Document:

Exhibit 10.1

 

SECOND
AMENDMENT 

TO

INTERNATIONAL LETTER OF CREDIT AGREEMENT

 

THIS SECOND AMENDMENT TO
INTERNATIONAL LETTER OF CREDIT AGREEMENT is dated as of the 29th day of
September, 2009 (this “Second Amendment”), and entered into among GREAT
LAKES DREDGE & DOCK CORPORATION, a Delaware corporation (the “Borrower”),
GREAT LAKES DREDGE & DOCK COMPANY, LLC, a Delaware limited liability
company (the “Guarantor”), and WELLS FARGO HSBC TRADE BANK, N.A. (the “Bank”).

 

BACKGROUND:

 

A.            The
Borrower, the Guarantor and Bank entered into an International Letter of Credit
Agreement, dated as of September 29, 2006 (as amended through the date
hereof and as may be further amended, modified or supplemented, the “Agreement”).  Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Agreement.

 

B.            The
Borrower has requested an amendment to extend the Maturity Date of the
Agreement.

 

C.            The
Bank hereby agrees to amend the Agreement, subject to the terms and conditions
set forth herein.

 

NOW, THEREFORE, in
consideration of the covenants, conditions and agreements hereafter set forth,
and for other good and valuable consideration, the receipt and adequacy of
which are all hereby acknowledged, the Borrower, the Guarantor and the Bank
covenant and agree as follows:

 

SECTION 1. 
AMENDMENTS.

 

(a)           Amendment
to Section 4.1.  Section 4.1
of the Agreement is hereby amended and restated to read as follows:

 

Facility Fee. 
The Borrower shall pay to the Bank (i) on September 29, 2009,
a non-refundable facility fee in an amount equal to the product of (x) the
Commitment and (y) the Annual Facility Fee Percentage, and (ii) on
each Loan Facility Anniversary Date (other than the Maturity Date), a
non-refundable facility fee in an amount equal to the product of (x) the
Commitment and (y) the Annual Facility Fee Percentage, prorated to the
Maturity Date in the case of the final Loan Facility Anniversary  Date prior to the Maturity Date.

 

 

(b)           Amendments
to Exhibit “A” of the Agreement. 
The following definitions in Exhibit “A” of the Agreement are
hereby amended and restated in their entirety, to read as follows:

 

“Borrower Agreement”
shall mean the Borrower Agreement dated as of the September 29, 2009,
executed by the Borrower and the Bank, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Fast Track Borrower
Supplement” shall mean the Fast Track Borrower Agreement Supplement
executed by the Borrower as of September 29, 2009, as the same may be
amended, restated, modified or supplemented from time to time.

 

“Loan Facility
Anniversary Date” shall mean each one (1) year anniversary of September 29,
2009.

 

“Maturity
Date” shall mean June 12, 2012.

 

SECTION 2. 
REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT.  By its execution and delivery hereof, the
Borrower represents and warrants that, as of the date hereof:

 

(a)           (i) the
Borrower has all requisite power and authority to execute and deliver this
Second Amendment, (ii) this Second Amendment has been duly executed and
delivered by the Borrower, and (iii) this Second Amendment and the
Agreement, as amended hereby, constitute valid and legally binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms, except as limited by Debtor Laws;

 

(b)           there
exists no Event of Default or Default under the Agreement both before and after
giving effect to this Second Amendment;

 

(c)           the
representations and warranties set forth in the Agreement and other International
Loan Documents are true and correct in all material respects on the date hereof
both before and after giving effect to this Second Amendment, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct in all material
respects as of such earlier date;

 

(d)           the
Agreement, as amended hereby, and the other International Loan Documents remain
in full force and effect; and

 

(e)           neither
the execution, delivery and performance of this Second Amendment or the
Agreement, as amended hereby, nor the consummation of any transactions
contemplated herein or therein, will (a) contravene the terms of the
Organization Documents of the Borrower, (b) violate any Governmental
Requirement or 

 

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(c) conflict
with any Obligation to which the Borrower is a party; except in the case of
clauses (b) and (c) above to the extent that such conflict could
not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3. 
CONDITIONS TO EFFECTIVENESS. 
All provisions of this Second Amendment shall be effective upon receipt
by the Bank of the following:

 

(a)           This
Second Amendment duly executed by the Borrower, the Guarantor and the Bank;

 

(b)           Secretary’s
Certificate of Borrower duly executed by the Borrower, in form and substance
satisfactory to Bank;

 

(c)           Secretary’s
Certificate of Guarantor duly executed by the Guarantor, in form and substance
satisfactory to Bank;

 

(d)           Acknowledgement
of Country Limitation Schedule duly executed by the Borrower;

 

(e)           Executed
copies of the Borrower Agreement and Fast Track Borrower Supplement;

 

(f)            Approval
and waiver letter from Ex-Im Bank; and

 

(g)           Payment
by the Borrower of the facility fee pursuant to Section 4.1 of the
Agreement.

 

SECTION 4. 
ACKNOWLEDGEMENT AND AGREEMENT OF GUARANTOR.  Guarantor hereby (i) consents to the
terms and execution hereof; (ii) reaffirms its obligations to the Bank
pursuant to the terms of its Guaranty; and (iii) acknowledges that the
Bank may amend, restate, extend, renew or otherwise modify the Agreement and
any indebtedness or agreement of the Borrower, or enter into any agreement or
extend additional or other credit accommodations, without notifying or
obtaining the consent of the Guarantor and without impairing the liability of
the Guarantor under its Guaranty for all of the Borrower’s present and future
indebtedness to the Bank.

 

SECTION 5. 
REFERENCE TO THE AGREEMENT.

 

(a)           Upon
the effectiveness of this Second Amendment, each reference in the Agreement to “this
Agreement”, “hereunder”, or words of like import shall mean and be a reference
to the Agreement, as affected and amended hereby.

 

(b)           The
Agreement, as amended by the amendments referred to above, shall remain in full
force and effect and is hereby ratified and confirmed.

 

3

 

SECTION 6. 
COSTS, EXPENSES AND TAXES. 
The Borrower agrees to pay all reasonable out-of-pocket costs and
expenses incurred by the Bank in connection with the preparation, reproduction,
execution and delivery of this Second Amendment and the other instruments and
documents to be delivered hereunder (including the reasonable fees, charges and
disbursements of counsel with respect thereto).

 

SECTION 7. 
EXECUTION IN COUNTERPARTS. 
This Second Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same instrument.  For purposes of this Second Amendment, a
counterpart hereof (or signature page thereto) signed and transmitted by
any Person party hereto to the Bank (or its counsel) by facsimile machine, telecopier
or electronic mail is to be treated as an original.  The signature of such Person thereon, for
purposes hereof, is to be considered as an original signature, and the
counterpart (or signature page thereto) so transmitted is to be considered
to have the same binding effect as an original signature on an original
document.

 

SECTION 8. 
HEADINGS.  Section headings
in this Second Amendment are included herein for convenience of reference only
and shall not constitute a part of this Second Amendment for any other purpose.

 

SECTION 9. 
ENTIRE AGREEMENT.  THIS SECOND AMENDMENT AND THE OTHER
INTERNATIONAL LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

SECTION 10. 
GOVERNING LAW.  THIS SECOND
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES (OTHER
THAN PROVISIONS OF 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

SECTION 11. 
WAIVERS OF JURY TRIAL.  TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, THE PARTIES HERETO HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS SECOND AMENDMENT OR INTERNATIONAL LOAN
DOCUMENTS, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS SECOND AMENDMENT OR ANY INTERNATIONAL LOAN DOCUMENT AND AGREE THAT
ANY ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

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REMAINDER OF PAGE LEFT
INTENTIONALLY BLANK

 

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IN WITNESS WHEREOF, this
Second Amendment is executed as of the date first set forth above.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  GREAT
  LAKES DREDGE & DOCK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Deborah A. Wensel

  
	
   

  	
   

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Senior
  Vice President, Chief Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  GREAT LAKES DREDGE & DOCK COMPANY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Deborah A. Wensel

  
	
   

  	
   

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Senior
  Vice President, Chief Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  WELLS
  FARGO HSBC TRADE BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert Corder

  
	
   

  	
   

  	
  Robert
  Corder

  
	
   

  	
   

  	
  Vice
  President

  

 

6Exhibit
10.1

 

CONFIDENTIAL TREATMENT REQUESTED

 

Information marked by [*] has
been omitted pursuant to a request for confidential treatment. The omitted
portion has been separately filed with the Securities and Exchange Commission.

 

 

 

 

CREDIT AND SECURITY AGREEMENT

 

BY AND AMONG

ANALYSTS INTERNATIONAL CORPORATION,

as Borrower

WELLS FARGO BANK, NATIONAL ASSOCIATION,

acting through its Wells Fargo Business Credit operating division

 

As of September 30, 2009

 

 

 

 

 

CREDIT
AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”) is dated as of September 30, 2009, and is
entered into between ANALYSTS INTERNATIONAL CORPORATION, a Minnesota
corporation (“Company”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION, a national banking association  (as
more fully defined in Exhibit A, “Wells Fargo”),
acting through its Wells Fargo Business Credit  operating
division.

 

RECITALS

 

Company has asked Wells
Fargo to provide it with a $15,000,000 revolving line of credit (the “Line of Credit”) for working capital purposes and to
facilitate the issuance of  letters of
credit.  Wells Fargo is agreeable to
meeting Company’s request, provided that Company agrees to the terms and
conditions of this Agreement.

 

For purposes of this Agreement, capitalized terms not
otherwise defined in the Agreement shall have the meaning given them in Exhibit
A.

 

ARTICLE I

AMOUNT AND TERMS OF THE LINE OF
CREDIT

 

Section 1.1             Line of Credit; Limitations on Borrowings; Termination Date; Use of
Proceeds.

 

(a)           Line
of Credit and Limitations on Borrowing.  Wells Fargo
shall make Advances to Company under the Line of Credit that, together with the
L/C Amount,  shall not at any time exceed in
the aggregate the lesser of (i) the Maximum Line Amount, or (ii) the
Borrowing Base.  Within these limits,
Company may periodically borrow, prepay in whole or in part, and reborrow.  Wells Fargo has no
obligation to make an Advance during a Default Period or at any time Wells
Fargo believes that an Advance would result in an Event of Default.

 

(b)           Maturity
and Termination Dates.  Company may request Advances
from the date that the conditions set forth in Article III are satisfied until the earlier of:  (i) the Maturity Date, (ii) the date
Company terminates the Line of Credit, or (iii) the date Wells Fargo terminates
the Line of Credit following an Event of Default.  The earliest of the dates described in this
clause (b) is the “Termination Date”.

 

(c)           Use of Line of Credit
Proceeds.  Company shall use the proceeds
of the initial Advance to refinance existing senior debt and shall use the
proceeds of each subsequent Advance and
each Letter of Credit for ordinary working capital purposes.

 

(d)           Revolving
Note.  Company’s obligation to repay Advances,
regardless of how initiated under Section 1.3,
shall be evidenced by a revolving promissory note substantially in the form set
forth in Exhibit G (as renewed, amended, substituted or replaced
from time to time, the “Revolving Note”).

 

 

Section 1.2             Borrowing Base; Mandatory Prepayment.

 

(a)           Borrowing
Base.  The borrowing base (the “Borrowing
Base”) is an amount equal to:

 

(i)            85%,
or such lesser percentage as Wells Fargo in its sole discretion may deem
appropriate, of Eligible Billed Accounts minus Subcontractor Payables related
to Billed Accounts; plus

 

(ii)           the
smaller of (A) 70%, or such lesser percentage as Wells Fargo in its sole
discretion may deem appropriate, of Eligible Unbilled Accounts minus
Subcontractor Payables related to Unbilled Accounts, or (B) $3,000,000; less

 

(iii)          the Borrowing Base Reserve, less

 

(iv)          the Dilution Reserve, less

 

(v)           the Payroll Reserve, less

 

(vi)          Indebtedness
that Company owes Wells Fargo that has not been advanced on the Revolving Note,
less

 

(vii)         Indebtedness
that is not otherwise described in Article I,
including Indebtedness that Wells Fargo in its sole discretion finds on the
date of determination to be equal to Wells Fargo’s net credit exposure with
respect to any Rate Hedge Agreement, derivative, foreign exchange, deposit,
treasury management or similar transaction or arrangement extended to Company
and/or any of its Subsidiaries by Wells Fargo.

 

Wells Fargo will use its
best efforts to promptly notify Company of any change in the advance rates set
forth in clauses (i) and (ii)(A) above.

