) amounts owing by Borrower to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on Schedule P-1 which is specifically identified thereon as entitled to have priority over the
Agent's Liens), 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, and (iii) the Availability Block, the Guaranty Reserve, the Bank Products Reserve and the Service Accounts Reserve. 


    (c) The
Lenders with Revolver Commitments shall have no obligation to make additional Advances hereunder to the extent such additional Advances would cause the Revolver
Usage to exceed the Maximum Revolver Amount or the Borrowing Base less the Letter of Credit Usage. 



    (d) Amounts
borrowed pursuant to this Section may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this
Agreement. 




    2.2 Guaranty Indemnity. Agent shall enter into the Intercreditor Agreement on behalf of the
Lenders as an accommodation to Borrower. The Pay-Out Amount shall be referenced to herein as the "Guaranty Indemnity" and shall be
indemnified and reimbursed by the Lenders as a Letter of Credit under Section 2.12. Any payments made by Agent pursuant to the terms of the
Intercreditor Agreement shall be deemed to be authorized Advances by the Lenders, irrespective of whether a Default or Event of Default has occurred or would result therefrom and irrespective of any
other provision in this Agreement to the contrary. The provisions of Section 2.3 shall apply to all such Advances. 


    2.3 Borrowing Procedures and Settlements. 



    (a) Procedure for Borrowing. Except as provided in Section 2.13 hereof, with respect to LIBOR Option Advances,
each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Agent (which 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 in the case of a request for an Advance specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day; provided, however, that in the case of a request for a Swing Loan in an amount of $2,500,000, or less, such notice
will be timely received if it is 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. At Agent's election, in lieu of delivering the above-described written request, any Authorized Person may give
Agent telephonic notice of 



19





 


such request by the required time, with such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice. 


    (b) Agent's Election. Promptly after receipt of a request for a Borrowing pursuant to  Section 2.3(a), Agent shall elect, in its discretion, (i) to have the terms
of  Section 2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested Borrowing; provided,
however, that if Swing Lender declines in its sole discretion to make a Swing Loan pursuant to Section 2.3(d), Agent
shall elect to have the terms of Section 2.3(c) apply to such requested Borrowing. 


    (c) Making of Advances.



     (i) In
the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested
Borrowing as described in Section 2.3(b), 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, upon satisfaction of the applicable conditions precedent set forth in Section 3 hereof,
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 Borrower's Designated
Account; provided, however, that, subject to the provisions of Section 2.3(i), Agent shall not
request any Lender to make, and no Lender shall 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 on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior
to the date of such 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 




20





 



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 it 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 Agreement 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 Obligations (other than Bank
Product Obligations) (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever; provided
further, 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) Making of Swing Loans.



     (i) In
the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this  Section 2.3(d) apply to a requested Borrowing as described in  Section 2.3(b), Swing Lender as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as
a Lender pursuant to this Section 2.3(d) 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 is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Swing
Loan shall be eligible for the LIBOR Option 




21





 



and all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account (and for the account of the holder of any participation interest with respect to such Swing
Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender shall
not make, any Swing Loan if Agent 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 unless such condition has been waived, or (ii) the requested Borrowing would exceed the Availability on such
Funding Date. Swing Lender as a 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, in its sole discretion, any Swing Loan. 



    (ii) The
Swing Loans shall be secured by the Agent's Liens, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from
time to time to Advances that are Base Rate Loans. 




    (e) Agent Advances.



     (i) Agent
hereby is authorized by Borrower and the Lenders, from time to time in Agent's sole discretion, (1) after the occurrence and during the continuance of
a Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in  Section 3 have not been satisfied, to make Advances to Borrower on
behalf of the Lenders that Agent, in its Permitted Discretion deems
necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of repayment of the Obligations (other than Bank Product
Obligations), or (C) 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 10 (any of the Advances described in this Section 2.3(e) shall be
referred to as "Agent Advances"). Each Agent Advance is an Advance hereunder and shall be subject to all the terms and conditions applicable to other
Advances, except that no such Agent Advance shall be eligible for the LIBOR Option and all payments thereon shall be payable to Agent solely for its own account (and for the account of the holder of
any participation interest with respect to such Agent Advance). 


    (ii) The
Agent Advances shall be repayable on demand and secured by the Agent's Liens granted to Agent under the Loan Documents, shall constitute Advances and
Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. 




    (f)  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 not be for the benefit of
or enforceable by Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to the Advances, the Swing Loans, and the Agent
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 each outstanding Swing Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect to
Collections 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 Agent Advances for the period since the prior Settlement Date. Subject to the
terms and conditions contained herein (including 




22





 


 Section 2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro Rata Share of the Advances, Swing
Loans, and Agent 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 the 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, Swing Loans,
and Agent Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent 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, Swing Loans, and Agent 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 Loan or Agent Advance and, together with the portion of such Swing Loan or Agent
Advance 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 Agent Advances is less than, equal to, or greater than such Lender's Pro Rata Share of
the Advances, Swing Loans, and
Agent 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 no Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender any 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 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 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 Agent Advances, and each Lender (subject to the effect of letter agreements between Agent and individual Lenders) with respect to the Advances other than Swing Loans and Agent
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. 




    (g) Notation. Agent shall record on its books the principal amount of the Advances owing to each Lender, including the
Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the interests therein of each Lender, from time to time. In addition, each Lender is authorized, at such Lender's option, to
note the date and amount of each payment or prepayment of principal of such Lender's Advances in its books and records, including computer records, such 



23





 


books and records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein. 


    (h) Lenders' Failure to Perform. All Advances (other than Swing Loans and Agent 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. 


    (i)  Optional Overadvances. Any contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent
or Swing Lender, as applicable, and 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 (i) after giving effect to such Advances (including a Swing Loan), the outstanding Revolver
Usage does not exceed the Borrowing Base by more than $2,500,000, (ii) after giving effect to such Advances (including a Swing Loan), 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, and (iii) at the time of the making of any such Advance (including
any Swing Loan), Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 90 days; provided, however, that the limitation set forth
herein shall not apply to any Advances made by Agent pursuant to the Intercreditor Agreement. The foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrower in any way. The Advances and Swing Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be
subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto
shall be the rate applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof without regard to the presence or absence of a
Default or Event of Default. 



     (i) In
the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason
for, such excess, Agent shall notify 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 paragraph. In the event Agent or any Lender disagrees over the 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. 


    (ii) Each
Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(f)
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(i), and any
Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses.
 





    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 




24





 



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 of Payments.



     (i) Except
as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the Loan Documents (including letter agreements between Agent
and individual Lenders), aggregate 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 payments of fees and expenses (other than fees or expenses that are for Agent's separate account, after giving effect to any letter agreements between Agent and
individual Lenders) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee relates. All payments shall be remitted to
Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is continuing and which relate to the payment of principal or interest of specific
Obligations or which relate to the payment of specific fees), and all proceeds of Accounts or other Collateral received by Agent, shall be applied as follows: 



    (A) first, to pay any Lender Group Expenses then due to Agent under the Loan Documents, until paid in full, 


    (B) second, to pay any Lender Group Expenses then due to the Lenders under the Loan Documents, on a ratable basis, until
paid in full, 


    (C) third, to pay any fees then due to Agent (for its separate accounts, after giving effect to any letter agreements
between Agent and individual Lenders) under the Loan Documents until paid in full, 


    (D) fourth, to pay any fees then due to any or all of the Lenders (after giving effect to any letter agreements between
Agent and individual Lenders) under the Loan Documents, on a ratable basis, until paid in full, 


    (E) fifth, to pay interest due in respect of all Agent Advances, until paid in full, 


    (F) sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances) and the Swing Loans until
paid in full, 


    (G) seventh, to pay the principal of all Agent Advances until paid in full, 


    (H) eighth, to pay the principal of all Swing Loans until paid in full, 


    (I) ninth, so long as no Event of Default has occurred and is continuing, and at Agent's election (which election Agent
agrees will not be made if an Overadvance would be created thereby), to pay amounts then due and owing by Borrower or its Affiliates in respect of Bank Products, until paid in full, 





25





 




    (J) tenth, so long as no Event of Default has occurred and is continuing, to pay the principal of all Advances until
paid in full, 


    (K) eleventh, if an Event of Default has occurred and is continuing, ratably (i) to pay the principal of all
Advances until paid in full, and (ii) to Agent, to be held by Agent, for the benefit of Wells Fargo or its Affiliates, as applicable, as cash collateral in an amount up to the amount of the
Bank Products Reserve established prior to the occurrence of, and not in contemplation of, the subject Event of Default until Borrower's and its Subsidiaries' obligations in respect of the then extant
Bank Products have been paid in full or the cash collateral amount has been exhausted, 


    (L) twelfth, if an Event of Default has occurred and is continuing, 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 then extant Letter of Credit Usage until paid in full, 


    (M) thirteenth, if an Event of Default has occurred and is continuing, to pay any other Obligations until paid in full,
and 


    (N) fourteenth, to Borrower or such other Person entitled thereto under applicable law. 




    (ii) Agent
promptly shall distribute to each Person entitled to receive funds pursuant to clause (i) above such funds as such Person may be entitled to receive.
Agent shall distribute such funds by wire transfer to the Designated Account in the case of a distribution to Borrower or, in the case of any other Person, by wire transfer pursuant to the applicable
wire instructions received from such Person in writing, subject, with respect to the Lenders, to a Settlement delay as provided in  Section 2.3(f). 



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


    (iv) For
purposes of the foregoing, "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 the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding. 



    (v) In
the event of a direct conflict between the priority provisions of this Section 2.4 and
other provisions contained in any other Loan Document, it is the intention of the parties hereto that such priority provisions in such documents shall 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. 