 

(b)           Mandatory
Prepayment; Overadvances.  If outstanding Advances
evidenced by the Revolving Note plus the L/C Amount exceed the Borrowing Base
or the Maximum Line Amount at any time, then Company shall immediately prepay
the Revolving Note in an amount sufficient to eliminate the excess, and if
payment in full of the Revolving Note is insufficient to eliminate this excess
and the L/C Amount continues to exceed the Borrowing Base, then Company shall
immediately deliver cash to Wells Fargo in an amount equal to the remaining
excess for deposit to the Special Account, unless in each case, Wells Fargo has
delivered to Company an Authenticated Record consenting to the Overadvance prior
to its occurrence, in which event the Overadvance shall be temporarily
permitted on such terms and conditions as Wells Fargo in its sole discretion
may deem appropriate, including the payment of additional fees or interest, or
both.

 

2

 

Section 1.3             Procedures for Advances.

 

(a)           Advances Credited to
Operating Account.  All Advances, whether accruing
interest at the Floating Rate (“Floating Rate Advances”) or at the Fixed Rate (“Fixed Rate Advances”), shall be credited to Company’s
demand deposit account maintained with Wells Fargo (the “Operating
Account”), unless the parties agree in an Authenticated Record to
disburse to another account.

 

(b)           Advances
upon Company’s Request.  Company may request one or
more Advances on any Business Day.  Each
request shall be deemed a request for a Floating Rate Advance unless Company
specifically requests that an Advance be funded as a Fixed Rate Advance as
provided in Section 1.5.  No request for an Advance will be deemed
received until Wells Fargo acknowledges receipt, and Company, if requested by
Wells Fargo, confirms the request in an Authenticated Record.  Company shall repay all Advances, even if the
Person requesting the Advance on behalf of Company lacked authorization.

 

(c)           Advances
through Loan Manager.  If Wells Fargo has separately agreed that
Company may use Loan Manager, Advances will be initiated by Wells Fargo and
credited to the Operating Account as Floating Rate Advances as of the end of
each Business Day in an amount sufficient to maintain an agreed upon ledger
balance in the Operating Account, subject only to Line of Credit availability
as provided in Section 1.1(a).  If Wells Fargo terminates Company’s access to
Loan Manager, Company may continue to request Advances as provided in Section 1.3(b). 
Wells Fargo shall have no obligation to make an Advance through Loan Manager
during a Default Period, or in an amount in excess of Line of Credit
availability, and may terminate Loan Manager at any time in its sole
discretion.  Wells Fargo will use its
best efforts to promptly notify Company of the termination of Loan Manager.  Advances through Loan Manager shall not be
made as Fixed Rate Advances.

 

(d)           Protective
Advances; Advances to Pay Indebtedness Due.  Wells Fargo
may initiate a Floating Rate Advance on the Line of Credit in its sole
discretion for any reason at any time, without Company’s compliance with any of
the conditions of this Agreement, and (i) disburse the proceeds directly
to third Persons in order to protect Wells Fargo’s interest in Collateral or to
perform any of Company’s obligations under this Agreement, or (ii) apply
the proceeds to the amount of any Indebtedness then due and payable to Wells
Fargo.

 

Section 1.4             Floating Rate Advances.  Company may
request an Advance at the Floating Rate no later than 11:59 a.m. Central Time
on the Business Day on which Company wants the Floating Rate Advance to be
funded.  Rate Hedges may not be used with
respect to any Advance that utilizes the Floating Rate.

 

Section 1.5             Fixed Rate Advances and Rate Hedges.

 

(a)           Fixed
Rates for Fixed Rate Interest Periods; Quotation of Rates. 
Wells Fargo will quote Company a Fixed Rate for a three (3) month
term (each a “Fixed Rate 

 

3

 

Interest
Period”, as more
fully defined in Exhibit A), which Fixed Rate Interest Period will
commence on the Business Day on which the request was made, provided that the
request is received by Wells Fargo no later than 11:59 a.m. Central Time
of the Business Day that the Advance is to be funded.  If Company does not promptly accept the
quoted Fixed Rate, then the quote shall expire and any subsequent request for a
quote shall be subject to redetermination by Wells Fargo.

 

(b)           Procedure
for Requesting and Renewing Fixed Rate Advances.  Company may
request a Fixed Rate Advance, or convert a Floating Rate Advance to a Fixed
Rate Advance, or renew an existing Fixed Rate Advance, provided that Wells
Fargo receives the request no later than 11:59 a.m. Central Time three
Business Days before the Business Day that will be the first day of the new
Fixed Rate Interest Period.  Each request
shall specify the principal amount to be advanced at the Fixed Rate, or to be
converted from the Floating Rate, or to be renewed, and shall be confirmed in
an Authenticated Record if requested by Wells Fargo.  Each Fixed Rate Advance shall be in multiples
of $500,000 and in the minimum
amount of at least $1,000,000.  No more
than four separate Fixed Rate Advances may be outstanding at any time.

 

(c)           Expiration
of Fixed Rate Advances.  Unless a Fixed Rate Advance is
subject to a Rate Hedge, or is renewed, paid, or prepaid on or before the
expiration of the related Fixed Rate Interest Period, each Fixed Rate Advance
shall automatically be converted to the Floating Rate upon the expiration of
the Fixed Rate Interest Period.  An
expiring Fixed Rate Advance may not be renewed for a new Fixed Rate Interest
Period if a Default Period is in effect, unless a Rate Hedge applies to the
Fixed Rate Advance.

 

(d)           Fixed
Rate Advances Subject to a Rate Hedge; Interest Rate Floors. 
Any Fixed Rate Advance may be made subject to a Rate Hedge pursuant to
the separate agreement of Company and Wells Fargo.  Any Fixed Rate Advance subject to a Rate
Hedge shall automatically and continuously renew for successive Fixed Rate
Interest Periods until the earlier of the Termination Date or the termination
of the Rate Hedge for any reason, after which time the Advance will accrue
interest at the Floating Rate, and subject to the Default Rate, if
applicable.  If the Floating Rate, which
determines Fixed Rate Advance pricing, is subject to a minimum interest rate
floor, the interest rate floor will not apply to the calculation of interest
accruing with respect to any Fixed Rate Advance at any time that a Rate Hedge
is currently in effect.  Upon termination
of any Rate Hedge, the minimum interest rate floor shall resume application to
Fixed Rate Advance borrowings that were formerly subject to such Rate Hedge.

 

(e)           Taxes
and Regulatory Costs.  Company shall also pay Wells Fargo with
respect to any Fixed Rate Advance based on LIBOR, all (i) withholdings,
interest equalization taxes, stamp taxes or other taxes (except income and
franchise taxes) imposed by any domestic or foreign governmental authority that
are related to LIBOR, and (ii) future, supplemental, emergency or other
changes in the LIBOR Reserve Percentage, the assessment rates imposed by the
Federal Deposit Insurance Corporation, or similar costs imposed by any domestic
or foreign governmental authority or resulting from compliance by Wells Fargo
with any request or directive (whether or not having the force of law) from any
central bank or other governmental authority that are related to 

 

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LIBOR
but not otherwise included in the calculation of LIBOR.  In determining which of these amounts are
attributable to an existing Fixed Rate Advance that is based on LIBOR, any
reasonable allocation made by Wells Fargo among its operations shall be deemed
conclusive and binding.

 

Section 1.6             Collection of Accounts and Application to Revolving Note.

 

(a)           The
Collection Account.  Company has granted a security interest to
Wells Fargo in the Collateral, including without limitation, all Accounts.
Except as otherwise agreed by both parties in an Authenticated Record, all
Proceeds of Accounts and other Collateral, upon receipt or collection, shall be
deposited each Business Day into the Collection Account. Funds so deposited (“Account Funds”) are the property of Wells Fargo, and may
only be withdrawn from the Collection Account by Wells Fargo.

 

(b)           Payment
of Accounts by Company’s Account Debtors.  Company shall
instruct all account debtors to make payments either directly to the Lockbox
for deposit by Wells Fargo directly to the Collection Account, or instruct them
to deliver such payments to Wells Fargo by wire transfer, ACH, or other means
as Wells Fargo may direct for deposit to the Collection Account or for direct
application to the Line of Credit. If Company receives a payment or the
Proceeds of Collateral directly, Company will promptly deposit the payment or
Proceeds into the Collection Account. Until deposited, Company will hold all
such payments and Proceeds in trust for Wells Fargo without commingling with
other funds or property.  All deposits
held in the Collection Account shall constitute Proceeds of Collateral and
shall not constitute the payment of Indebtedness.

 

(c)           Application
of Payments to Revolving Note.  Wells Fargo
will withdraw Account Funds deposited to the Collection Account and pay down
borrowings on the Line of Credit by applying them to the Revolving Note on the
first Business Day following the Business Day of deposit to the Collection
Account, or, if payments are received by Wells Fargo that are not first
deposited to the Collection Account pursuant to any treasury management service
provided to Company by Wells Fargo, such payments shall be applied to the
Revolving Note as provided in the Master Agreement for Treasury Management
Services and the relevant service description. 
All payments shall be applied first to any unpaid Floating Rate
Advances, and once paid, to outstanding Fixed Rate Advances.  If more than one Fixed Rate Advance is
outstanding, the payments shall be applied to such Fixed Rate Advances in the
order and in the amounts as Wells Fargo may deem appropriate, unless Company
specifies at the time of payment how such payments are to be applied.

 

5

 

Section 1.7             Interest and Interest Related Matters.

 

(a)           Interest Rates Applicable to
Line of Credit.  Except as otherwise provided in this
Agreement, the unpaid principal amount of each Advance evidenced by the
Revolving Note shall accrue interest at an annual interest rate calculated as
follows:

 

(i)            Floating Rate Pricing.  The “Floating
Rate” for Advances shall be an interest rate equal to Daily Three
Month LIBOR plus the  applicable  Margin, which
interest rate shall change whenever Daily Three Month LIBOR changes.

 

(ii)           Fixed Rate Pricing.  The “Fixed Rate” for Advances shall be an interest rate equal to
the Floating Rate in effect on the first Business Day of the Fixed Rate
Interest Period.

 

(iii)          Margin.  The margin (the “Margin”)
shall be  three and one-half percent (3.50%).

 

(b)           Default Interest Rate. 
Commencing on the day an Event of Default occurs, through and including
the date identified by Wells Fargo in a Record as the date that the Event of
Default has been waived (each such period a “Default
Period”), or during a time period specified in Section 1.10, or at any time following the Termination
Date, in Wells Fargo’s sole discretion and without waiving any of its other
rights or remedies, the principal amount of the Revolving Note shall bear
interest at a rate that is three percent (3.00%)  above
the contractual rate set forth in Section 1.7(a) (the “Default
Rate”), or any lesser rate that Wells Fargo may deem appropriate,
starting on the first day of the fiscal
quarter in which the Default Period begins through the last day of that
Default Period, or any shorter time period to which Wells Fargo may agree in an
Authenticated Record.

 

(c)           Usury. 
No interest rate shall be effective which would result in a rate greater
than the highest rate permitted by law. 
Payments in the nature of interest and other charges made under any Loan
Documents or any other document or agreement described in or related to this
Agreement that are later determined to be in excess of the limits imposed by
applicable usury law will be deemed to be a payment of principal, and the
Indebtedness shall be reduced by that amount so that such payments will not be
deemed usurious.

 

Section 1.8             Fees.

 

(a)           Origination Fee. 
Company shall pay Wells Fargo a one time origination fee of $150,000,
which shall be fully earned and payable upon the execution of this Agreement.

 

(b)           Unused
Line Fee.  Company shall pay
Wells Fargo an annual unused line fee of one-half of one percent (0.50%) per
annum of the daily average of the Maximum Line Amount reduced by outstanding
Advances and the L/C Amount (the “Unused Amount”),
from the date of this Agreement to and including the Termination Date, 

 

6

 

which
unused line fee shall be payable monthly in arrears on the first day of each
month and on the Termination Date.

 

(c)           Collateral
Exam Fees.  Company shall pay Wells Fargo fees in
connection with any collateral exams, audits or inspections conducted by or on
behalf of Wells Fargo at the current rates established from time to time by
Wells Fargo as its collateral exam fees (which fees are currently $125.00 per
hour per collateral examiner), together with all actual out-of-pocket costs and
expenses incurred in conducting any collateral exam, audit or inspection.