    2.5 Overadvances. If, at any time or for any reason, the amount of Obligations (other than Bank
Product Obligations) owed by Borrower to the Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or percentage limitations
set forth in Sections 2.1 or 2.12, (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). In addition, Borrower hereby promises to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group as and when due and payable under the terms of this Agreement and the other Loan Documents. 


26





 


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



    (a) Interest Rates. Except as provided in clause (c) below, 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 as follows (i) if the relevant
Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, (i) otherwise, at a per annum rate equal to the Base Rate plus the
Base Rate Margin. 


    The
foregoing notwithstanding, at no time shall any portion of the Obligations (other than Bank Product Obligations) bear interest on the Daily Balance thereof at a per annum rate
less than 6.0%. To the extent that interest accrued hereunder at the rate set forth herein 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. On the first day of each month during the term of this Agreement, Borrower shall pay Agent
(for the ratable benefit of the Lenders with a Revolver Commitment, subject to any letter agreement 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 2.0% per annum  times the Daily Balance of the undrawn
amount of all outstanding Letters of Credit (except for Agent's obligations under the Intercreditor Agreement). 



    (c) Guaranty Reserve Fee. On the first day of each month during the term of this Agreement, Borrower shall pay Agent
(for the ratable benefit of the Lenders with a Revolver Commitment, subject to any letter agreement between Agent and individual Lenders), a Guaranty Reserve fee which shall accrue at a rate equal to
1.0% per annum times the Daily Balance of the IBMCC Obligations. 


    (d) 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, 


    (ii) the
Letter of Credit fee provided for above shall be increased to 2 percentage points above the per annum rate otherwise applicable hereunder, and 


    (iii) the
Guaranty Reserve fee provided for above shall be increased to 2 percentage points above the per annum rate otherwise applicable hereunder. 




    (e) Payment. 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 such
interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.12(e)
(as and when accrued or incurred), the 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 any amounts due and payable to Wells Fargo or its Affiliates in respect of Bank Products up to the amount of the then extant Bank Products
Reserve) to Borrower's Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid
when due shall be compounded by being charged to Borrower's Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are
Base Rate Loans hereunder. 



27





 


    (f)  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. 


    (g) 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, 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 (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 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
Collections (including those sent directly by Account Debtors to a Cash Management Bank) into a bank account in Agent's name (a "Cash Management
Account") at one of the Cash Management Banks. 


    (b) Each
Cash Management Bank shall establish and maintain Cash Management Agreements with Agent and Borrower, in form and substance acceptable to Agent. Each such Cash
Management Agreement shall provide, among other things, that (i) all items of payment deposited in such Cash Management Account and proceeds thereof are held by such Cash Management Bank as
agent or bailee-in-possession for Agent, (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) it immediately 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
satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such Cash Management Account with the prospective Cash Management Bank, and (ii) prior to the time
of the opening of such Cash Management Account, Borrower and such prospective Cash Management Bank shall have executed and delivered to Agent a Cash Management Agreement. Borrower 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. 



28





 


    (d) The Cash Management Accounts shall be cash collateral accounts, with all cash, checks and similar items of payment in such accounts securing payment of the
Obligations, and in which Borrower is hereby deemed to have granted a Lien to Agent. 




    2.8 Crediting Payments; Float 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 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 1 Business Day of "clearance' or "float' at the rate applicable to Base Rate Loans
under Section 2.6 on all Collections that are received by Borrower (regardless of whether forwarded by the Cash Management Banks to Agent). This
across-the-board 1 Business Day clearance or float charge on all Collections 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 or float charge being the equivalent of charging 1 Business Day of
interest on such Collections. 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 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, Agent 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 all Advances (including Agent 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 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. 


29







 
    2.11 Fees. Borrower shall pay to Agent the following fees and charges, which fees and charges
shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter) and shall be apportioned among the Lenders in accordance with the terms of letter
agreements between Agent and individual Lenders: 



    (a) Unused Line Fee. On the first day of each month during the term of this Agreement, an unused line fee in an amount
equal to 0.30% per annum times the result of (a) the Maximum Revolver Amount, less (b) the
sum of (i) the average Daily Balance of Advances that were outstanding during the immediately preceding month, plus (ii) the average Daily
Balance of the Letter of Credit Usage during the immediately preceding month, plus (iii) the average Daily Balance of IBMCC Obligations, plus
(iv) the Availability Block, 


    (b) Fee Letter Fees. As and when due and payable under the terms of the Fee Letter, Borrower shall pay to Agent the fees
set forth in the Fee Letter, and 


    (c) Audit, Appraisal, and Valuation Charges. For the separate account of Agent, audit, appraisal, and valuation fees and
charges as follows (i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for each financial audit of Borrower performed by personnel employed by Agent,
(ii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral performed by personnel employed by Agent, and
(iii) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits of Borrower, to appraise the Collateral, or any
portion thereof, or to assess Borrower's business valuation. 




    2.12 Letters of Credit. 



    (a) Subject
to the terms and conditions of this Agreement, the Issuing Lender agrees to issue letters of credit, indemnities, or guarantees (including but not limited
to Agent's obligations under the Intercreditor Agreement) for the account of Borrower (each, an "L/C") or to purchase participations or execute
indemnities or reimbursement obligations (including but not limited to Agent's obligations under the Intercreditor Agreement) (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 except with
respect to any Letter of Credit pursuant to the Intercreditor Agreement where the Underlying Issuer shall be the Agent) for the account of Borrower. To request the issuance of an L/C or an L/C
Undertaking (or the amendment, renewal, or extension of an outstanding L/C or L/C Undertaking), Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for
doing so have been approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the requested date of issuance, amendment,
renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of issuance, amendment,
renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or the beneficiary of the
Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. 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 requested Letter of Credit: 



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




30





 



    (ii) the Letter of Credit Usage would exceed $2,000,000, exclusive of the Letter of Credit Usage pursuant to the Agent's obligations under the Intercreditor Agreement,
which Letter of Credit Usage pursuant to the Intercreditor Agreement shall not exceed $22,000,000, or 


    (iii) the
Letter of Credit Usage would exceed the Maximum Revolver Amount less the then extant amount of
outstanding Advances. 




    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, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans under Section 2.6. 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(c) to reimburse the Issuing
Lender, then to such Lenders and the Issuing Lender as their interest 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 Commitment, 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 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 clause (a) of this Section, 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 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 hereof. If any such Lender
fails to make available to Agent the amount of such Lender's Pro Rata Share of any payments made by the
 



31





 


Issuing Lender in respect of such Letter of Credit as provided in this Section, 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 that 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 that is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. 



    (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 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 face 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 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 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, 




32





 




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 LIBOR Option. 



    (a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate,
Borrower shall have the option (the "LIBOR Option") to have interest on all or a portion of the Advances be charged at the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which the Required
Lenders or Agent on behalf thereof elect to accelerate the maturity of all or any portion of the Obligations, (iii) termination of this Agreement pursuant to the terms hereof, or
(iv) the first day of each month that such LIBOR Rate Loan is outstanding. On the last day of each applicable Interest Period, unless Borrower properly has exercised the LIBOR Option with
respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time
that an Event of Default has occurred and is continuing, Borrower no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the
interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. 


    (b) LIBOR Election.



     (i) Borrower
may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior to the commencement of the proposed Interest Period (the "LIBOR
Deadline"). Notice of Borrower's election of the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this Section shall be made by delivery
to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice
received by Agent prior to 5:00 p.m. (California time) on the same day. Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having a
Revolver Commitment. 


    (ii) Each
LIBOR Notice shall be irrevocable and binding on Borrower. In connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold Agent and the
Lenders harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses,
collectively, "Funding Losses"). Funding Losses shall, with respect to Agent or 




33





 



any Lender, be deemed to equal the amount determined by Agent or such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such
LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor),  minus (ii) the amount of interest that would accrue
on such principal amount for such period at the interest rate which Agent or
such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a
Lender delivered to Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error. 


    (iii) Borrower
shall have not more than 5 LIBOR Rate Loans in effect at any given time. Borrower only may exercise the LIBOR Option for LIBOR Rate Loans of at least
$1,000,000 and integral multiples of $500,000 in excess thereof. 




    (c) Prepayments. Borrower may prepay LIBOR Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent of proceeds of Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, Borrower shall indemnify, defend, and hold
Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with clause (b)(ii) above. 


    (d) Special Provisions Applicable to LIBOR Rate.



     (i) The
LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes
in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any
successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, the affected Lender
shall give Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected
Lender, Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for
determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under
clause (b)(ii) above). 


    (ii) In
the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Advances or to continue such
funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrower and Agent promptly shall transmit
the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender's notice shall be deemed to be the last day of
the Interest Period of such LIBOR Rate Loans, and 




34





 



interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrower shall not be entitled to elect the LIBOR
Option until such Lender determines that it would no longer be unlawful or impractical to do so. 




    (e) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Agent, nor any
Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions
of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans, except that Borrower shall not be liable for LIBOR Rate Loan administrative expenses not actually incurred. 