 

(d)           Line
of Credit Termination and/or Reduction
Fees.  If (i) Wells Fargo terminates the Line of Credit
or reduces the Maximum Line Amount during a Default Period, or if (ii) Company
terminates the Line of Credit on a date prior to the Maturity Date, or if (iii) Company
reduces the Maximum Line Amount, then Company shall pay Wells Fargo as
liquidated damages a termination or reduction fee, as applicable, in an amount
equal to a percentage of the Maximum
Line Amount or the reduction of the Maximum Line Amount, as the case may be,
calculated as follows:  (A) two
percent (2.00%) if the termination or reduction occurs on or before the first
anniversary of the date of this Agreement; (B) one percent (1%) if the
termination or reduction occurs after the first anniversary of the date of this
Agreement, but on or before the second anniversary of the date of this Agreement;
provided, however, the termination fee set forth in this Section 1.8(d) shall be waived by Wells Fargo if the Line of Credit is fully refinanced
by a commercial banking office of Wells Fargo at any time following the date
which is eighteen (18) months after the date of this Agreement.

 

(e)           Overadvance
Fees.  Company shall pay a $500 Overadvance fee for
each day that an Overadvance exists which was not agreed to by Wells Fargo in
an Authenticated Record prior to its occurrence; provided that Wells Fargo’s
acceptance of the payment of such fees shall not constitute either consent to
the Overadvance or waiver of the resulting Event of Default.  Company shall pay additional Overadvance fees
and interest in such amounts and on such terms as Wells Fargo in its sole
discretion may consider appropriate for any Overadvance to which Wells Fargo
has specifically consented in an Authenticated Record prior to its occurrence.

 

(f)            Treasury Management Fees.  Company will
pay service fees to Wells Fargo for treasury management services provided
pursuant to the Master Agreement for Treasury Management Services or any other
agreement entered into by the parties, in the amount prescribed in Wells Fargo’s
current service fee schedule.

 

(g)           Letter
of Credit Fees.  Company shall pay a fee with respect to each
Letter of Credit issued by Wells Fargo of three percent (3.0%) of the Aggregate
Face Amount of the Letter of Credit accruing daily from and including the date
the Letter of Credit is issued until the date that it either expires or is
returned for cancellation, which fee shall be payable monthly in arrears on the
first day of each month and on the date that the Letter of Credit either
expires or is returned for cancellation; provided, however, following an Event
of Default, this fee shall increase to six percent (6.0%) of the Aggregate Face
Amount of such Letter of Credit, commencing on the first day of the 

 

7

 

fiscal  quarter  in which the
Default Period begins and continuing through the last day of such Default
Period, or any shorter time period that Wells Fargo in its sole discretion may
deem appropriate, without waiving any of its other rights and remedies.  Pricing will be determined on a case-by-case
basis in respect of any commercial letters of credit.

 

(h)           Letter
of Credit Administrative Fees.  Company shall
pay all administrative fees charged by Wells Fargo in connection with the
honoring of drafts under any Letter of Credit, and any amendments to or
transfers of any Letter of Credit, and any other activity with respect to any
Letter of Credit at the current rates published by Wells Fargo for such
services rendered on behalf of its customers generally.

 

(i)            Other Fees and Charges.  Wells Fargo
may impose additional fees and charges during a Default Period for (i) waiving
an Event of Default, or (ii) the administration of Collateral by Wells
Fargo. All such fees and charges shall be imposed at Wells Fargo’s sole
discretion following oral notice to Company on either an hourly, periodic, or
flat fee basis, and in lieu of or in addition to imposing interest at the
Default Rate, and Company’s request for an Advance following such notice shall
constitute Company’s agreement to pay such fees and charges.

 

(j)            Appraisal Fees.  Company shall pay Wells Fargo
fees in connection with any appraisal of Collateral or any other property in
which Wells Fargo has a security interest conducted by or on behalf of Wells
Fargo, together with all actual out-of-pocket costs and expenses incurred in conducting
any appraisal.

 

(k)           Fixed
Rate Advance Breakage Fees.  Company may
prepay any Fixed Rate Advance at any time in any amount, whether voluntarily or
by acceleration; provided, however, that if the Fixed Rate Advance is prepaid,
Company shall pay Wells Fargo upon demand a Fixed Rate Advance breakage fee
equal to the sum of the discounted monthly differences for each month from the
month of prepayment through the month in which the Fixed Rate Interest Period
matures, calculated as follows for each such month:

 

(i)            Determine
the amount of interest that would have accrued each month on the amount prepaid
at the interest rate applicable to such amount had it remained outstanding
until the last day of the applicable Fixed Rate Interest Period.

 

(ii)           Subtract from the amount determined in (i) above
the amount of interest that would have accrued for the same month on the amount
of principal prepaid for the remaining term of the Fixed Rate Interest Period
at a rate equal to LIBOR in effect on the date of prepayment for new loans
extended at a Fixed Rate for the remainder of the Fixed Rate Interest Period in
a principal amount equal to the amount prepaid.

 

(iii)          If
the result obtained in (ii) for any month is greater than zero, discount
that difference by LIBOR used in (ii) above.

 

8

 

Company acknowledges that prepayment of the Revolving Note
may result in Wells Fargo incurring additional costs, expenses or liabilities,
and that it is difficult to ascertain the full extent of such costs, expenses
or liabilities.  Company agrees to pay
the above-described Fixed Rate Advance breakage fee and agrees that this amount
represents a reasonable estimate of the Fixed Rate Advance breakage costs,
expenses and/or liabilities of Wells Fargo.

 

Section 1.9             Interest Accrual; Principal and Interest Payments; Computation.

 

(a)           Interest
Payments and Interest Accrual.  Accrued and
unpaid interest under the Revolving Note on Floating Rate Advances and interest
accruing on any Fixed Rate Advance shall be due and payable on the applicable
Interest Payment Date (as defined in Exhibit A hereto) and on the
Termination Date, and, in the case of interest due and payable on Floating Rate
Advances, shall be paid in the manner provided in Section 1.6(c). 
Interest shall accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of Advance to the
Interest Payment Date.

 

(b)           Payment
of Revolving Note Principal.  The principal
amount of the Revolving Note shall be paid from time to time as provided in
this Agreement, and shall be fully due and payable on the Termination Date.

 

(c)           Payments
Due on Non-Business Days.  Unless otherwise specified, if
an Interest Payment Date or the Termination Date falls on a day which is not a
Business Day, payment shall be made on the next Business Day, and interest
shall continue to accrue during that time period.

 

(d)           Computation
of Interest and Fees.  Interest accruing on the unpaid principal
amount of the Revolving Note and fees payable under this Agreement shall be
computed on the basis of the actual number of days elapsed in a year of 360
days.

 

(e)           Liability
Records.  Wells Fargo shall maintain accounting and
bookkeeping records of all Advances and payments under the Line of Credit and
all other Indebtedness due to Wells Fargo in such form and content as Wells
Fargo in its sole discretion deems appropriate. 
Wells Fargo’s calculation of current Indebtedness shall be presumed
correct unless proven otherwise by Company. 
Upon Wells Fargo’s request, Company will admit and certify in a Record
the exact principal balance of the Indebtedness that Company then believes to
be outstanding.  Any billing statement or
accounting provided by Wells Fargo shall be conclusive and binding unless
Company notifies Wells Fargo in a detailed Record of its intention to dispute
the billing statement or accounting within 30 days of receipt.

 

Section 1.10           Termination, Reduction or Non-Renewal of Line of Credit by Company;
Notice.

 

(a)           Termination
or Reduction of the Line of Credit by Company after Advance Notice. 
Company may terminate or reduce the Line of Credit at any time prior

 

9

 

to the
Maturity Date, if it (i) delivers an Authenticated Record notifying Wells Fargo
of its intentions at least 90 days prior to the proposed date of termination or
reduction, (ii) pays Wells Fargo the termination or reduction fee, as
applicable, set forth in Section 1.8(d),
and (iii) pays the Indebtedness in full in connection with a termination or
down to the reduced Maximum Line Amount in connection with a reduction.  Any reduction in the Maximum Line Amount
shall be in multiples of $1,000,000, with a minimum reduction of at least
$5,000,000.

 

(b)           Termination
or Reduction of the Line of Credit by Company without Advance Notice. 
If Company fails to deliver to Wells Fargo timely notice of its
intention to terminate the Line of Credit or reduce the Maximum Line Amount as
provided in Section 1.10(a), Company may
nevertheless terminate the Line of Credit or reduce the Maximum Line Amount and
pay the Indebtedness in full in connection with a termination or down to the
reduced Maximum Line Amount in connection with a reduction if it pays the
termination or reduction fee, as applicable, set forth in Section 1.8(d).

 

(c)           Non-Renewal
by Company; Notice.
 If Company does not wish Wells Fargo to
consider renewal of the Line of Credit on the next Maturity Date, Company shall
deliver an Authenticated Record to Wells Fargo at least 90 days prior to the
Maturity Date notifying Wells Fargo of its intention not to renew. If Company
fails to deliver to Wells Fargo such timely notice, then the Revolving Note
shall accrue interest at the Default Rate commencing on the 90th day prior to
the Maturity Date and continuing through the date that Wells Fargo receives
delivery of an Authenticated Record giving it actual notice of Company’s
intention not to renew.

 

Section 1.11           Letters of Credit.

 

(a)           Issuance
of Letters of Credit; Amount.  Wells Fargo,
subject to the terms and conditions of this Agreement, shall issue, on or after
the date that Wells Fargo is obligated to make its first Advance under this
Agreement and prior to the Termination Date, one or more irrevocable  standby or commercial  letters of
credit (each, a “Letter of Credit”, and
collectively, “Letters of Credit”) for Company’s
account.  Wells Fargo will not issue any
Letter of Credit if the face amount of the Letter of Credit would exceed the
lesser of:  (i) $3,000,000 less the L/C
Amount, or (ii) the lesser of the Maximum Line Amount or the Borrowing Base,
minus an amount equal to the sum of the outstanding Advances plus the L/C
Amount.

 

(b)           Additional
Letter of Credit Documentation.  Prior to
requesting issuance of a Letter of Credit, Company shall first execute and
deliver to Wells Fargo a Standby Letter of Credit Agreement or a Commercial
Letter of Credit Agreement, as applicable, an L/C Application, and any other
documents that Wells Fargo may request, which shall govern the issuance of the
Letter of Credit and Company’s obligation to reimburse Wells Fargo for any
related Letter of Credit draws (the “Obligation of
Reimbursement”).

 

10

 

(c)           Expiration. 
No Letter of Credit shall be issued that has an expiry date that is
later than one (1) year from the date of issuance, or the Maturity Date in
effect on the date of issuance, whichever is earlier.

 

(d)           Obligation
of Reimbursement During Default Periods.  If Company is
unable, due to the existence of a Default Period or for any other reason, to
obtain an Advance to pay any Obligation of Reimbursement, Company shall pay
Wells Fargo on demand and in immediately available funds, the amount of the
Obligation of Reimbursement together with interest, accrued from the date of
presentment of the underlying draft until reimbursement in full at the Default
Rate.  Wells Fargo is authorized, alternatively
and in its sole discretion, to make an Advance in an amount sufficient to
discharge the Obligation of Reimbursement and pay all accrued but unpaid
interest and fees with respect to the Obligation of Reimbursement.

 

Section 1.12           Special Account.  If the Line of Credit is
terminated for any reason while a Letter of Credit is outstanding, or if after
prepayment of the Revolving Note the L/C Amount continues to exceed the
Borrowing Base, then Company shall promptly pay Wells Fargo in immediately
available funds for deposit to the Special Account, an amount equal, as the
case may be, to either (a) the L/C Amount plus any anticipated fees and costs,
or (b) the amount by which the L/C Amount exceeds the Borrowing Base.  If Company fails to pay these amounts
promptly, then Wells Fargo may in its sole discretion make an Advance to pay
these amounts and deposit the proceeds to the Special Account.  The Special Account shall be an interest
bearing account maintained with Wells Fargo or any other financial institution
acceptable to Wells Fargo.  Wells Fargo
may in its sole discretion apply amounts on deposit in the Special Account to
the Indebtedness.  Company may not
withdraw amounts deposited to the Special Account until the Line of Credit has
been terminated and all outstanding Letters of Credit have either been returned
for cancellation to Wells Fargo or have expired and the Indebtedness has been
fully paid.

 

ARTICLE II

SECURITY INTEREST AND
OCCUPANCY OF COMPANY’S PREMISES

 

Section 2.1             Grant of Security Interest.  Company
hereby pledges, assigns and grants to Wells Fargo  a
Lien and security interest (collectively referred to as the “Security Interest”) in the Collateral, as security for the
payment and performance of all Indebtedness. Following request by Wells Fargo,
Company shall grant Wells Fargo  a Lien and
security interest in all commercial tort claims that it may have against any
Person.

 

Section 2.2             Notifying Account Debtors and Other Obligors; Collection of Collateral. 
Wells Fargo may, at any time during any Default Period, deliver a Record
giving an account debtor or other Person obligated to pay an Account, a General
Intangible, or other amount due, notice that the Account, General Intangible or
other amount due has been assigned to Wells Fargo for security and must be paid
directly to Wells Fargo.  Company shall
join in giving such notice and shall Authenticate any Record giving such notice
upon Wells Fargo’s request.  After
Company or Wells Fargo gives such notice, Wells Fargo may, but need not, in
Wells Fargo’s or in Company’s name, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of, or securing,
such Account, General Intangible, 

 

11

 

or
other amount due, or grant any extension to, make any compromise or settlement
with or otherwise agree to waive, modify, amend or change the obligations
(including collateral obligations) of any account debtor or other obligor.  Wells Fargo may, in Wells Fargo’s name or in
Company’s name, as Company’s agent and attorney-in-fact, notify the United
States Postal Service to change the address for delivery of Company’s mail to
any address designated by Wells Fargo, otherwise intercept Company’s mail, and
receive, open and dispose of Company’s mail, applying all Collateral as
permitted under this Agreement and holding all other mail for Company’s account
or forwarding such mail to Company’s last known address.

 

Section 2.3             Assignment of Insurance.  As additional security for the
Indebtedness, Company hereby assigns to Wells Fargo all rights of Company under
every policy of insurance covering the Collateral and all business records and
other documents relating to it, and all monies (including without limitation
all proceeds and refunds) that may be payable under any policy, and Company
hereby directs the issuer of each policy to pay all such monies directly to
Wells Fargo.  At any time, whether or not
a Default Period then exists, Wells Fargo may (but need not), in Wells Fargo’s
or Company’s name, execute and deliver proofs of claim, receive payment of
proceeds and endorse checks and other instruments representing payment of the
policy of insurance, and adjust, litigate, compromise or release claims against
the issuer of any policy.  Any monies
received under any insurance policy assigned to Wells Fargo, other than
liability insurance policies, or received as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid to
Wells Fargo and, as determined by Wells Fargo in its sole discretion, either be
applied to prepayment of the Indebtedness or disbursed to Company under staged
payment terms reasonably satisfactory to Wells Fargo for application to the
cost of repairs, replacements, or restorations which shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed.

 

Section 2.4             Company’s Premises.

 

(a)           Wells
Fargo’s Right to Occupy Company’s Premises.  Company
hereby grants to Wells Fargo the right, at any time during a Default Period and
without notice or consent, to take exclusive possession of all locations where
Company or any Subsidiary conducts its business or has any rights of
possession, including without limitation the locations described on Exhibit B (the “Premises”),
until the earlier of (i) payment in full and discharge of all Indebtedness and
termination of the Line of Credit, or (ii) final sale or disposition of all
items constituting Collateral and delivery of those items to purchasers.

 

(b)           Wells
Fargo’s Use of Company’s Premises.  Wells Fargo
may use the Premises to store, process, manufacture, sell, use, and liquidate
or otherwise dispose of items that are Collateral, and for any other incidental
purposes deemed appropriate by Wells Fargo in good faith.

 

(c)           Company’s
Obligation to Reimburse Wells Fargo.  Wells Fargo
shall not be obligated to pay rent or other compensation for the possession or
use of any Premises, but if Wells Fargo elects to pay rent or other
compensation to the owner or mortgagee of any Premises in order to have access
to the Premises, then Company shall promptly 

 

12

 

reimburse
Wells Fargo all such amounts, as well as all taxes, fees, charges and other
expenses at any time payable by Wells Fargo with respect to the Premises by
reason of the execution, delivery, recordation, performance or enforcement of
any terms of this Agreement.

 

Section 2.5             License.  Without limiting the generality of any other
Security Document, Company hereby grants to Wells Fargo a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of Company for the purpose of finishing, selling, leasing or
otherwise disposing of any or all Collateral during any Default Period.

 

Section 2.6             Financing Statements.

 

(a)           Authorization
to File.  Company authorizes Wells Fargo to file
financing statements describing Collateral to perfect Wells Fargo’s Security
Interest in the Collateral, and Wells Fargo may describe the Collateral as “all
personal property” or “all assets” or describe specific items of Collateral
including without limitation any commercial tort claims.  All financing statements filed before the
date of this Agreement to perfect the Security Interest were authorized by
Company and are hereby re-authorized. 
Following the termination of the Line of Credit and payment of all
Indebtedness, Wells Fargo shall, at Company’s expense and within the time
periods required under applicable law, release or terminate any filings or
other agreements that perfect the Security Interest.

 

(b)           Termination. 
Wells Fargo shall, at Company’s expense, release or terminate any
filings or other agreements that perfect the Security Interest, provided that
there are no suits, actions, proceedings or claims pending or threatened
against any Indemnitee under this Agreement with respect to any Indemnified
Liabilities, upon Wells Fargo’s receipt of the following, in form and content
satisfactory to Wells Fargo:  (i) cash
payment in full of all Indebtedness and a completed performance by Company with
respect to its other obligations under this Agreement, (ii) evidence that the
commitment of Wells Fargo to make Advances and to issue Letters of Credit under
the Line of Credit or under any other facility with Company has been
terminated, (iii) a release of all claims against Wells Fargo by Company
relating to Wells Fargo’s performance and obligations under the Loan Documents,
and (iv) an agreement by Company, any Guarantor, and any new lender to Company
to indemnify Wells Fargo for any payments received by Wells Fargo that are
applied to the Indebtedness as a final payoff that may subsequently be returned
or otherwise not paid for any reason.

 

Section 2.7             Setoff.  Wells Fargo may at any time, in its sole
discretion and without demand or notice to anyone, setoff any liability owed to
Company or any Subsidiary by Wells Fargo against any Indebtedness, whether or
not due.

 

Section 2.8             Collateral Related Matters.  This
Agreement does not contemplate a sale of Accounts or chattel paper, and, as
provided by law, Company is entitled to any surplus and shall remain liable for
any deficiency.  Wells Fargo’s duty of
care with respect to Collateral in its possession (as imposed by law) will be
deemed fulfilled if it exercises reasonable 

 

13

 

care
in physically keeping such Collateral, or in the case of Collateral in the
custody or possession of a bailee or other third Person, exercises reasonable
care in the selection of the bailee or third Person, and Wells Fargo need not
otherwise preserve, protect, insure or care for such Collateral.  Wells Fargo shall not be obligated to
preserve rights Company may have against prior parties, to liquidate the
Collateral at all or in any particular manner or order or apply the Proceeds of
the Collateral in any particular order of application.  Wells Fargo has no obligation to clean-up or
prepare Collateral for sale.  Company
waives any right it may have to require Wells Fargo to pursue any third Person
for any of the Indebtedness.

 

Section 2.9             Notices Regarding Disposition of Collateral. 
If notice to Company of any intended disposition of Collateral or any
other intended action is required by applicable law in a particular situation,
such notice will be deemed commercially reasonable if given in the manner
specified in Section 7.4 at least 10 days
before the date of intended disposition or other action.

 

ARTICLE III

CONDITIONS PRECEDENT

 

Section 3.1             Conditions Precedent to Initial Advance and Issuance of Initial Letter
of Credit.  Wells Fargo’s obligation to make the initial
Advance or issue the first Letter of Credit shall be subject to the condition
that Wells Fargo shall have received this Agreement and each of the Loan
Documents, and any document, agreement, or other item described in or related
to this Agreement, and all fees and information described in Exhibit C, executed and in form and content
satisfactory to Wells Fargo.

 

Section 3.2             Additional Conditions Precedent to All Advances and Letters of Credit.  Wells Fargo’s obligation to make
any Advance (including the initial Advance) or issue any Letter of Credit shall
be subject to the further additional conditions: (a) that the representations
and warranties described in Exhibit D are correct on the date of the Advance or the
issuance of the Letter of Credit, except to the extent that such
representations and warranties relate solely to an earlier date; and (b) that
no event has occurred and is continuing, or would result from the requested
Advance or issuance of the Letter of Credit that would result in an Event of
Default.

 

ARTICLE IV

REPRESENTATIONS AND
WARRANTIES

 

To induce Wells Fargo to
enter into this Agreement, Company makes the representations and warranties
described in Exhibit D.  Any request for
an Advance will be deemed a representation by Company that all representations
and warranties described in Exhibit D are true, correct, and complete as of the
time of the request, unless they relate exclusively to an earlier date. Company
shall promptly deliver a Record notifying Wells Fargo of any change in
circumstance that would affect the accuracy of any representation or warranty,
unless the representation and warranty specifically relates to an earlier date.

 

14

 

ARTICLE V

COVENANTS

 

So long as the Indebtedness
remains unpaid, or the Line of Credit has not been terminated, Company shall
comply with each of the following covenants, unless Wells Fargo shall consent
otherwise in an Authenticated Record delivered to Company.

 

Section 5.1             Reporting Requirements.  Company shall
deliver to Wells Fargo the following information, compiled where applicable
using GAAP consistently applied, in form and content acceptable to Wells Fargo:

 

(a)           Annual
Financial Statements.  As soon as available and in any event within
120  days after Company’s fiscal year end,
the audited financial statements of Company and its Subsidiaries prepared by an
independent certified public accountant acceptable to Wells Fargo, which shall
include the balance sheet, income statement, and statement of shareholders’
equity and cash flows for Company and its Subsidiaries prepared on a
consolidated basis.  The annual financial
statements shall be accompanied by the unqualified opinion of such accountant
and a certificate (the “Compliance Certificate”)
in the form of Exhibit E that is signed by Company’s chief financial officer.  Each Compliance Certificate
that accompanies an annual financial statement shall also be accompanied by
copies of all management letters prepared by Company’s accountants if provided
by such accountants.

 

(b)           Monthly
Financial Statements.  As soon as available and in any event within
30  days after the end of each fiscal
month, a Company-prepared balance sheet, income statement and statement of cash
flows of Company and its Subsidiaries prepared for that month and for the year—to-date
period then ended, prepared on a consolidated basis and stating in comparative
form the figures for the corresponding date and periods in the prior fiscal
year, subject to year-end adjustments. 
The financial statements shall be accompanied by a Compliance
Certificate in the form of Exhibit E that is signed by Company’s chief financial officer.

 

(c)           Collateral
Reports.  No later than 10 Business Days after each
month end (or more frequently if Wells Fargo shall request it), detailed agings
of Company’s accounts receivable and accounts payable, and a calculation of
Company’s Accounts, Eligible Billed Accounts and Eligible Unbilled Accounts as
of the end of that month or shorter time period requested by Wells Fargo.  All reports described in this subsection (c) shall
be submitted electronically to Wells Fargo through the secure file upload
service available through Wells Fargo’s Commercial Electronic
Office® (“CEO®”)
portal.

 

(d)           Projections. 
No later than 30  days after
each fiscal year end, Company’s projected balance sheet, income statement and
statement of cash flows  for each month
of the next fiscal year, certified as accurate by Company’s chief financial
officer and accompanied by a statement of assumptions and supporting schedules
and information.

 

(e)           Supplemental
Reports.  Weekly, or more frequently if Wells Fargo
requests, Wells Fargo’s standard form of “daily collateral report”, together
with 

 

15

 

receivables
schedules, collection reports, credit memos,  copies
of invoices, shipment documents and delivery receipts for goods sold and
services provided to account debtors; provided, however, if (a) the sum of
outstanding Advances and the L/C Amount has been less than $3,000,000 at all
times and (b) the sum of Cash-on-Hand and the Excess Borrowing Base
Availability has been $8,000,000 or more at all times, then Wells Fargo will
permit such collateral reports to be delivered to Wells Fargo on a monthly
basis.

 

(f)            Litigation.  No later than 3 days after discovery, a
Record notifying Wells Fargo of any litigation or other proceeding before any
court or governmental agency which seeks a monetary recovery against Company or
any Subsidiary in excess of $100,000.