    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), 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 the Lender Group (or any member thereof) to make the initial Advance (or otherwise to extend any credit provided for hereunder), is subject to the fulfillment, to the satisfaction of
Agent, of each of the conditions precedent set forth below: 



    (a) the
Closing Date shall occur on or before January 10, 2002; 


    (b) Agent
shall have received all financing statements required by Agent, duly executed or authorized by Borrower, and Agent shall have received searches reflecting the
filing of all such financing statements; 


    (c) Agent
shall have received each of the following documents, in form and substance satisfactory to Agent, duly executed, and each such document shall be in full force
and effect: 



     (i) the
Control Agreements, 


    (ii) the
Disbursement Letter, 


    (iii) the
Due Diligence Letter, 



    (iv) the
Fee Letter, 




35





 



    (v) the Guaranties, 


    (vi) the
Stock Pledge Agreement, together with all certificates representing the shares of Stock pledged thereunder, as well as Stock powers with respect thereto
endorsed in blank, 


   (vii) the
Trademark Security Agreement, 


   (viii) the
Cash Management Agreements, 


    (ix) the
License Agreement, 


    (x) the
Officers' Certificate, 


    (xi) the
Non-Offset Agreement, and 


   (xii) the
Intercreditor Agreement. 




    (d) Agent
shall have received a certificate from the Secretary of Borrower attesting to the resolutions of Borrower's Board of Directors authorizing its execution,
delivery, and performance of this Agreement and the other Loan Documents to which Borrower is a party and authorizing specific officers of Borrower to execute the same; 



    (e) Agent
shall have received copies of Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of
Borrower; 


    (f)  Agent
shall have received a certificate of status with respect to Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the
appropriate officer of the jurisdiction of organization of Borrower, which certificate shall indicate that Borrower is in good standing in such jurisdiction; 


    (g) Agent
shall have received certificates of status with respect to Borrower, each dated within 30 days of the Closing Date, such certificates to be issued by
the appropriate officer of the jurisdictions of New Jersey, Minnesota, Indiana, and West Virginia, which certificates shall indicate that Borrower is in good standing in such jurisdictions; 


    (h) Agent
shall have received a certificate from the Secretary of each Guarantor attesting to the resolutions of such Guarantor's Board of Directors authorizing its
execution, delivery, and performance of the Loan Documents to which such Guarantor is a party and authorizing specific officers of such Guarantor to execute the same; 


    (i)  Agent
shall have received copies of each Guarantor's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of
such Guarantor; 


    (j)  Agent
shall have received a certificate of status with respect to each Guarantor, dated within 10 days of the Closing Date, such certificate to be issued by
the appropriate officer of the jurisdiction of organization of such Guarantor, which certificate shall indicate that such Guarantor is in good standing in such jurisdiction; 


    (k) Agent
shall have received certificates of status with respect to each Guarantor, each dated within 30 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Guarantor) in which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Guarantor is in good standing in such jurisdictions; 


    (l)  Agent
shall have received a certificate of insurance, together with the endorsements thereto, as are required by  Section 6.8, the form and substance of which shall be satisfactory to Agent; 



36





 


    (m) Agent shall have received Collateral Access Agreements with respect to the following locations: 100 North Sepulveda Boulevard, 19th Floor, El Segundo,
California 90245; and 1040 Vintage Avenue, Ontario, California 91761; 


    (n) Agent
shall have received an opinion of Borrower's and Guarantors' counsel in form and substance satisfactory to Agent; 


    (o) Agent
shall have received satisfactory evidence (including a certificate of the chief financial officer of Borrower) that all tax returns required to be filed by
Borrower have been timely filed and all taxes upon Borrower or its properties, assets, income, and franchises (including Real Property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest; 


    (p) Borrower
shall have the Required Availability after giving effect to the initial extensions of credit hereunder; 


    (q) Agent
shall have received Borrower's Closing Date Business Plan; 


    (r) Borrower
shall pay all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; 


    (s) Borrower
shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and
delivery by Borrower of this Agreement or any other Loan Document or with the consummation of the transactions contemplated hereby and thereby; 


    (t)  Agent
shall have received evidence that Accounts owed by any Affiliate of IBM Corporation not subject to the Non-Offset Agreement are not subject to
any setoff rights afforded to such Account Debtors; 


    (u) Agent
shall have received evidence that Borrower has been released of all obligations owing under any Investments in its Affiliates; 



    (v) Agent
shall have received evidence satisfactory to Agent that IBMCC has amended any financing statements against the Borrower or any Guarantor to reflect that its
interests are subject to the Intercreditor Agreement; 


    (w) the
IBMCC Agreement shall be in full force and effect, and shall be in form and substance satisfactory to Agent; and 


    (x) all
other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall
be in form and substance reasonably satisfactory to Agent. 




    3.2 Condition Subsequent to the Initial Extension of Credit. The obligation of the Lender Group
(or any member thereof) to continue to make Advances (or otherwise extend credit hereunder) is subject to
the following conditions and the failure of Borrower to satisfy such conditions shall be an Event of Default: 



    (a) the
Borrower's delivering to Agent within 30 days of the Closing Date, certified copies of the policies of insurance, together with the endorsements thereto,
as are required by Section 6.8, the form and substance of which shall be reasonably satisfactory to Agent and its counsel; 



    (b) the
Borrower's delivering to Agent within 60 days of the Closing Date, evidence, in form and substance satisfactory to Agent, that those certain Los Angeles
County tax liens filed with the Los Angeles County Recorder against Parent as instrument numbers 01-0480001, 01-0480002 and 01-0605463 have been satisfied and
released as of record; and 



37





 


    (c) the Borrower's delivering to Agent on or before January 15, 2002 a copy of the "Judgment Lien—Statement of Release or Subordination" indicating
that such statement has been filed with the California Secretary of State with respect to the notice of judgment lien filed June 14, 2000 by Romac International, Inc. against Parent as
filing number 0017260246. 




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



    (a) the
representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects 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 prohibiting, directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against Borrower, Agent, any Lender, or any of their Affiliates. 


    (d) no
Material Adverse Change shall have occurred. 




    3.4 Term. This Agreement shall become effective upon the execution and delivery hereof by
Borrower, Agent, and the Lenders and shall continue in full force and effect for a term ending on December 31, 2004 (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. 


    3.5 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 (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the
then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the
benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations). No termination of this Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and the Agent's Liens in the Collateral shall remain in effect until all Obligations have been fully and finally discharged 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 fully and finally discharged 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, release all Collateral in its possession and execute and deliver any UCC
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. 


    3.6 Early Termination by Borrower. Borrower has the option, at any time upon 90 days
prior written notice to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including (a) either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to the 


38





 


Issuing Lender and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations), in full,
together with the Applicable Prepayment Premium (to be allocated based upon letter agreements between Agent and individual Lenders). 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) either (i) providing cash collateral to be held
by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with
respect to the then extant Bank Products Obligations), in full, together with the Applicable Prepayment Premium, on the date set forth as the date of termination of this Agreement in such notice. In
the event of the termination of this Agreement and repayment of the Obligations at any time prior to the Maturity Date, for any other reason, including (a) termination upon the election of the
Required Lenders to terminate after the occurrence of an Event of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or
(iv) restructure, reorganization, or compromise of the Obligations by the confirmation of a plan of reorganization or any other plan of compromise, restructure, or arrangement in any Insolvency
Proceeding, then, in view of the impracticability and extreme difficulty of ascertaining the actual amount of damages to the Lender Group or profits lost by the Lender Group as a result of such early
termination, and by mutual agreement of the parties as to a reasonable estimation and calculation of the lost profits or damages of the Lender Group, Borrower shall pay the Applicable Prepayment
Premium to Agent (to be allocated based upon letter agreements between Agent and individual Lenders), measured as of the date of such termination. In the event the termination of this Agreement and
repayment of the Obligations at any time prior to the Maturity Date occurs as a result of refinancing provided by Wells Fargo and no Default or Event of Default has occurred and continues to exist,
the Applicable Prepayment Premium shall be waived by Agent and each Lender. 


39







   4.  CREATION OF SECURITY INTEREST. 


    4.1 Grant of Security Interest. Borrower hereby grants to Agent, for the benefit of the Lender
Group, a continuing security interest in all of its right, title, and interest in all currently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all
of the Obligations in accordance with the terms and conditions of the Loan Documents and in order to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents.
The Agent's Liens in and to the Collateral shall attach to all Collateral without further act on the part of Agent or Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, Borrower has no authority, express or implied, to dispose of any item or portion of the Collateral. 


    4.2 Negotiable Collateral. In the event that any Collateral, including proceeds, is evidenced by
or consists of Negotiable Collateral, and if and to the extent that perfection or priority of Agent's security interest is dependent on or enhanced by possession, Borrower, immediately upon the
request of Agent, shall endorse and deliver physical possession of such Negotiable Collateral to Agent. 


    4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. At any time after
the occurrence and during the continuation of an Event of Default, Agent or Agent's designee may (a) notify Account Debtors of Borrower that the Accounts, chattel paper, or General Intangibles
have been assigned to Agent or that Agent has a security interest therein, or (b) collect the Accounts, chattel paper, or General Intangibles directly and charge the collection costs and
expenses to the Loan Account. Borrower agrees that it will hold in trust for the Lender Group, as the Lender Group's trustee, any Collections that it receives and immediately will deliver said
Collections to Agent or a Cash Management Bank in their original form as received by Borrower. 


    4.4 Delivery of Additional Documentation Required. At any time upon the request of Agent,
Borrower shall execute and deliver to Agent any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, and all other documents (the "Additional Documents") that Agent may request in its Permitted
Discretion, in form and substance satisfactory to Agent, to perfect and continue perfected or better perfect the Agent's Liens in the Collateral (whether now owned or hereafter arising or acquired),
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 name and authorizes Agent to file such executed Additional Documents in any appropriate filing office. In addition, on such periodic basis as Agent shall
require, Borrower shall (a) provide Agent with a report of all new patentable, copyrightable,
or trademarkable materials acquired or generated by Borrower during the prior period, (b) as Agent shall reasonably request, cause all patents, copyrights, and trademarks acquired or generated
by Borrower that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing
office in a manner sufficient to impart constructive notice of Borrower's ownership thereof, and (c) cause to be prepared, executed, and delivered to Agent supplemental schedules to the
applicable Loan Documents to identify such patents, copyrights, and trademarks as being subject to the security interests created thereunder. 