 

(g)           Intellectual Property.  (i) No later than 30 days before
it acquires material Intellectual Property Rights, a Record notifying Wells
Fargo of the intention of Company or any Subsidiary to acquire such rights; (ii)
except for transfers permitted under Section 5.18, no later
than 30 days before Company or any Subsidiary disposes of material Intellectual
Property Rights, a Record notifying Wells Fargo of Company’s or such Subsidiary’s
intention to dispose of such rights, along with copies of all proposed
documents and agreements concerning the disposal of such rights as requested by
Wells Fargo; (iii) promptly upon discovery, a Record notifying Wells Fargo of (A)
any Infringement of Company’s or any Subsidiary’s Intellectual Property Rights
by any Person, (B) claims that Company or any Subsidiary is Infringing another
Person’s Intellectual Property Rights and (C) any threatened cancellation,
termination or material limitation of Company’s or any Subsidiary’s
Intellectual Property Rights; and (iv) promptly upon receipt, copies of all
registrations and filings with respect to Company’s or any Subsidiary’s
Intellectual Property Rights.

 

(h)           Defaults. 
No later than 3 days after learning of the probable occurrence of any
Event of Default, a Record notifying Wells Fargo of the Event of Default and
the steps being taken by Company to cure the Event of Default.

 

(i)            Disputes.  Promptly upon discovery, a Record notifying
Wells Fargo of (i) any disputes or claims by Company’s customers exceeding
$200,000 individually or $500,000 in the aggregate during any fiscal year; (ii)
credit memos not previously reported in Section 5.1(e);
and (iii) any goods returned to or recovered by Company or services disputed
outside of the ordinary course of business or in the ordinary course of
business but with a value in an amount in excess of $200,000.

 

(j)            Changes in Officers and Directors.  Promptly
following occurrence, a Record notifying Wells Fargo of any change in the
persons constituting Company’s Officers and Directors.

 

(k)           Collateral. 
Promptly upon discovery, a Record notifying Wells Fargo of any loss of
or material damage to any Collateral or to any material assets of any
Subsidiary or of any substantial adverse change in any Collateral or the
prospect of its payment or in any material assets of any Subsidiary.

 

16

 

(l)            Commercial Tort Claims.  Promptly upon
discovery, a Record notifying Wells Fargo of any commercial tort claims brought
by Company or any Subsidiary against any Person, including the name and address
of each defendant, a summary of the facts, an estimate of the damages of
Company or such Subsidiary, copies of any complaint or demand letter submitted
by Company or such Subsidiary, and such other information as Wells Fargo may
request.

 

(m)          Reports
to Shareholders.  Promptly upon distribution, access to all
financial statements, reports and proxy statements which Company shall have
sent to its Shareholders.

 

(n)           Violations
of Law.  No later than 3 days after discovery of any
violation, a Record notifying Wells Fargo of any violation by Company or any
Subsidiary of any law, rule or regulation, the non-compliance with which could materially and adversely affect the financial
condition, properties or operations of Company or any Subsidiary.

 

(o)           Pension Plans.  (i)
Promptly upon discovery, and in any event within 30 days after Company knows or
has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a Record authenticated by Company’s chief financial officer
notifying Wells Fargo of the Reportable Event in detail and the actions which
Company proposes to take to correct the deficiency, together with a copy of any
related notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly
upon discovery, and in any event within 10 days after Company or any Subsidiary
fails to make a required quarterly Pension Plan contribution under Section 412(m)
of the IRC, a Record authenticated by Company’s chief financial officer
notifying Wells Fargo of the failure in detail and the actions that Company
will take to cure the failure, together with a copy of any related notice sent
to the Pension Benefit Guaranty Corporation; and (iii) promptly upon discovery,
and in any event within 10 days after Company knows or has reason to know that
Company or any Subsidiary may be liable or may be reasonably expected to have
liability for any withdrawal, partial withdrawal, reorganization or other event
under any Multiemployer Plan under Sections 4201 or 4243 of ERISA, a Record
authenticated by Company’s chief financial officer notifying Wells Fargo of the
details of the event and the actions that Company proposes to take in response.

 

(p)           Other
Reports.  From time to time, with reasonable
promptness, all customer lists, receivables schedules, inventory reports,
collection reports, deposit records, equipment schedules, invoices to account
debtors  and such other materials, reports,
records or information as Wells Fargo may request.

 

Section 5.2             Financial Covenants.  Company agrees to comply with the
financial covenants described below, which shall be calculated using GAAP
consistently applied, except as they may be otherwise modified by the following
capitalized definitions:

 

(a)           Minimum
Year-to-Date Earnings Before Taxes.  Company shall
achieve, during each year-to-date period described below, Earnings Before Taxes
for the Consolidated Group of not less than the amount set forth for each such
year-to-date period (numbers appearing between “< >“ are negative):

 

17

 

[*
— table omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission]

 

(b)           Capital
Expenditures.  Company and its Subsidiaries shall not incur
or contract to incur Capital Expenditures of more than $2,000,000  in the aggregate for the Consolidated Group during any
fiscal year, or more than $2,000,000  in any one
transaction.

 

(c)           Minimum
Excess Borrowing Base Availability.  Company shall
maintain, at all times, a minimum Excess Borrowing Base Availability of not
less than $5,000,000.

 

Section 5.3             Other Liens and Permitted Liens.

 

(a)           Other
Liens; Permitted Liens.  Company
shall not, and shall not permit any Subsidiary to, create, incur or suffer to
exist any Lien upon any of its assets, now owned or later acquired, as security
for any indebtedness, with the exception of the following (each a “Permitted Lien”; collectively, “Permitted
Liens”):  (i) in the case of
real property, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with the business or
operations of Company or such Subsidiary as presently conducted; (ii) Liens in
existence on the date of this Agreement that are described in Exhibit F and that secure indebtedness for
borrowed money permitted under Section 5.4;
(iii) the Security Interest and Liens created by the Security Documents; and (iv)
purchase money Liens relating to the acquisition of Equipment not exceeding the
lesser of cost or fair market value of such Equipment and so long as no Default
Period is then in existence and none would exist immediately after such
acquisition.

 

(b)           Financing
Statements.  Company shall not, and shall not permit any
Subsidiary to, authorize the filing of any financing statement by any Person as
Secured Party with respect to any of the assets of Company or any Subsidiary,
other than Wells Fargo.  Company shall
not, and shall not permit any Subsidiary to, amend any financing statement
filed by Wells Fargo as Secured Party except as permitted by law.

 

Section 5.4             Indebtedness.  Company shall not, and shall not permit any
Subsidiary to, incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or letters of credit issued on behalf of
Company or any Subsidiary, or advances or any indebtedness for borrowed money
of any kind, whether or not evidenced by an instrument, except:  (a) Indebtedness described in this Agreement;
(b) indebtedness of Company described in Exhibit F; and (c) indebtedness secured by Permitted Liens.

 

Section 5.5             Guaranties.  Company shall not, and shall not permit any
Subsidiary to, assume, guarantee, endorse or otherwise become directly or
contingently liable for the obligations of any Person, except:  (a) the endorsement of negotiable instruments
by Company or any Subsidiary for deposit or collection or similar transactions
in the ordinary course of business; and (b) guaranties, endorsements and other
direct or contingent liabilities in connection with the obligations of other
Persons in existence on the date of this Agreement and described in Exhibit F.

 

18

 

Section 5.6             Investments and Subsidiaries.  Company shall
not, and shall not permit any Subsidiary to, make or permit to exist any loans
or advances to, or make any investment or acquire any interest whatsoever in,
any Person or Affiliate, including without limitation any partnership or joint
venture, nor purchase or hold beneficially any stock or other securities or
evidence of indebtedness of any Person or Affiliate, except:

 

(a)           Investments
in direct obligations of the United States of America or any of its political
subdivisions whose obligations constitute the full faith and credit obligations
of the United States of America and have a maturity of one year or less,
commercial paper issued by U.S. corporations rated “A-1” or “A-2” by Standard &
Poor’s Ratings Services or “P-1” or “P-2” by Moody’s Investors Service or
certificates of deposit or bankers’ acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having deposits in
excess of $100,000,000 (which certificates of deposit or bankers’ acceptances
are fully insured by the Federal Deposit Insurance Corporation);

 

(b)           Travel
advances or loans to Company’s Officers and employees not exceeding at any one
time an aggregate of $100,000;

 

(c)           Prepaid
rent not exceeding one month or security deposits; and

 

(d)           Current
investments in those Subsidiaries in existence on the date of this Agreement
which are identified on Exhibit D.

 

Section 5.7             Creation of New Subsidiaries; New Guarantors. 
Company shall not, and shall not permit any Subsidiary to, create a
Subsidiary, nor will it acquire any business which would constitute a
Subsidiary, without first obtaining the prior written approval of Wells
Fargo.  Upon receipt of any such prior
written approval, Company will cause each new Subsidiary to execute and deliver
to Wells Fargo a Guaranty guarantying the Indebtedness and a Security Agreement
and such other security documents as may be required by Wells Fargo, granting
Wells Fargo a security interest in all of the assets of such Subsidiary, each
in form and content acceptable to Wells Fargo.

 

Section 5.8             Dividends and Distributions.  Company shall
not declare or pay any dividends (other than dividends payable solely in stock
of Company) on any class of its stock, or make any payment on account of the
purchase, redemption or retirement of any shares of its stock, or other
securities or make any distribution regarding its stock, either directly or
indirectly.

 

Section 5.9             Salaries.  Company shall not, and shall not permit any
Subsidiary to, pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation.

 

Section 5.10           Books and Records; Collateral Examination; Inspection and Appraisals.

 

(a)           Books
and Records; Inspection.  Company shall keep, and shall
cause each Subsidiary to keep, complete and accurate books and records with
respect to its

 

19

 

assets
and its business and financial condition and any other matters that Wells Fargo
may request in accordance with GAAP, and all such books and records shall at
all times be maintained at the chief executive office of Company located at
3601 West 76th Street,
Minneapolis, Minnesota 55435.  Company
shall permit, and shall cause each Subsidiary to permit, any employee,
attorney, accountant or other agent of Wells Fargo to audit, review, make
extracts from and copy any of its books and records at any time during ordinary
business hours, and to discuss its affairs with any of its Directors, Officers,
employees or agents.

 

(b)           Authorization
to Agents of Company and Subsidiaries to Make Disclosures to Wells Fargo.  Company authorizes, and shall cause each Subsidiary
to authorize, all accountants and other Persons acting as its agent to disclose
and deliver to Wells Fargo’s employees, accountants, attorneys and other
Persons acting as its agent, at Company’s expense, all financial information,
books and records, work papers, management reports and other information in
their possession regarding Company or any Subsidiary.

 

(c)           Collateral
Exams and Inspections.  Company shall
permit, and shall cause each Subsidiary to permit, Wells Fargo’s employees,
accountants, attorneys or other Persons acting as its agent, to examine and
inspect any Collateral or any other property or assets of Company or any
Subsidiary at any time during ordinary business hours; provided, however, so
long as (i) no Event of Default exists, (ii) the sum of outstanding Advances
and the L/C Amount have been less than $3,000,000 at all times, and (iii) the
sum of Cash-on-Hand and the Excess Borrowing Base Availability has been
$8,000,000 or more at all times, then collateral exams may be performed on a
semi-annual basis.

 

(d)           Collateral
Appraisals.  Wells Fargo may also
obtain, from time to time, at Company’s expense, an appraisal of the Collateral
and of any other assets of Company or any Subsidiary by an appraiser acceptable
to Wells Fargo in its sole discretion.

 

Section 5.11           Account Verification;
Payment of Permitted Liens.

 

(a)           Account
Verification.  Wells Fargo or its
agents may (i) contact account debtors and other obligors at any time to verify
Accounts of Company or any Subsidiary; and (ii) require Company or any
Subsidiary to send requests for verification of Accounts or send notices of
assignment of Accounts to account debtors and other obligors.

 

(b)           Covenant
to Pay Permitted Liens.  Company
shall pay when due each account payable due to any Person holding a Permitted
Lien (as a result of such payable) on any Collateral.

 

Section 5.12           Compliance with Laws.

 

(a)           General
Compliance with Applicable Law; Use of Collateral.  Company shall comply, and shall cause each
Subsidiary to comply, with the requirements of applicable laws and regulations,
the non-compliance with which would materially and adversely affect its
business or its financial condition. 
Company shall use and keep, and shall cause each Subsidiary and each
other Person to use and keep the Collateral and all 

 

20

 

other
assets only for lawful purposes, without violation of any federal, state or
local law, statute or ordinance.

 

(b)           Compliance
with Federal Regulatory Laws. 
Company shall (i) prohibit, and cause each Subsidiary to prohibit, any
Person that is a Director or Officer from being listed on the Specially
Designated Nationals and Blocked Person List or other similar lists maintained
by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury or included in any Executive Orders, (ii) not permit
the proceeds of the Line of Credit or any other financial accommodation
extended by Wells Fargo to be used in any way that violates any foreign asset
control regulations of OFAC or other applicable law, (iii) comply,  and cause each Subsidiary to comply, with all applicable
Bank Secrecy Act laws and regulations, as amended from time to time, and (iv) otherwise
comply, and cause each Subsidiary to comply, with the USA Patriot Act and Wells
Fargo’s related policies and procedures.

 

(c)           Compliance
with Environmental Laws.  Company
shall (i) comply, and cause each Subsidiary to comply, with the requirements of
applicable Environmental Laws and obtain and comply with all permits, licenses
and similar approvals required by them, and (ii) not generate, use, transport,
treat, store or dispose of, and shall cause each Subsidiary to not generate,
use, transport, treat, store or dispose of, any Hazardous Substances in such a
manner as to create any material liability or obligation under the common law
of any jurisdiction or any Environmental Law.

 

Section 5.13           Payment of Taxes and Other
Claims.  Company shall pay or
discharge, when due, and shall cause each Subsidiary to pay or discharge, when
due, (a) all taxes, assessments and governmental charges levied or imposed upon
it or upon its income or profits, upon any properties belonging to it
(including without limitation the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of Company or
of any Subsidiary, although Company or such Subsidiary, as applicable, shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.

 

Section 5.14           Maintenance of Collateral
and Properties.

 

(a)           Company
shall keep and maintain, and shall cause each Subsidiary to keep and maintain,
the Collateral and all of its other properties necessary or useful in its
business in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn, defective or
broken parts, although Company or such Subsidiary, as applicable, may discontinue
the operation and maintenance of any properties if Company or such Subsidiary,
as applicable, believes that such discontinuance is desirable to the conduct of
its business and not disadvantageous in any material respect to Wells Fargo.  Company shall take, and shall cause each
Subsidiary to take, all commercially reasonable steps necessary to protect and
maintain its Intellectual Property Rights.

 

21

 

(b)           Company
shall  defend, and shall cause each Subsidiary
to defend, the Collateral and all other property against all Liens, claims and
demands of all third Persons claiming any interest in the Collateral or such
property.  Company shall keep, and shall
cause each Subsidiary to keep, all Collateral and other property free and clear
of all Liens except Permitted Liens. Company shall take, and shall cause each
Subsidiary to take, all commercially reasonable steps necessary to prosecute
any Person Infringing its Intellectual Property Rights and to defend itself
against any Person accusing it of Infringing any Person’s Intellectual Property
Rights.

 

Section 5.15           Insurance.  Company shall at all times maintain, and
shall cause each Subsidiary to maintain, insurance with insurers acceptable to
Wells Fargo, in such amounts and on such terms (including deductibles) as Wells
Fargo in its sole discretion may require and including, as applicable and
without limitation, business interruption insurance, hazard coverage on an “all
risks” basis for all tangible Collateral and other property, and theft and
physical damage coverage for Collateral consisting of motor vehicles.  All insurance policies must contain an
appropriate lender’s interest endorsement or clause, and name Wells Fargo as an
additional insured.

 

Section 5.16           Preservation of Existence.  Company shall, and shall cause each
Subsidiary to, preserve and maintain its existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business and shall conduct its business in an orderly, efficient and regular
manner.

 

Section 5.17           Delivery of Instruments,
etc.  Upon request by Wells
Fargo, Company shall, and shall cause each Subsidiary to, promptly deliver to
Wells Fargo in pledge all instruments, documents and chattel paper constituting
Collateral under this Agreement or constituting collateral under any of the
other Security Documents, endorsed or assigned by Company or such Subsidiary,
as applicable.

 

Section 5.18           Sale or Transfer of
Assets; Suspension of Business Operations.  Company shall not, and shall not permit any
Subsidiary to, sell, lease, assign, transfer or otherwise dispose of (a) the
stock of any Subsidiary, (b) all or a substantial part of its assets, or (c) any
Collateral under this Agreement or any collateral under any of the other
Security Documents or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than the sale of Inventory by
Company in the ordinary course of business and shall not liquidate, dissolve or
suspend business operations.  Company
shall not, and shall not permit any Subsidiary to, transfer any part of its
ownership interest in any Intellectual Property Rights and shall not permit its
rights as licensee of Licensed Intellectual Property to lapse, except that
Company or any Subsidiary may transfer such rights or permit them to lapse if
it has reasonably determined that such Intellectual Property Rights are no
longer useful in its business.  If Company
or any Subsidiary transfers any Intellectual Property Rights for value, Company
or such Subsidiary, as applicable, shall pay the Proceeds to Wells Fargo for
application to the Indebtedness.  Company
shall not license any other Person to use any of its Intellectual Property
Rights, except that Company may grant licenses in the ordinary course of its
business in connection with sales of Inventory or the provision of services to
its customers.

 

22

 

Section 5.19           Consolidation and Merger;
Asset Acquisitions.  Company
shall not, and shall not permit any Subsidiary to, consolidate with or merge
into any other entity, or permit any other entity to merge into it, or acquire
(in a transaction analogous in purpose or effect to a consolidation or merger)
all or substantially all of the assets of any other entity.

 

Section 5.20           Sale and Leaseback.  Company shall not,
and shall not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any other Person pursuant to which Company or such Subsidiary
will sell or transfer any real or personal property, whether owned now or
acquired in the future, and then rent or lease all or part of such property or
any other property which Company or such Subsidiary intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.

 

Section 5.21           Restrictions on Nature of
Business.  Company shall not,
and shall not permit any Subsidiary to, engage in any line of business
materially different from that presently engaged in by Company or such
Subsidiary, as applicable, and will not purchase, lease or otherwise acquire
assets not related to its business.

 

Section 5.22           Accounting.  Company shall not, and shall not permit any
Subsidiary to, adopt any material change in accounting principles except as
required by GAAP, consistently applied. 
Company shall not, and shall not permit any Subsidiary to, change its
fiscal year.

 

Section 5.23           Discounts, etc.  After notice from Wells Fargo,
Company shall not, and shall not permit any Subsidiary to, grant any discount,
credit or allowance to any customer of Company or such Subsidiary, as
applicable, or accept any return of goods sold. 
Company shall not, and shall not permit any Subsidiary to, at any time
modify, amend, subordinate, cancel or terminate any Account.

 

Section 5.24           Pension Plans.  Except as disclosed to Wells Fargo in a
Record prior to the date of this Agreement, none of Company, any Subsidiary or
any ERISA Affiliate shall (a) adopt, create, assume or become party to any
Pension Plan, (b) become obligated to contribute to any Multiemployer Plan, (c)
incur any obligation to provide post-retirement medical or insurance benefits
with respect to employees or former employees (other than benefits required by
law) or (d) amend any Plan in a manner that would materially increase its
funding obligations.

 

Section 5.25           Place of Business; Name.  Company shall not, and shall not permit any
Subsidiary to, transfer its chief executive office or principal place of
business, or move, relocate, close or sell any business Premises.  Company shall not, and shall not permit any
Subsidiary to, permit any tangible Collateral under this Agreement or
collateral under any other Security Document or any records relating thereto to
be located in any state or area in which, in the event of such location, a
financing statement covering such Collateral or such other collateral would be
required to be, but has not in fact been, filed in order to perfect the
applicable security interest.  Company
shall not, and shall not permit any Subsidiary to, change its name or
jurisdiction of organization.

 

23

 

Section 5.26           Constituent Documents; S
Corporation Status.  Company
shall not, and shall not permit any Subsidiary to, amend its Constituent
Documents.  Company shall not, and shall
not permit any Subsidiary to, become an S Corporation.

 

Section 5.27           Performance by Wells Fargo.  If Company or any Subsidiary fails to perform
or observe any of its obligations under this Agreement at any time, Wells Fargo
may, but need not, perform or observe them on behalf of Company or such
Subsidiary and may, but need not, take any other actions which Wells Fargo may
reasonably deem necessary to cure or correct this failure; and Company shall
pay Wells Fargo upon demand the amount of all costs and expenses (including
reasonable attorneys’ fees and legal expense) incurred by Wells Fargo in
performing these obligations, together with interest on these amounts at the
Default Rate.

 

Section 5.28           Wells Fargo Appointed as
Company’s Attorney in Fact. 
To facilitate Wells Fargo’s performance or observance of the obligations
of Company and/or any Subsidiary under this Agreement, Company and each
Subsidiary hereby irrevocably appoints Wells Fargo, and Wells Fargo’s agents,
as its attorney in fact (which appointment is coupled with an interest) with
the right (but not the duty) to create, prepare, complete, execute, deliver,
endorse or file on behalf of Company or such Subsidiary, as applicable, any
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and any other agreements or any Record required to
be obtained, executed, delivered or endorsed by Company or such Subsidiary in
accordance with the terms of this Agreement.

 

ARTICLE VI

EVENTS OF DEFAULT AND
REMEDIES

 

Section 6.1             Events of
Default.  An “Event of Default”
means any of the following:

 

(a)           Company
fails to pay any the amount of any Indebtedness on the date that it becomes due
and payable;

 

(b)           Company
fails to observe or perform any covenant or agreement of Company set forth in
this Agreement, or in any of the Loan Documents, or in any other document or
agreement described in or related to this Agreement or to any Indebtedness;

 

(c)           An
Overadvance arises as the result of any reduction in the Borrowing Base or
arises in any other manner or on terms not otherwise approved of in advance by
Wells Fargo in a Record that it has Authenticated;

 

(d)           An
event of default or termination event (however defined) occurs under any Rate
Hedge Agreement, derivative, foreign exchange, or similar transaction or
arrangement entered into between Company and Wells Fargo;

 

(e)           A
Change of Control shall occur;

 

(f)            Company,
any Subsidiary or any Guarantor becomes insolvent or admits in a Record an
inability to pay debts as they mature, or Company, any Subsidiary or any
Guarantor makes an assignment for the benefit of creditors; or Company, any
Subsidiary 

 

24

 

or any
Guarantor applies for or consents to the appointment of any receiver, trustee,
or similar officer for the benefit of Company, any Subsidiary or any Guarantor,
or for any of their properties; or any receiver, trustee or similar officer is
appointed without the application or consent of Company, any Subsidiary or such
Guarantor; or any judgment, writ, warrant of attachment or execution or similar
process is issued or levied against a substantial part of the property of
Company, any Subsidiary or any Guarantor;

 

(g)           Company,
any Subsidiary or any Guarantor files a petition under any chapter of the
United States Bankruptcy Code or under the laws of any other jurisdiction
naming Company, such Subsidiary or such Guarantor as debtor; or any such
petition is instituted against Company, any Subsidiary or any Guarantor; or
Company, any Subsidiary or any Guarantor institutes (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization, debt
arrangement, dissolution, liquidation or similar proceeding under the laws of
any jurisdiction; or any such proceeding is instituted (by petition,
application or otherwise) against Company, any Subsidiary or any Guarantor.