    4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and appoints Agent (and
any of Agent's officers, employees, or agents designated by Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of the documents described in  Section 4.4, (b) at any time that
an Event of Default has occurred and is continuing, sign Borrower's name on any invoice or bill of
lading relating to the Collateral, drafts against Account Debtors, or notices to Account Debtors, (c) send requests for verification of Accounts, (d) endorse Borrower's 


40





 


name on any Collection item that may come into the Lender Group's possession, (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under
Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (f) at any time that an Event of Default has occurred and is
continuing, settle and adjust disputes and claims respecting the Accounts, chattel paper, or General Intangibles directly with Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents and releases that Agent determines to be necessary. The appointment of Agent as Borrower's attorney, and each and every one
of its rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed and the Lender Group's obligations to extend
credit hereunder are terminated. 


    4.6 Right to Inspect. Agent and each Lender (through any of their respective officers,
employees, or agents) shall have the right, from time to time hereafter to inspect the Books and to check, test, and appraise the Collateral in order to verify Borrower's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the Collateral. 


    4.7 Control Agreements. Borrower agrees that it will not transfer assets out of any Securities
Accounts other than as permitted under Section 7.19 and, if to another securities intermediary, unless each of Borrower, Agent, and the
substitute securities intermediary have entered into a Control Agreement. No arrangement contemplated hereby or by any Control Agreement in respect of any Securities Accounts or other Investment
Property shall be modified by Borrower without the prior written consent of Agent. Upon the occurrence and during the continuance of a Default or Event of Default, Agent may notify any securities
intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to the Agent's Account. 



5.  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 such Advance (or other extension of credit) (except to the 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: 



    5.1 No Encumbrances. Borrower has good and indefeasible title to the Collateral, free and clear
of Liens except for Permitted Liens. 


    5.2 Eligible Accounts. The Eligible Accounts are bona
fide existing payment obligations of Account Debtors created by the sale and delivery of Inventory or the rendition of services to such Account Debtors in the ordinary course
of Borrower's business, owed to Borrower without defenses, disputes, offsets, counterclaims, or rights of return or cancellation. As to each Account that is identified by Borrower as an Eligible
Account in a borrowing base report submitted to Agent, such Account is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Accounts. 


    5.3 Inventory. All of Borrower's Inventory is of good and merchantable quality, free from
material defects and is: 



    (a) owned
by Borrower free and clear of all Liens other than Liens in favor of Lender and Permitted Liens, and 



41





 


    (b) either located at one of the locations set forth on Schedule 5.5 or in transit from one such location to
another such location. 




    5.4 Equipment. All of Borrower's Equipment is used or held for use in Borrower's business and is
fit for such purposes. 


    5.5 Location of Inventory and Equipment. Except for Inventory and Equipment not to exceed
$75,000 in value at any one location or $300,000 in the aggregate, the Inventory and Equipment of Borrower are not stored with a bailee, warehouseman, or similar party and, are located only at the
locations identified on Schedule 5.5. 


    5.6 Inventory Records. Borrower keeps correct and accurate records itemizing and describing the
type and quantity of its Inventory and the book value thereof. 


    5.7 Location of Chief Executive Office; FEIN. The chief executive office of Borrower is located
at the address indicated in Schedule 5.7 and Borrower's FEIN is identified in  Schedule 5.7. 


    5.8 Due Organization and Qualification; Subsidiaries. 



    (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 have a Material Adverse Change. 


    (b) Set
forth on Schedule 5.8(b), 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 5.8(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 5.8(c), 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 5.8(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 Borrowers' Subsidiaries' capital Stock or any security convertible into or exchangeable
for any such capital Stock. 




    5.9 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 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, except such laws and regulations the violation of which could not reasonably be expected cause a 



42





 


Material Adverse Change, (ii) except as addressed in Section 17.9 of this Agreement, conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation 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) except as addressed in Section 17.9 of this Agreement, require any approval of Borrower's interestholders or any approval or consent of any
Person under any material contractual obligation of Borrower. 


    (c) Other
than the filing of financing statements, fixture filings, Mortgages, and any other filing contemplated by this Agreement, the execution, delivery, and
performance by Borrower of this Agreement and the 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 or other Person. 


    (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 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 in effect from time to time and by general principles of
equity. 


    (e) The
Agent's Liens are validly created, perfected, 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 contractual obligation 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 contractual obligation of such Guarantor. 


    (h) 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 or other Person. 



    (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. 




    5.10 Litigation. Other than those matters disclosed on  Schedule 5.10, there are no actions, suits, or proceedings pending or,
 to the best knowledge of Borrower, threatened against Borrower, or any of
its Subsidiaries, as applicable, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if
decided adversely to 


43





 


Borrower, or any of its Subsidiaries, as applicable, reasonably could not be expected to result in a Material Adverse Change. 


    5.11 No Material Adverse Change. All financial statements relating to Borrower or Guarantors
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 (or Guarantor's, as applicable) 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 (or any Guarantor, as applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date. 


    5.12 Fraudulent Transfer. 



    (a) Borrower
is Solvent. 


    (b) No
transfer of property is being made by Borrower and no obligation is being incurred by Borrower 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. 




    5.13 Employee Benefits. Except as set forth on  Schedule 5.13, none of Borrower, any of its
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan. 



    5.14 Environmental Condition. Except as set forth on  Schedule 5.14, (a) to Borrower's knowledge, none of Borrower's
assets has ever been used by Borrower or by previous owners or operators in
the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such production, storage, handling, treatment, release or transport was in violation, in any
material respect, of applicable Environmental Law, (b) to Borrower's knowledge, none of Borrower's 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) Borrower has not 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, and (d) Borrower has not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by Borrower resulting in the releasing or disposing of Hazardous Materials into the environment. 


    5.15 Brokerage Fees. Borrower has not utilized the services of any broker or finder in
connection with Borrower's obtaining financing from the Lender Group under this Agreement and no brokerage commission or finders fee is payable by Borrower in connection herewith. 


    5.16 Intellectual Property. Borrower owns, or holds licenses in, all trademarks, trade names,
copyrights, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted. Attached hereto as  Schedule 5.16 is a true, correct, and complete listing
of all material patents, patent applications, trademarks, trademark applications,
copyrights, and copyright registrations as to which Borrower is the owner or is an exclusive licensee. 


    5.17 Leases. Borrower enjoys peaceful and undisturbed possession under all leases material to
the business of Borrower and to which it is a party or under which it is operating. All of such leases are valid and subsisting and no material default by Borrower exists under any of them. 


    5.18 DDAs. Set forth on Schedule 5.18 are
all of Borrower's DDAs, including, with respect to each depository (i) the name and address of such depository, and (ii) the account numbers of the accounts maintained with such
depository. 


44





 


    5.19 Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf
of Borrower 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 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 best estimate of its future
performance for the periods covered thereby. 


    5.20 Indebtedness. Set forth on  Schedule 5.20 is a true and complete list of each item of Indebtedness of each Obligor in
excess of $100,000 individually and $1,000,000 in the
aggregate outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof. 


6.  AFFIRMATIVE COVENANTS.  


    Obligors covenant and agree that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Obligors shall do all
of the following: 


    6.1 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 an inventory reporting system or records that show all additions, sales, claims, returns, and allowances with respect to the Inventory. 


45





 


    6.2 Collateral Reporting. Provide Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following times in form satisfactory to Agent: 



	Weekly	 	(a) invoice register, cash receipts register and Accounts Receivable cash applications register.
	

Monthly (not later than the 10th Business Day of the following month)	
 	

(b) a detailed calculation of the Borrowing Base (including detail regarding those Accounts that are not Eligible Accounts) substantially in the form of Exhibit B-1 hereto,



(c) a detailed aging, by total, of the Accounts, together with a reconciliation to the detailed calculation of the Borrowing Base previously provided to Agent,



(d) a summary aging, by vendor, of Borrower's accounts payable and any book overdraft, and



(e) Inventory reports specifying Borrower's cost of its Inventory, and delineating all Inventory located in the Ontario facility.
	

Quarterly	
 	

(f) a calculation of Dilution for the prior 3 months, and



(g) a report showing, in reasonable detail supported by work papers and documentation satisfactory to Agent, the calculation of Borrower's EBITDA as required under Section 7.19 (a)(i).
	

Upon request by Agent	
 	

(h) a detailed list of Borrower's customers,



(i) copies of invoices in connection with the Accounts, credit memos, remittance advices, deposit slips, shipping and delivery documents in connection with the Accounts and, for Inventory and Equipment acquired by Borrower, purchase orders and
invoices, and



(j) such other reports as to the Collateral, or the financial condition of Borrower, as Agent may request.





    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. The reports detailed in clauses (b), (f) and (g) above will be made available to the Lenders by Agent upon their reasonable request. 