 

(h)           Any
representation or warranty made by Company in this Agreement or in any other
Loan Document or by any Guarantor in any Guaranty or in any other Loan
Document, or by Company (or any of its Officers) or any Guarantor in any
agreement, certificate, instrument or financial statement or other statement
delivered to Wells Fargo in connection with this Agreement or any other Loan
Document or in connection with such Guaranty or in any other Loan Document is
untrue or misleading in any material respect when delivered to Wells Fargo;

 

(i)            A
final, non-appealable arbitration award, judgment, or decree or order for the
payment of money in an amount in excess of $100,000 which is not insured or
subject to indemnity, is entered against Company, any Subsidiary or any
Guarantor which is not immediately stayed or appealed;

 

(j)            Company,
any Subsidiary or any Guarantor is in default with respect to any bond,
debenture, note or other evidence of material indebtedness issued by Company,
such Subsidiary or such Guarantor that is held by any third Person other than
Wells Fargo, or under any instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any material
lease or other contract, and the applicable grace period, if any, has expired,
regardless of whether such default has been waived by the holder of such
indebtedness;

 

(k)           Company,
any Subsidiary or any Guarantor liquidates, dissolves, terminates or suspends
its business operations or otherwise fails to operate its business in the
ordinary course, or merges with another Person; or sells or attempts to sell
all or substantially all of its assets;

 

(l)            Company,
any Subsidiary or any Guarantor fails to pay any indebtedness or obligation
owed to Wells Fargo which is unrelated to the Line of Credit or this Agreement
as it becomes due and payable;

 

25

 

(m)          Any
Guarantor repudiates or purports to revoke the Guarantor’s Guaranty or other
Loan Documents, or fails to perform any obligation under such Guaranty or under
such other Loan Documents, or any individual Guarantor dies or becomes
incapacitated, or any Guarantor ceases to exist for any reason;

 

(n)           An
event of default shall occur under any of the Security Documents or any other
security agreement, mortgage, deed of trust, assignment or other instrument or
agreement directly or indirectly securing any Indebtedness;

 

(o)           Company
engages in any act prohibited by any Subordination Agreement, or makes any
payment on Subordinated Debt that the Subordinated Creditor was not
contractually entitled to receive under the terms of the applicable
Subordination Agreement;

 

(p)           Any
event or circumstance occurs that Wells Fargo in good faith believes may impair
the prospect of payment of all or part of the Indebtedness, or the ability of
Company, any Subsidiary or any Guarantor to perform any of its material
obligations under any of the Loan Documents to which it is a party, or any
other document or agreement described in or related to this Agreement, or there
occurs any material adverse change in the business or financial condition of
Company, any Subsidiary or any Guarantor.

 

(q)           Any
Director, Officer or individual Guarantor is indicted for a felony offence
under state or federal law, or Company or any Subsidiary hires an Officer or
appoints a Director who has been convicted of any such felony offense.

 

(r)            Any
Reportable Event, which Wells Fargo in good faith believes to constitute
sufficient grounds for termination of any Pension Plan or for the appointment
of a trustee to administer any Pension Plan, has occurred and is continuing 30 days
after Company gives Wells Fargo a Record notifying it of the Reportable Event;
or a trustee is appointed by an appropriate court to administer any Pension
Plan; or the Pension Benefit Guaranty Corporation institutes proceedings to
terminate or appoint a trustee to administer any Pension Plan; or Company or
any ERISA Affiliate files for a distress termination of any Pension Plan under
Title IV of ERISA; or Company or any ERISA Affiliate fails to make any
quarterly Pension Plan contribution required under Section 412(m) of the IRC,
which Wells Fargo in good faith believes may, either by itself or in
combination with other failures, result in the imposition of a Lien on Company’s
assets in favor of the Pension Plan; or any withdrawal, partial withdrawal,
reorganization or other event occurs with respect to a Multiemployer Plan which
could reasonably be expected to result in a material liability by Company to
the Multiemployer Plan under Title IV of ERISA.

 

Section 6.2             Rights and
Remedies.  During any Default
Period, Wells Fargo may in its discretion exercise any or all of the following
rights and remedies:

 

26

 

(a)           Wells
Fargo may terminate the Line of Credit and decline to make Advances, and
terminate any services extended to Company under the Master Agreement for
Treasury Management Services;

 

(b)           Wells
Fargo may declare the Indebtedness to be immediately due and payable and
accelerate payment of the Revolving Note, and all Indebtedness shall
immediately become due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which Company hereby expressly
waives;

 

(c)           Wells
Fargo may, without notice to Company or any Subsidiary, apply any money owing by
Wells Fargo to Company or to any Subsidiary to payment of the Indebtedness;

 

(d)           Wells
Fargo may exercise and enforce any rights and remedies available upon default
to a secured party under the UCC, including the right to take possession of
Collateral under this Agreement or any other collateral under any of the other
Security Documents (without posting a bond or other form of security, which
Company and each Subsidiary hereby waives), to proceed with or without judicial
process (without a prior hearing or notice of hearing, which Company and each
Subsidiary hereby waives) and to sell, lease or otherwise dispose of such
Collateral and/or such other collateral for cash or on credit (with or without
giving warranties as to condition, fitness, merchantability or title to such
Collateral or to such other collateral, and in the event of a credit sale,
Indebtedness shall be reduced only to the extent that payments are actually
received), and Company will, and will cause each Subsidiary to, upon Wells
Fargo’s demand assemble such Collateral and such other collateral and make it
available to Wells Fargo at any place designated by Wells Fargo;

 

(e)           Wells
Fargo may exercise and enforce its rights and remedies under any of the Loan
Documents and any other document or agreement described in or related to this
Agreement;

 

(f)            Company
will pay Wells Fargo upon demand in immediately available funds an amount equal
to the Aggregate Face Amount plus any anticipated costs and fees for deposit to
the Special Account pursuant to Section 1.10;

 

(g)           Wells
Fargo may for any reason apply for the appointment of a receiver of Company and
its Subsidiaries or of the Collateral under this Agreement or any other
collateral under any of the other Security Documents (to which appointment Company
and each Subsidiary hereby consents) without the necessity of posting a bond or
other form of security (which Company and each Subsidiary hereby waives), and
Company agrees to execute and deliver any and all documents reasonably
requested by Wells Fargo relating to the appointment of such receiver; and

 

(h)           Wells
Fargo may exercise any other rights and remedies available to it by law or
agreement.

 

Section 6.3             Immediate
Default and Acceleration. 
Following the occurrence of an Event of Default described in Section 6.1(f) or (g), the Line of Credit shall
immediately 

 

27

 

terminate
and all of the Indebtedness shall immediately become due and payable without
presentment, demand, protest or notice of any kind.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1             No Waiver;
Cumulative Remedies.  No delay
or any single or partial exercise by Wells Fargo of any right, power or remedy
under the Loan Documents, or under any other document or agreement described in
or related to this Agreement, shall constitute a waiver of any other right,
power or remedy under the Loan Documents or granted by Company, any Subsidiary
or any Guarantor to Wells Fargo under other agreements or documents that are
unrelated to the Loan Documents.  No notice
to or demand on Company, any Subsidiary or any Guarantor in any circumstance
shall entitle Company, such Subsidiary or such Guarantor to any additional
notice or demand in any other circumstances. 
The remedies provided in the Loan Documents or in any other document or
agreement described in or related to this Agreement are cumulative and not
exclusive of any remedies provided by law. 
Wells Fargo may comply with applicable law in connection with a
disposition of Collateral under this Agreement or any other collateral under
any of the other Security Documents, and such compliance will not be considered
to adversely affect the commercial reasonableness of any sale of such
Collateral or such other collateral.

 

Section 7.2             Amendment;
Consents and Waivers; Authentication.  No amendment or modification of any Loan
Documents, or any other document or agreement described in or related to this
Agreement, or consent to or waiver of any Event of Default, or consent to or
waiver of the application of any covenant or representation set forth in any of
the Loan Documents, or any other document or agreement described in or related
to this Agreement, or any release of Wells Fargo’s Security Interest in any
Collateral under this Agreement or Wells Fargo’s security interest or Lien in
any other collateral under any of the other Security Documents, shall be
effective unless it has been agreed to by Wells Fargo and memorialized in a
Record that:  (a) specifically states
that it is intended to amend or modify specific Loan Documents, or any other
document or agreement described in or related to this Agreement, or waive any
Event of Default or the application of any covenant or representation of any
terms of specific Loan Documents, or any other document or agreement described
in or related to this Agreement, or is intended to release Wells Fargo’s
Security Interest in specific Collateral or Wells Fargo’s security interest or
Lien in any other specific collateral; and (b) is Authenticated by the
signature of an authorized employee of both parties, or by an authorized
employee of Wells Fargo with respect to a consent or waiver.  The terms of an amendment, consent or waiver
memorialized in any Record shall be effective only to the extent, and in the
specific instance, and for the limited purpose to which Wells Fargo has agreed.

 

Section 7.3             Execution in
Counterparts; Delivery of Counterparts.  This Agreement and all other Loan Documents,
or any other document or agreement described in or related to this Agreement,
and any amendment or modification to them may be Authenticated by the parties
in any number of counterparts, each of which, once authenticated and delivered
in accordance with the terms of this Section 7.3,
will be deemed an original, and all such counterparts, taken together, shall
constitute one and the same instrument. 
Delivery by fax or by encrypted e-mail or e-mail file attachment of any
counterpart to any Loan Document 

 

28

 

Authenticated
by an authorized signature will be deemed the equivalent of the delivery of the
original Authenticated instrument. 
Company shall send, and shall cause each Subsidiary to send, the
original Authenticated counterpart to Wells Fargo by first class U.S. mail or
by overnight courier, but the failure of Company or such Subsidiary to deliver
a Record in this form shall not affect the validity, enforceability, and
binding effect of this Agreement or the other Loan Documents, or any other
document or agreement described in or related to this Agreement.

 

Section 7.4             Notices,
Requests, and Communications; Confidentiality.  Except as otherwise expressly provided in
this Agreement:

 

(a)           Delivery
of Notices, Requests and Communications. 
Any notice, request, demand, or other communication by either party that
is required under the Loan Documents, or any other document or agreement
described in or related to this Agreement, to be in the form of a Record (but
excluding any Record containing information Company must report to Wells Fargo
under Section 5.1) may be delivered (i) in
person, (ii) by first class U.S. mail, (iii) by overnight courier of national
reputation, or (iv) by fax, or the Record may be sent as an Electronic Record
and delivered (v) by an encrypted e-mail, or (vi) through Wells Fargo’s CEO® portal or other secure electronic channel to which the
parties have agreed.

 

(b)           Addresses
for Delivery.  Delivery of any Record
under this Section 7.4 shall be made to
the appropriate address set forth on the last page of this Agreement (which
either party may modify by a Record sent to the other party), or through Wells
Fargo’s CEO® portal or other secure electronic
channel to which the parties have agreed.

 

(c)           Date
of Receipt.  Each
Record sent pursuant to the terms of this Section 7.4 will be deemed to have been received on (i) the date of
delivery if delivered in person, (ii) the date deposited in the mail if sent by
mail, (iii) the date delivered to the courier if sent by overnight courier, (iv)
the date of transmission if sent by fax, or (v) the date of transmission, if
sent as an Electronic Record by electronic mail or through Wells Fargo’s CEO®  portal or
similar secure electronic channel to which the parties have agreed; except
that any request for an Advance or any other notice, request, demand or other
communication from Company required under Article I, and any request for an accounting under Section 9-210 of the
UCC, will not be deemed to have been received until actual receipt by Wells
Fargo on a Business Day by an authorized employee of Wells Fargo.

 

(d)           Confidentiality
of Unencrypted E-mail.  Company
acknowledges that if it sends an Electronic Record to Wells Fargo without
encryption by e-mail or as an e-mail file attachment, there is a risk that the
Electronic Record may be received by unauthorized Persons, and that by so doing
it will be deemed to have accepted this risk and the consequences of any such
unauthorized disclosure.

 

Section 7.5             Company
Information Reporting; Confidentiality.  Except as otherwise expressly provided in
this Agreement:

 

29

 

(a)           Delivery
of Company Information Records.  Any
information that Company is required to deliver under Section 5.1 in the form of a Record may be delivered to
Wells Fargo (i) in person, or by (ii) first class U.S. mail, (iii) overnight
courier of national reputation, or (iv) fax, or the Record may be sent as an
Electronic Record (v) by encrypted e-mail, or (vi) through the file upload
service of Wells Fargo’s CEO® portal or
other secure electronic channel to which the parties have agreed.

 

(b)           Addresses
for Delivery.  Delivery of any Record
to Wells Fargo under this Section 7.5
shall be made to the appropriate address set forth on the last page of this
Agreement (which Wells Fargo may modify by a Record sent to Company), or
through Wells Fargo’s CEO® portal or
other secure electronic channel to which the parties have agreed.

 

(c)           Date
of Receipt.  Each
Record sent pursuant to this Section will be deemed to have been received on (i)
the date of delivery to an authorized employee of Wells Fargo, if delivered in
person, or by U.S. mail, overnight courier, fax, or e-mail; or (ii) the date of
transmission, if sent as an Electronic Record through Wells Fargo’s CEO®  portal or
similar secure electronic channel to which the parties have agreed.

 

(d)           Authentication
of Company Information Records. 
Company shall Authenticate any Record delivered (i) in person, or by
U.S. mail, overnight courier, or fax, by the signature of the Officer or
employee of Company who prepared the Record; (ii) as an Electronic Record sent
via encrypted e-mail, by the signature of the Officer or employee of Company
who prepared the Record by any file format signature that is acceptable to
Wells Fargo, or by a separate certification signed and sent by fax; or (iii) as
an Electronic Record via the file upload service of Wells Fargo’s CEO®  portal or
similar secure electronic channel to which the parties have agreed, through
such credentialing process as Wells Fargo and Company may agree to under the CEO®  agreement.