    6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
copies to each Lender: 



    (a) as
soon as available, but in any event within 45 days after the end of each month during each of Parent's fiscal years, 



     (i) a
company prepared consolidated and consolidating balance sheet and income statement of Parent and its Subsidiaries, and, for every month that is the last month of
a fiscal quarter, a consolidated statement of cash flow covering the operations of Parent and its Subsidiaries during such fiscal quarter, 


    (ii) a
certificate signed by the chief financial officer of Borrower to the effect that: 



    (A) the
financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to year-end
audit 





46





 




adjustments) and fairly present in all material respects the financial condition of Parent and its Subsidiaries, 



    (B) the
representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), and 


    (C) there
does not exist any condition or event that constitutes a Default or Event of Default (or, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto), and 




    (iii) for
each month that is the date on which a financial covenant in Section 7.19 is to be
tested, a Compliance Certificate demonstrating, in reasonable detail, compliance at the end of such period with the applicable financial covenants contained in  Section 7.19, and 




    (b) as
soon as available, but in any event within 90 days after the end of each of Parent's fiscal years, consolidated financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants' letter to management), 


    (c) as
soon as available, but in any event within 30 days prior to the start of each of Borrower's fiscal years, 



     (i) copies
of Borrower's Projections, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 2 years, year by year, and for the forthcoming fiscal year, month by month, certified by the chief financial officer of Borrower as being such officer's good faith best estimate of
the financial performance of Borrower during the period covered thereby, 




    (d) if
and when filed by Parent, 



     (i) Form 10-Q
quarterly reports, Form 10-K annual reports, and Form 8-K current reports, 


    (ii) any
other filings made by Parent with the SEC, 


    (iii) copies
of Parent's federal income tax returns, and any amendments thereto, filed with the Internal Revenue Service, and 


    (iv) any
other information that is provided by Parent to its shareholders generally, 




    (e) if
and when filed by Borrower and as requested by Agent, satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which
(i) Borrower conducts business or is required to pay any such excise tax, (ii) where Borrower's failure to pay any such applicable excise tax would result in a Lien on the properties or
assets of Borrower, or (iii) where Borrower's failure to pay any such applicable excise tax reasonably could be expected to result in a Material Adverse Change, 


    (f)  as
soon as any Obligor has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative
action that Borrower proposes to take with respect thereto, and 


    (g) upon
the request of Agent, any other report reasonably requested relating to the financial condition of any Obligor. 



47





 

    In
addition to the financial statements referred to above, Obligors agree to deliver financial statements of Parent and its Subsidiaries prepared on both a consolidated and
consolidating basis and agrees that no Subsidiary of Parent will have a fiscal year different from that of Parent. Obligors agree that their independent certified public accountants are authorized to
communicate with Agent and to release to Agent whatever financial information concerning Obligors that Agent may reasonably request. Each Obligor waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this Agreement, and agrees that
Agent may contact directly any such accounting firm or service bureau in order to obtain such information. 


    6.4 Guarantor Tax Returns. Deliver copies of all federal income tax
returns of Guarantors as soon as the same are available and in any event no later than 30 days after the same are required to be filed by law. 


    6.5 Return. Cause returns and allowances, as between Borrower and its
Account Debtors, to be on the same basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution and delivery of this Agreement. If, at a time when
no Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to Borrower, Borrower promptly shall determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum (with a copy to be sent to Agent at any time when Agent so requests) in the appropriate amount to such Account Debtor. If, at a time when an Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to Borrower, Borrower promptly shall determine the reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to Agent at any time that Agent so requests) in the appropriate amount to such Account Debtor. 


    6.6 Maintenance of Properties. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct to its business in good working order and condition, ordinary wear and tear excepted, 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, except for such instances of non-compliance as could not reasonably be
expected to cause a Material Adverse Change. 


    6.7 Taxes. Cause all assessments and taxes, whether real, personal, or otherwise, due or payable
by, or imposed, levied, or assessed against any Obligor or any of its 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 and such delinquencies in excess of $25,000 would not cause a lien against any Obligor's assets or a Material Adverse
Change. Each Obligor will make timely payment or deposit of all tax payments and withholding taxes required of it 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 such Obligor has made such payments or deposits. At any
time that Agent so requests, any
Obligor shall deliver satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which such Obligor is required to pay any such excise tax. 


    6.8 Insurance. 



    (a) At
Obligor's expense, maintain insurance respecting its 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. Obligors shall deliver copies of all such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent and IBMCC, as their interests may appear, as the only loss
payees or 



48





 


additional insureds, 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) Obligors
shall give Agent prompt notice of any loss covered by such insurance in excess of $50,000. Agent shall have the exclusive right to adjust any losses
payable under any such insurance policies in excess of $50,000, without any liability to any Obligor whatsoever in respect of such adjustments. Any monies received as payment for any loss under any
insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be
applied at the option of the Required Lenders either to the prepayment of the Obligations or shall be disbursed to the affected Obligor under staged payment terms reasonably satisfactory to the
Required Lenders for application to the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items of property destroyed prior to such damage or destruction. 


    (c) Obligors
will not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this  Section 6.8, unless Agent is included thereon as named
insured with the loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Each Obligor shall immediately notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Agent. 




    6.9 Location of Inventory and Equipment. Keep the Inventory and Equipment only at the locations
identified on Schedule 5.5; provided, however, that Borrower may amend Schedule 5.5 so
long as such
amendment occurs by written notice to Agent not less than 10 days prior to the date on which Inventory or Equipment is moved to such new location, so long as such new location is within the
continental United States and, at the time of such written notification, with respect to any location where the value of Borrower's Inventory and Equipment exceeds $250,000, Borrower obtains a
Collateral Access Agreement executed by the landlord, mortgagee, bailee or warehouseman, as the case may be, in favor of Agent. Borrower hereby authorizes Agent to file any financing statements or
fixture filings necessary to perfect and continue perfected the Agent's Liens on such assets in such locations. 


    6.10 Compliance with Laws. Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, including the Fair Labor Standards Act and the Americans With Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not result in and reasonably could not be expected to result in a Material Adverse Change. 


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


    6.12 Existence. At all times preserve and keep in full force and effect Obligor's valid
existence and good standing and any rights and franchises material to Obligor's businesses, except for such qualifications and licenses the absence of which could not reasonably be expected to cause a
Material Adverse Change; provided, however, that Borrower must be qualified to do business in New Jersey, Minnesota, Indiana and West Virginia to the
extent that it continues to do business in such states. 


    6.13 Environmental. 



    (a) Keep
any property either owned or operated by Borrower 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 



49





 


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 and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly
provide Agent with written notice within 10 Business Days of the receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal
property of Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against Borrower that could reasonably be expected to result in a
Material Adverse Change,
and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change. 




    6.14 Commercial Tort Claims. Promptly and in no event later than 10 Business Days after
knowledge thereof, notify Agent of any commercial tort claim in excess of $100,000 it may have and execute any documents or instruments that the Agent requests in order to create in Agent's favor a
security interest in any such commercial tort claims. Obligors hereby authorize Agent to file any financing statements or fixture filings necessary to perfect and continue perfected Agent's Liens in
such commercial tort claims. 


    6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days after obtaining
knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained 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, and (b) correct any defect or error that may be discovered therein
or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof. 


7.  NEGATIVE COVENANTS.  


    Obligors covenant and agree that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, no Obligor will do
any of the following: 


    7.1 Indebtedness. Create, incur, assume, permit, 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 5.20 or existing on the date of this Agreement and not required to be set
forth on Schedule 5.20, 


    (c) Permitted
Purchase Money Indebtedness, 


    (d) refinancings,
renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this  Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such
refinancings, renewals, or extensions do not, in Agent's judgment, materially impair the prospects of repayment of the Obligations or materially impair such Obligor's
creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended,
nor are they on terms or conditions that, taken as a whole, are materially more burdensome or restrictive to such Obligor, and (iv) if the Indebtedness that is refinanced, renewed, or extended
was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are
at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and 



50





 


    (e) Indebtedness comprising Permitted Investments. 




    7.2 Liens. Create, incur, assume, or permit 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 (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d) and so long as the
replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness). 


    7.3 Restrictions on Fundamental Changes. 



    (a) 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). 


    (c) Convey,
sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets. 




    7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease, license, assign,
transfer, or otherwise dispose of any of such Obligor's assets. 


    7.5 Change Name. Change Obligor's name, FEIN, corporate structure, or identity, or add any new
fictitious name; provided, however, that any Obligor may change its name upon at least 30 days prior
written notice to Agent of such change. Each Obligor authorizes Agent to prepare and file any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens. 


    7.6 Guarantee. Guarantee or otherwise become in any way liable with respect to the obligations
of any third Person (other than in connection with this Agreement) except by endorsement of instruments or items of payment for deposit to the account of Borrower or which are transmitted or turned
over to Agent. 


    7.7 Nature of Business. Make any change in the principal nature of its business. 


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    7.8 Prepayments and Amendments. 



    (a) Except
for early payment of IBMCC under Section 2.6(a) of the IBMCC Agreement or in connection with a refinancing permitted by  Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire
any Indebtedness of Borrower, other than the Obligations in accordance
with this Agreement, and 


    (b) Directly
or indirectly, amend, modify, alter, increase, or change the IBMCC Agreement or, except in connection with a refinancing permitted by  Section 7.1(d), any of the material terms or conditions of any
other agreement, instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Sections 7.1(b) or (c) so as to increase the amount of or
shorten the timing of payments the Obligor is required to make with respect to such Indebtedness. 




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


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


    7.11 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 Stock of any class, whether now or hereafter outstanding except that any Obligor may repurchase its Stock on the open
market so long as (a) such purchase is made pursuant to and consistent with the terms of such entity's "Employee Stock Purchase Plan" or "Employee Stock Option Plan" as currently in effect,
(b) both before and after giving effect to such purchase Borrower shall then have no less than $2,000,000 in Excess Availability and (c) both before and after giving effect thereto no
Default or Event of Default shall exist or have occurred. 


    7.12 Accounting Methods. Modify or change its method of accounting (other than as may be
required to conform to GAAP) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the
preparation or storage of any Obligor's accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding the Collateral or such Obligor's financial
condition. 


    7.13 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 Obligors shall
not have Permitted Investments (other than in the Cash Management Accounts) in deposit accounts or Securities Accounts in excess of $500,000 outstanding at any one time unless such Obligor and the
applicable securities intermediary or bank have entered into Control Agreements governing such Permitted Investments, as Agent shall determine in its Permitted Discretion, to perfect (and further
establish) the Agent's Liens in such Permitted Investments. 


    7.14 Transactions with Affiliates; Intercompany Transfers. Directly or indirectly: 



    (a) enter
into or permit to exist any transaction with any Affiliate of such Obligor except for transactions that are in the ordinary course of such Obligor's business,
upon fair and reasonable terms, that are fully disclosed to Agent, and that are no less favorable to such Obligor than would be obtained in an arm's length transaction with a
non-Affiliate; or 



52





 


    (b) make any loans, advances, financial accommodations or transfers of funds to any Affiliate, except that, so long as both before and after giving effect thereto no
Default or Event of Default shall exist or have occurred, Borrower may transfer funds: 



     (i) to
En Pointe Technologies, Inc., (A) in the amount of and for the purpose of paying or prepaying administrative and operating expenses to the extent
incurred by such entity on behalf of or for the direct benefit of Borrower, provided that such entity shall be obligated to return any prepayments for such expenses in excess of amounts actually
expended for such purposes, (B) for the purpose of making Permitted Investments by Parent or its Subsidiaries, in an amount not to exceed $2,000,000, in cash per fiscal year;  provided, however,
(1) all provisions herein concerning Permitted Investments shall have been complied with and (2) such transfer shall be
considered a Permitted Investment for the purpose of calculating compliance with any dollar limitation on Permitted Investments contained in this Agreement, and (C) for the purpose of paying
bona fide expenses of such entity incurred in the ordinary course of such entity's normal business operations, in an amount not to exceed $750,000 in the aggregate for any twelve (12) month
period; 


    (ii) to
En Pointe Technologies Ventures, Inc., (A) for the purpose of paying or prepaying administrative and operating expenses to the extent incurred by
such entity on behalf of or for the direct benefit of Borrower, provided that such entity shall be obligated to return any prepayments for such expenses in excess of amounts actually expended for such
purposes, in an amount not to exceed $750,000 in the aggregate, for any twelve (12) month period, and (B) for any purpose in an amount not to exceed $100,000 in the aggregate for any
twelve (12) month period; and 


    (iii) to
En Pointe Technologies Canada, Inc., (A) for the purpose of paying or prepaying administrative and operating expenses to the extent incurred by
such entity on behalf of or for the direct benefit of Borrower, provided that such entity shall be obligated to return any prepayments for such expenses in excess of amounts actually expended for such
purposes, in an amount not to exceed $200,000 in the aggregate, for any twelve (12) month period, and (B) for any purpose in an amount not to exceed $50,000 in the aggregate, for any
twelve (12) month period. 





    7.15 Suspension. Suspend or go out of a substantial portion of its business. 


    7.16 Use of Proceeds. In the case of Borrower, use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) 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, if necessary, (ii) to repay a portion of the outstanding principal, accrued interest, and accrued fees and expenses owning to IBMCC and
(b) thereafter, consistent with the terms and conditions hereof, for its lawful and permitted purposes, including without limitation to pay or permit Agent to pay the IBMCC Obligations under
the Intercreditor Agreement, provided that proceeds of Advances may not be used for such purpose in excess of $22,000,000. 


    7.17 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.
Relocate its chief executive office to a new location without providing 30 days prior written notification thereof to Agent and obtaining, at the time of such written notification, a Collateral
Access Agreement with respect to such new location signed by the landlord or mortgagee in favor of Agent and satisfactory in form and substance to Agent. Each Obligor authorizes Agent to prepare and
file any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens. Borrower's Inventory and Equipment shall not at any time now or hereafter be stored with
a bailee, warehouseman, or similar party without Agent's prior written consent, except as set forth in Section 5.5. 


53





 


    7.18 Securities Accounts. Borrower shall not establish or maintain any Securities Account unless
Agent shall have received a Control Agreement in respect of such Securities Account. Borrower shall not transfer assets out of any Securities Account; provided,
however, that, so long as no Event of Default has occurred and is continuing or would result therefrom, Borrower may use such assets (and the proceeds thereof) to the extent
not prohibited by this Agreement. 


    7.19 Financial Covenants. 



    (a) Fail
to maintain: 



     (i) Minimum EBITDA.  EBITDA, measured on a fiscal quarter-end basis, of not less than the
required amount set forth in the following table for the applicable period set forth opposite thereto; 




	Applicable Amount
	 	Applicable Period

	

($1,800,000)	
 	

For the 3 month period ending December 31, 2001
	

($2,000,000)	
 	

For the 6 month period ending March 31, 2002
	

($1,000,000)	
 	

For the 9 month period ending June 30, 2002
	

$0	
 	

For the 12 month period ending September 30, 2002
	

$300,000	
 	

For the 12 month period ending December 31, 2002
	

$700,000	
 	

For the 12 month period ending March 31, 2003
	

$1,200,000	
 	

For the 12 month period ending June 30, 2003
	

$1,700,000	
 	

For the 12 month period ending September 30, 2003
	

$2,000,000	
 	

For the 12 month period ending each fiscal quarter thereafter






    (ii) Tangible Net Worth.  Tangible Net Worth of at least $17,000,000 for each fiscal
quarter-end. 




    (b) Make




     (i) Capital Expenditures.  Capital expenditures in any fiscal year in excess of $1,200,000. 





8.  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: 


    8.1 If Borrower fails to pay when due and payable, or when declared due and payable, all or any portion of the
Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting Obligations); 


    8.2 If (a) Borrower fails or neglects to perform, keep, or observe any term, provision, condition, covenant, or
agreement contained in Section 6.2 or 6.3 of this Agreement and such failure continues for a period of 5 Business Days after the date on which such failure first occurs, or (b) if
Borrower 


54





 


fails to perform, keep, or observe any covenant or other provision contained in Sections 6.1, 6.7 or 6.11 hereof and such failure or neglect is not cured within 15 days after the date on which
such failure or neglect first occurs, or (c) if any Obligor fails or neglects to perform, keep, or observe any other covenant or other provision contained in any Section of this Agreement
(other than a Section that is expressly dealt with elsewhere in this Section 8) or the other Loan Documents (other than a Section of such other Loan Document dealt with elsewhere in this
Section 8); provided that, during any period of time that any such failure referred to in this paragraph exists, even if such failure is not yet an Event of Default by virtue of the existence
of a grace or cure period, Lender shall be relieved of its obligation to extend credit hereunder; 


    8.3 If any material portion of any Obligor's assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person; 


    8.4 If an Insolvency Proceeding is commenced by any Obligor; 


    8.5 If an Insolvency Proceeding is commenced against any Obligor and any of the following events occur: (a) such
Obligor 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; provided, however, that, during the
pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of their obligations to extend credit hereunder, (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, such Obligor, or (e) an order for relief shall have been entered therein; 


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


    8.7 If a notice of Lien, levy, or assessment is filed of record with respect to the assets of any Obligor by the United
States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of
such entities becomes a Lien, whether choate or otherwise, upon the assets of any Obligor and the same is not paid before such payment is delinquent; 


    8.8 If a judgment or other claim becomes a Lien or encumbrance upon any material portion of any Obligor's assets; 



    8.9 If there is a default in any material agreement to which any Obligor is a party and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of such Obligor's
obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein; 


    8.10 If any Obligor makes any payment on account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; 



    8.11 If any misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or
Record made to the Lender Group by Borrower, its Subsidiaries, or any officer, employee, agent, or director of Borrower or any of its Subsidiaries; 


    8.12 If the obligation of any Guarantor under any Guaranty is limited or terminated by operation of law or by Guarantor
thereunder; 


55





 


    8.13 If this 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; 


    8.14 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 any Obligor, or a proceeding shall be commenced by any Obligor, or by any Governmental Authority having jurisdiction over any Obligor, seeking
to establish the invalidity or unenforceability thereof, or any Obligor shall deny that such Obligor has any liability or obligation purported to be created under any Loan Document; 


    8.15 If there is any default under the IBMCC Agreement; 


    8.16 If there is a default under or revocation of the Intercreditor Agreement; or 


    8.17 Borrower fails to find replacement floor financing, on terms and conditions satisfactory to Lender, at least
90 days prior to the termination date under the IBMCC Agreement, unless IBMCC has given Lender notice of its intention to extend the termination date of the IBMCC Agreement in accordance with
Section 16 of the Intercreditor Agreement. 


9.  THE LENDER GROUP'S RIGHTS AND REMEDIES.  


    9.1 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 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; 


    (d) Settle
or adjust disputes and claims directly with Account Debtors for amounts and upon terms which Agent considers advisable, and in such cases, Agent will credit
Borrower's Loan Account with only the net amounts received by Agent in payment of such disputed Accounts after deducting all Lender Group Expenses incurred or expended in connection therewith; 



    (e) Cause
Borrower to hold all returned Inventory in trust for the Lender Group, segregate all returned Inventory from all other assets of Borrower or in Borrower's
possession and conspicuously label said returned Inventory as the property of the Lender Group; 


    (f)  Without
notice to or demand upon Borrower or any Guarantor, make such payments and do such acts as Agent considers necessary or reasonable to protect its security
interests in the Collateral. Borrower agrees to assemble the Collateral if Agent so requires, and to make the Collateral available to Agent at a place that Agent may designate which is reasonably
convenient to both parties. Borrower authorizes Agent to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any Lien that in Agent's determination appears to conflict with the Agent's Liens and to pay all expenses incurred in connection therewith and to charge Borrower's Loan Account
therefor. With respect to any of Borrower's owned or leased premises, Borrower hereby grants 



56





 


Agent a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of the Lender Group's rights or remedies provided herein, at law, in equity,
or otherwise; 


    (g) Without
notice to Borrower (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the
meaning of the Code), set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by the Lender Group (including any amounts received in the Cash Management
Accounts), or (ii) Indebtedness at any time owing to or for the credit or the account of Borrower held by the Lender Group; 


    (h) Hold,
as cash collateral, any and all balances and deposits of Borrower held by the Lender Group, and any amounts received in the Cash Management Accounts, to
secure the full and final repayment of all of the Obligations; 


    (i)  Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral.
Borrower hereby grants to Agent a license or other right to use, without charge, Borrower's labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to the Lender Group's benefit; 


    (j)  Sell
the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Agent determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale; 


    (k) Agent
shall give notice of the disposition of the Collateral as follows: 



     (i) Agent
shall give Borrower a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made; and 



    (ii) The
notice shall be personally delivered or mailed, postage prepaid, to Borrower as provided in Section 12,
at least 10 days before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily sold on a recognized market; 




    (l)  Agent,
on behalf of the Lender Group, may credit bid and purchase at any public sale; and 



    (m) Agent
may seek the appointment of a receiver or keeper to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent
permitted by law, may seek the appointment of such a receiver without the requirement of prior notice or a hearing; 


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


    (o) Any
deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower. Any excess will be returned, without interest
and subject to the rights of third Persons, by Agent to Borrower. 




    9.2 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 


57





 


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. 


10.  TAXES AND EXPENSES.  


    If Borrower fails 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 in Borrower's
Loan Account 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 6.8 hereof, obtain and
maintain insurance policies of the type described in  Section 6.8 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 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. 


11.  WAIVERS; INDEMNIFICATION.  


    11.1 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. 


    11.2 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. 


    11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons,
the Lender-Related Persons with respect to each Lender, each Participant, and each of their respective officers, directors, employees, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (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 of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby, and (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 (all the foregoing, collectively, the "Indemnified Liabilities"). The foregoing to
the contrary notwithstanding, Borrower shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that the parties agree or a trier of fact determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination
of this Agreement 


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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 CAUSED BY OR ARISE OUT OF
ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.


12.  NOTICES.  


    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:	 	EN POINTE TECHNOLOGIES SALES, INC.

100 N. Sepulveda Boulevard, 19th Floor

El Segundo, California 90245

Attn: Chief Financial Officer

Fax No.: (310) 725-1185
	

with copies to:	
 	
STRADLING YOCCA CARLSON & RAUTH

660 Newport Center Drive #1600

Newport Beach, California 92660-6441

Attn: Nick E. Yocca, Esq.

Fax No.: (949) 725-4100
	

If to Agent:	
 	
FOOTHILL CAPITAL CORPORATION

2450 Colorado Avenue

Suite 3000 West

Santa Monica, California 90404

Attn: Business Finance Division Manager

Fax No.: (310) 453-7413
	

with copies to:	
 	
MAYER, BROWN & PLATT

350 South Grand Avenue, 25th Floor

Los Angeles, California 90017-1503

Attn: Marshall C. Stoddard, Jr., Esq.

Fax No.: (213) 625-0248






    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 12, 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. Agent will exercise reasonable efforts to duplicate by telefacsimile transmission any notice 


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formally given by deposit into the mail, provided that failure to give such duplicate notice shall not negatively affect the effectiveness of notice given by mail. 



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



    (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 CALIFORNIA.


    (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 FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, 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 AS AGENT REASONABLY DEEMS NECESSARY IN ORDER TO PROTECT OR ENFORCE AND
MATERIAL RIGHTS. BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).  



    (c) BORROWER AND 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 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.



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   14.  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.  


    14.1 Assignments and Participations. 



    (a) Any
Lender may, with the written consent of Agent (provided that no written consent of Agent shall be required in connection with any assignment and delegation by a
Lender to an Eligible Transferee), assign and delegate to one or more assignees (each an "Assignee") all, or any ratable part of all, 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 of $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 in form and substance satisfactory to Agent, and (iii) the assignor Lender or Assignee
has paid to Agent for Agent's separate account a processing fee in the amount of $5,000. Anything contained herein to the contrary notwithstanding, the consent of Agent shall not be required (and
payment of any fees shall not be required) 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 such Lender. 


    (b) From
and after the date that Agent notifies the assignor Lender (with a copy to Borrower) that it has received an executed Assignment and Acceptance and payment of
the above-referenced 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 assignor 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 11.3 hereof) and be released from its
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 affect a novation between Borrower and the Assignee. 


    (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: (1) 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, (2) 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, (3) 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, (4) 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, (5) 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 (6) such Assignee 



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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 each Assignee's making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully
executed Assignment and Acceptance, 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, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such
Lender (a "Participant") participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the
"Originating Lender") hereunder and under the other Loan Documents (provided that no written consent of Agent shall be required in connection with any
sale of any such participating interests by a Lender to an Eligible Transferee); 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 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 a material portion 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, 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 disclose all documents and information which it now
or hereafter may have relating to Borrower or Borrower's business; provided, however, that if a proposed assignee or participant is not a financial institution, such proposed assignee or participant
shall, as a 



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condition to receiving any non-public information of borrower, enter into a confidentiality agreement with Borrower. 



    (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 §203.14,
and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 




    14.2 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 14.1 hereof and, except as
expressly required pursuant to Section 14.1 hereof, no
consent or approval by Borrower is required in connection with any such assignment. 



15.  AMENDMENTS; WAIVERS.  


    15.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any
other Loan Document, 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 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 affected thereby and Borrower,
do any of the following: 



    (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 percentage of the Commitments that is required to take any action hereunder, 


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


    (f)  release
Collateral other than as permitted by Section 16.12, 


    (g) change
the definition of "Required Lenders", 


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



    (i)  release
Borrower or any Guarantor from any obligation for the payment of money, 


    (j)  change
the definition of Borrowing Base or the definitions of Eligible Accounts, Maximum Revolver Amount, or change  Section 2.1(b), 


    (k) amend
any of the provisions of Section 16, or 


    (l)  amend
Section 2.4 on terms any less favorable than currently in effect. 



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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. 


    15.2 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 Agreement,
subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of 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 Agreement prior to the effective date of such replacement, the
Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of  Section 14.1. 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 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. 




    15.3 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 the Agent or any Lender may have. 



16.  AGENT; THE LENDER GROUP.  


    16.1 Appointment and Authorization of Agent. Each Lender hereby
designates and appoints Foothill as its representative under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes Agent to take such 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 16. The provisions of this Section 16 are solely for the benefit of Agent, and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any of the provisions 


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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 Foothill 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, 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 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, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrower, the Obligations, the Collateral, the Collections, 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. 


    16.2 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. 


    16.3 Liability of Agent. None of the Agent-Related Persons shall (i) 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 (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by Borrower or any Subsidiary or Affiliate of
Borrower, 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 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 or properties
of Borrower or the books or records or properties of any of Borrower's Subsidiaries or Affiliates. 


    16.4 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, facsimile, 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 


65





 


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 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 Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 



    16.5 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, 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 16.4, 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 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default
as it shall deem advisable. 


    16.6 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 and any other Person (other than the Lender Group) 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 and any other Person (other than the Lender Group) 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 and any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons. 



    16.7 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, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and 


66





 


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 the Loan Agreement or
otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from Collections 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 from Collections received by Agent, each Lender hereby agrees that it is
and shall be obligated to pay to or reimburse Agent for the amount of 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 ratable share of any costs or
out-of-pocket expenses (including attorneys 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. 


    16.8 Agent in Individual Capacity. Foothill 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 Borrower
and its Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Loan Documents as though Foothill 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, Foothill or its Affiliates may receive information regarding
Borrower or its Affiliates and any other Person (other than the Lender Group) 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 Foothill in its
individual capacity. 


    16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the 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 16 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 


67





 


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. 


    16.10  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 (other than the Lender Group) 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 and any other Person (other than the Lender Group) 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 not shall be under any obligation to provide such information to them. With respect
to the Swing Loans and Agent Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the
sub-agent of Agent. 


    16.11  Withholding Taxes. 



    (a) If
any Lender is a "foreign corporation, partnership or trust" within the meaning of the IRC and such Lender claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and Borrower: 



     (i) if
such Lender claims an exemption from 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 (within the meaning of Section 881(c)(3)(B) of the IRC), or
(III) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of
any interest under this Agreement and at any other time reasonably requested by Agent or Borrower; 



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


    (iv) such
other form or forms 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 tax. 





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



    (b) If
any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such
Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrower to such Lender, 



68





 


such Lender agrees to notify Agent 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 will
treat such Lender's IRS Form W-8BEN as no longer valid. 


    (c) 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 (a) of this Section 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. 


    (d) 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 (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, 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. 


    (e) All
payments made by Borrower hereunder or under any note will be made without setoff, counterclaim, or other defense, except as required by applicable law other
than for Taxes (as defined below). All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments
or other charges of whatever nature now or hereafter imposed by any jurisdiction (other than the United States) or by any political subdivision or taxing authority thereof or therein (other than of
the United States) with respect to such payments (but excluding, any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of a Lender, or (ii) to the extent that such tax results from a change in the circumstances of the Lender, including a change in the residence, place of
organization, or principal place of business of the Lender, or a change in the branch or lending office of the Lender participating in the transactions set forth herein) and all interest, penalties or
similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as
"Taxes"). 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 or under any note, including any amount paid pursuant to this Section 16.11(e)
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 payable to Agent or any Lender (i) that is not organized under the laws of the United States, if such Person fails to comply with the other
requirements of this Section 16.11, or (ii) if the increase in such amount payable results from Agent's or such Lender's own willful
misconduct or gross negligence. Borrower will furnish to Agent as promptly as possible after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by Borrower. 




    16.12  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 



69





 


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 7.4 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 owned no interest at the time the security interest was granted or at any time thereafter, or (iv) constituting property leased to Borrower
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 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 16.12; 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 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. 




    16.13  Restrictions on Actions by Lenders; Sharing of Payments. 



    (a) Each
of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the
request of Agent, set off against the Obligations, any amounts owing by such Lender to Borrower or any deposit accounts of Borrower now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose
any Lien on, or otherwise enforce any security interest in, any of the Collateral the purpose of which is, or could be, to give such Lender any preference or priority against the other Lenders with
respect to 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 arising under, or relating to, this Agreement or the other Loan Documents, 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 ratable portion of all such distributions by Agent, such Lender promptly shall (1) 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 (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the
other Lenders so 



70





 


that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of 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. 




    16.14  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 9 of the UCC can be perfected only by
possession. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor shall deliver such Collateral to Agent or in
accordance with Agent's instructions. 


    16.15  Payments by Agent to the Lenders.  All payments to be made by Agent to the
Lenders shall be made by bank wire transfer or internal 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, or interest of the Obligations. 



    16.16  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 relating to the Collateral, for the benefit of the Lender Group. 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. 



    16.17  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 (each a
"Report" and collectively, "Reports") prepared by 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 will rely significantly upon the Books, 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; it being understood and agreed by Borrower that in any event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona fide potential or actual Assignee or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender's rights hereunder, provided, however, that if a proposed Assignee
or Participant is not a financial institution, such proposed Assignee or Participant shall, as a condition to receiving any non-public information of Borrower, enter into a confidentiality
agreement with Borrower, (c) of information that has become public by disclosures 



71





 


made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative agency, pursuant to
any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, however, that, unless prohibited by applicable law,
statute, regulation, or court order, such Lender shall notify Borrower of any request by any court, governmental or administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, 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 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 to Agent
that has not been contemporaneously provided by Borrower 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, 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 the additional reports or information reasonably specified by such Lender, and, upon receipt
thereof from
Borrower, 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. 


    16.18  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 16.7, no member of the Lender Group shall have any liability for the acts or 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. 


    16.19  Legal Representation of Agent.  In connection with the negotiation,
drafting, and execution of this Agreement and the other Loan Documents, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or
enforcement of remedies, Mayer, Brown & Platt ("MBP") only has represented and only shall represent Foothill in its capacity as 


72





 


Agent and as a Lender. Each other Lender hereby acknowledges that MBP does not represent it in connection with any such matters. 



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 Amendments in Writing. This Agreement only can be amended by a writing signed by Agent (on
behalf of the requisite Lenders) and Borrower. 


    17.6 Counterparts; Telefacsimile 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 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 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. 


    17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations
by Borrower or any 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
(collectively, 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 costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Borrower or Guarantors automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made. 


    17.8 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. 


    17.9 Effect of Intercreditor Agreement. So long as the Intercreditor Agreement shall remain in
full force and effect, to the extent that compliance by Borrower with any provision hereof shall cause Borrower to be in default of any provision of the IBMCC Agreement, such lack of compliance, if 


73





 


allowed under and addressed by the Intercreditor Agreement, shall not be deemed an Event of Default hereunder. 


    17.10  Organization of Canadian Affiliate.  This Agreement shall become effective
with respect to En Pointe Technologies Canada, Inc. upon such entity being duly incorporated or organized under the laws of any province, or other applicable jurisdiction, of Canada. Borrower
hereby covenants and agrees that upon the due incorporation or organization of En Pointe Technologies Canada, Inc. it will cause such entity to execute a Guaranty and Security Agreement in
favor of Agent for the benefit of Lenders and such other agreements, documents and instruments as Agent may request, each in form and substance satisfactory to Agent. 


[Signature page to follow.]


74





 

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



	"Borrower"	 	"Agent"
	
EN POINTE TECHNOLOGIES SALES, INC.

a Delaware corporation	
 	
FOOTHILL CAPITAL CORPORATION,

a California corportion
	

By:	
 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	

	Name:	 	 	 	Name:	 	 
	 	 	
	 	 	 	

	Title:	 	 	 	Title:	 	 
	 	 	
	 	 	 	

	
"Lenders"	
 	

 	
 	

 
	
FOOTHILL CAPITAL CORPORATION,

a California corporation	
 	

 	
 	

 
	

By:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	

Name:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	

Title:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 




75









	 
	 	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 L-1	 	Form of LIBOR Notice
	Schedule A-1	 	Agent's Account
	Schedule B-1	 	Designated Account
	Schedule C-1	 	Commitments
	Schedule P-1	 	Permitted Liens
	Schedule 1.1	 	Commercial Tort Claims
	Schedule 2.7(a)	 	Cash Management Banks
	Schedule 5.5	 	Locations of Inventory and Equipment
	Schedule 5.7	 	Chief Executive Office; FEIN
	Schedule 5.8(b)	 	Capitalization of Borrower
	Schedule 5.8(c)	 	Capitalization of Borrower's Subsidiaries
	Schedule 5.10	 	Litigation
	Schedule 5.13	 	Employee Benefits
	Schedule 5.14	 	Environmental Matters
	Schedule 5.16	 	Intellectual Property
	Schedule 5.18	 	Demand Deposit Accounts
	Schedule 5.20	 	Permitted Indebtedness







Schedule A-1

Agent's Account  


    An account at a bank designated by Agent from time to time as the account into which Borrower shall make all payments to Agent for the benefit of the Lender
Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other Loan Documents; unless and until Agent notifies Borrower and the Lender Group to the contrary,
Agent's Account shall be that certain deposit account bearing account number 323-266193 and maintained by Agent with The Chase Manhattan Bank, 4 New York Plaza, 15th Floor,
New York, New York 10004, ABA #021000021. 





 
 

Schedule B-1
  Designated Account    
  



    Account number 449-6879230 of Borrower maintained with Borrower's Designated Account Bank, or such other deposit account of Borrower (located
within the United States) that has been designated as such, in writing, By Borrower to Agent. 






 
 

Schedule C-1
  Commitments    
  



	Lender
	 	Revolver Commitment
	 	Total Commitment

	Foothill Capital Corporation	 	$30,000,000	 	$30,000,000
	 	 	 	 	 
	All Lenders	 	$30,000,000	 	$30,000,000







 
 

Schedule P-1
  Permitted Liens    
  



	En Pointe Technologies Sales, Inc.
 
	 	 
	 	 

	JURISDICTION
 
	 	FILING

NUMBER
	 	FILING

DATE
	 	SECURED

PARTY

	California Secretary of State	 	9806160274	 	02/25/98	 	IBM Credit Corporation
	"	 	9829660650	 	10/16/98	 	Canon Financial Services, Inc.
	Colorado Secretary of State	 	19982014129	 	03/03/98	 	IBM Credit Corporation
	New York Secretary of State	 	061293	 	03/23/98	 	IBM Credit Corporation
	New York County, New York	 	98PN14623	 	03/24/98	 	IBM Credit Corporation
	"	 	98PN28864	 	06/08/98	 	IBM Credit Corporation
	North Carolina Secretary of State	 	19980023655	 	05/11/98	 	IBM Credit Corporation
	Mecklenburg County, North Carolina	 	3970	 	03/18/98	 	IBM Credit Corporation
	Utah Secretary of State	 	98-596428	 	03/02/98	 	IBM Credit Corporation
	Washington Secretary of State	 	98-0610139	 	03/0/98	 	IBM Credit Corporation





	En Pointe Technologies, Inc.
 
	 	 
	 	 

	JURISDICTION
 
	 	FILING

NUMBER
	 	FILING

DATE
	 	SECURED

PARTY

	California Secretary of State	 	93-047887(1	)	03/08/93	 	IBM Credit Corporation
	"	 	9621960154	 	08/02/96	 	IBM Credit Corporation
	"	 	9631260022	 	11/04/96	 	Winthrop Resources Corporation
	"	 	9708460116	 	03/24/97	 	FBS Business Finance Corporation
	"	 	9710760837	 	04/14/97	 	Advanta Financial Corp.
	"	 	9714860888	 	05/23/97	 	IBM Credit Corporation
	"	 	9714860894	 	05/23/97	 	IBM Credit Corporation
	"	 	9732860165	 	11/21/97	 	M & SD Financial Services, a Div. of Electronic Data Systems Corporation
	"	 	9821760891	 	08/03/98	 	Associates Commercial Corporation
	"	 	9825960587	 	09/11/98	 	Mitel Capital Corporation
	"	 	9827460294	 	09/25/98	 	Mitel Capital Corporation
	"	 	9835760332	 	12/18/98	 	Yale/Chase Materials Handling, Inc.
	"	 	9901360322	 	01/08/99	 	IBM Credit Corporation
	Los Angeles County, CA Recorder	 	98 1866216	 	10/13/98	 	Associates Commercial Corporation
	Georgia Secretary of State	 	441997012494	 	12/12/97	 	M & SD Financial Services, a Div. of Electronic Data Systems Corporation
	North Carolina Secretary of State	 	001518228	 	11/21/97	 	M & SD Financial Services, a Div. of Electronic Data Systems Corporation
	"	 	001518229	 	11/21/97	 	M & SD Financial Services, a Div. of Electronic Data Systems Corporation
	Utah Secretary of State	 	95-561133	 	04/10/97	 	Advanta Financial Corp.











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LOAN AND SECURITY AGREEMENT


Schedule B-1 Designated Account

Schedule C-1 Commitments

Schedule P-1 Permitted Liens