 

(e)           Certification
of Company Information Records.   Any Record (including without limitation any
Electronic Record) Authenticated and delivered to Wells Fargo under this Section
7.5 will be deemed to have been certified
as materially true, correct, and complete by Company and each Officer or
employee of Company who prepared and Authenticated the Record on behalf of
Company, and may be legally relied upon by Wells Fargo without regard to method
of delivery or transmission.

 

(f)            Confidentiality
of Company Information Records Sent by Unencrypted E-mail.  Company acknowledges that if it sends an
Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail
file attachment, there is a risk that the Electronic Record may be received by
unauthorized Persons, and that by so doing it will be deemed to have accepted
this risk and the consequences of any such unauthorized disclosure.  Company acknowledges that it may deliver
Electronic Records containing Company information to Wells Fargo by e-mail
pursuant to any encryption tool acceptable to Wells Fargo and Company, or
through Wells Fargo’s CEO®  portal file upload service without risk of unauthorized
disclosure.

 

30

 

Section 7.6             Further
Documents.  Company shall, and
shall cause each Subsidiary to, from time to time, execute, deliver, endorse
and authorize the filing of any instruments, documents, conveyances,
assignments, security agreements, financing statements, control agreements and
other agreements that Wells Fargo may reasonably request in order to secure,
protect, perfect or enforce Wells Fargo’s Security Interest in the Collateral
and Wells Fargo’s security interest or Lien in any other collateral under any
of the other Security Documents, or Wells Fargo’s rights under the Loan Documents,
or any other document or agreement described in or related to this Agreement
(but any failure to request or assure that Company or any Subsidiary executes,
delivers, endorses or authorizes the filing of any such item shall not affect
or impair the validity, sufficiency or enforceability of the Loan Documents, or
any other document or agreement described in or related to this Agreement, and
Wells Fargo’s Security Interest or any other security interest or Lien of Wells
Fargo, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).

 

Section 7.7             Costs and
Expenses.  Company shall pay
on demand all costs and expenses, including without limitation reasonable
attorneys’ fees and reasonable consultant’s fees, incurred by Wells Fargo in
connection with the Indebtedness, this Agreement, the Loan Documents, or any
other document or agreement described in or related to this Agreement, and the
transactions contemplated by this Agreement, including without limitation all
such costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, delivery, amendment, administration, performance,
collection and enforcement of the Indebtedness and all such documents and agreements
and the creation, perfection, protection, satisfaction, foreclosure or
enforcement of Wells Fargo’s Security Interest in the Collateral under this
Agreement and all other security interests and Liens of Wells Fargo in any
other collateral under any of the other Security Documents.  Without limiting the generality of the
foregoing, Company acknowledges and agrees that it is obligated to reimburse
Wells Fargo the full amount of any payment made by Wells Fargo pursuant to the
Lockbox and Blocked Account Agreement by and among Company, Wells Fargo and
Harris N.A. of even date herewith.

 

Section 7.8             Indemnity.  In addition to its obligation to
pay Wells Fargo’s expenses under the terms of this Agreement, Company shall
indemnify, defend and hold harmless Wells Fargo, its parent Wells Fargo &
Company, and any of its affiliates and successors, and all of their present and
future officers, directors, employees, attorneys and agents (each an “Indemnitee”) from and against any of the following
(collectively, “Indemnified Liabilities”):

 

(a)           Any
and all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan
Documents, or any other document or agreement described in or related to this
Agreement or the making of the Advances;

 

(b)           Any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Exhibit D proves to be incorrect in any respect or as a result
of any violation of the covenants contained in Section 5.12; and

 

31

 

(c)           Any
and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including without
limitation the reasonable fees and disbursements of counsel) in connection with
this Agreement and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party to such
proceedings, which may be imposed on, incurred by or asserted against any such
Indemnitee, in any manner related to or arising out of or in connection with
the making of the Advances and the Loan Documents, or any other document or
agreement described in or related to this Agreement, or the use or intended use
of the proceeds of the Advances, with the exception of any Indemnified
Liability caused by the gross negligence or willful misconduct of an
Indemnitee.

 

If any investigative, judicial or administrative
proceeding described in this Section is brought against any Indemnitee, upon
the Indemnitee’s request, Company, or counsel designated by Company and
satisfactory to the Indemnitee, will resist and defend the action, suit or
proceeding to the extent and in the manner directed by the Indemnitee, at
Company’s sole cost and expense.  Each
Indemnitee will use its best efforts to cooperate in the defense of any such
action, suit or proceeding.  If this
agreement to indemnify is held to be unenforceable because it violates any law
or public policy, Company shall nevertheless make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities to the
extent permissible under applicable law. 
Company’s obligations under this Section shall survive the termination
of this Agreement and the discharge of Company’s other obligations under this
Agreement.

 

Section 7.9             Retention of
Company’s Records.  Wells Fargo shall have no
obligation to maintain Electronic Records or retain any documents, schedules,
invoices, agings, or other Records delivered to Wells Fargo by Company, any
Subsidiary or any Guarantor in connection with the Loan Documents, or any other
document or agreement described in or related to this Agreement for more than
30 days after receipt by Wells Fargo.  If
there is a special need to retain specific Records, Company must notify Wells
Fargo of its need to retain or return such Records with particularity, which
notice must be delivered to Wells Fargo in accordance with the terms of this
Agreement at the time of the initial delivery of the Record to Wells Fargo.

 

Section 7.10           Binding Effect;
Assignment; Complete Agreement. 
The Loan Documents, or any other document or agreement described in or
related to this Agreement, shall be binding upon and inure to the benefit of
Company and its Subsidiaries and Wells Fargo and their respective successors
and assigns, except that neither Company nor any Subsidiary shall have the
right to assign its rights under this Agreement or under any other Loan
Document or any interest in this Agreement or in any other Loan Document
without Wells Fargo’s prior consent, which must be confirmed in a Record
Authenticated by Wells Fargo. To the extent permitted by law, Company and each
Subsidiary waives and will not assert against any assignee any claims, defenses
or set-offs which Company or such Subsidiary could assert against Wells Fargo.
This Agreement shall also bind all Persons who become a party to this Agreement
as a borrower.  This Agreement, together
with the Loan Documents, or any other document or agreement described in or
related to this Agreement, comprises the complete and integrated agreement of
the parties on the subject matter of this Agreement and supersedes all prior
agreements, whether oral or evidenced in a Record.  To the extent that any provision of this
Agreement contradicts other provisions of the Loan Documents other than this
Agreement, or 

 

32

 

any
other document or agreement described in or related to this Agreement, this
Agreement shall control.

 

Section 7.11           Sharing of Information.  Wells Fargo may share any Confidential
Information that it may have regarding Company, its Subsidiaries and its
Affiliates with its accountants, lawyers, and other advisors, and with each
business unit and line of business within Wells Fargo and each direct and
indirect subsidiary of Wells Fargo & Company.

 

Section 7.12           Severability of Provisions.  Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining terms of
this Agreement.

 

Section 7.13           Headings.  Section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

 

Section 7.14           Definitional Terms and Rules
of Interpretation.  All
accounting terms not otherwise defined in this Agreement shall have the
meanings given them in accordance with GAAP. 
Unless the context clearly requires otherwise, the word “or” has the
inclusive meaning represented by the phrase “and/or”.  Reference to any agreement (including without
limitation the Loan Documents), document or instrument means the agreement,
document or instrument as amended, restated or supplemented, subject to any
restrictions on amendment contained therein (and, if applicable, in accordance
with the terms of this Agreement and the other Loan Documents).  Unless otherwise specified, any reference to
a statute or regulation means that statute or regulation as amended or
supplemented from time to time, and any corresponding provisions of successor
statutes or regulations.

 

Section 7.15           Customer Identification –
USA Patriot Act Notice.  Wells
Fargo hereby notifies Company that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001)
(the “Act”), Wells Fargo is required to
obtain, verify and record certain information and documentation that identifies
Company and each Subsidiary, which information includes the name and address of
Company and each Subsidiary and such other information that will allow Wells
Fargo to identify Company and each Subsidiary in accordance with the Act.

 

Section 7.16           Governing Law; Jurisdiction,
Venue; Waiver of Jury Trial. 
The Loan Documents (other than real estate related documents, if any)
shall be governed by and construed in accordance with the substantive laws
(other than conflict laws) of the State of Minnesota.  The parties to this Agreement (a) consent to
the personal jurisdiction of the state and federal courts located in the State
of Minnesota  in connection with any
controversy related to this Agreement; (b) waive any argument that venue in any
such forum is not convenient; (c) agree that any litigation initiated by Wells
Fargo, Company or any Subsidiary in connection with this Agreement or the other
Loan Documents may be venued in either the state or federal courts located in
the City of Minneapolis, County of Hennepin,  State
of Minnesota; and (d) agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

33

 

Signature page(s) follow

 

34

 

COMPANY AND WELLS FARGO
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY
OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.

 

ANALYSTS INTERNATIONAL
CORPORATION

 

 

	
  By:

  	
   /s/ Randy Strobel

  	
   

  
	
    Name:
  Randy Strobel

  	
   

  

 

	
    Its:
  Senior Vice President, Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  WELLS
  FARGO BANK,

  	
   

  
	
    NATIONAL
  ASSOCIATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Karen J. Hagen

  	
   

  
	
    Name:
  Karen J. Hagen

  	
   

  
	
    Its: Officer

  	
   

  
				

 

Waiver

 

 

COMPANY AND WELLS FARGO have executed
this Agreement through their authorized officers as of the date set forth
above.

 

	
  WELLS FARGO BANK,

    NATIONAL ASSOCIATION

  	
   

  	
  ANALYSTS INTERNATIONAL

    CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Karen J. Hagen

  	
   

  	
  By:

  	
   /s/ Randy Strobel

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Karen J. Hagen

  	
   

  	
   

  	
  Name: Randy Strobel

  
	
   

  	
  Its: Officer

  	
   

  	
   

  	
  Its: Senior Vice President, Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Wells Fargo Bank, National Association

  	
   

  	
  Analysts International Corporation

  
	
  MAC N9312-040

  	
   

  	
  3601 West 76th Street

  
	
  109 South Seventh Street, Suite 4

  	
   

  	
  Minneapolis, MN 55435

  
	
  Minneapolis, MN 55402

  	
   

  	
  Fax: (952) 838-3175

  
	
  Fax: (612) 673-8589

  	
   

  	
  Attention: Randy Strobel

  
	
  Attention: Karen Hagen

  	
   

  	
  e-mail: rstrobel@analysts.com

  
	
  e-mail: karen.j.hagen@wellsfargo.com

  	
   

  	
   

  

 

Signature Page to Credit and
Security Agreement

 

 

Exhibit A to Credit and Security
Agreement

 

DEFINITIONS

 

“Account
Funds” is defined in Section 1.6(a).

 

“Accounts” shall have the
meaning given it under the UCC.

 

“Advance” and “Advances” means an advance or advances under the Line of
Credit.

 

“Affiliate” or “Affiliates” means any Person controlled by, controlling or
under common control with Company, including without limitation any Subsidiary
of Company.  For purposes of this definition,
“control,” when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

 

“Aggregate Face Amount” means the
aggregate amount that may then be drawn under each outstanding Letter of
Credit, assuming compliance with all conditions for drawing.

 

“Agreement” means this
Credit and Security Agreement.

 

“Authenticated” means (e) to
have signed; or (f) to have executed or to have otherwise adopted a symbol, or
have encrypted or similarly processed a Record in whole or in part, with the
present intent of the authenticating Person to identify the Person and adopt or
accept a Record.

 

“Billed Account” means an
unpaid Account of Company arising from the sale or lease of goods or the
performance of any services, net of any credits, with respect to which Company
has earned full payment and has issued an invoice to the applicable account
debtor.

 

“Borrowing
Base” is defined in Section 1.2(a).

 

“Borrowing Base Reserve” means, as of any date of determination, an amount or a percent of a
specified category or item that Wells Fargo establishes in its sole discretion
from time to time to reduce availability under the Borrowing Base (a) to
reflect events, conditions, contingencies or risks which affect the assets,
business or prospects of Company or its Subsidiaries, or the Collateral or its
value, or the enforceability, perfection or priority of Wells Fargo’s Security
Interest in the Collateral, as the term “Collateral” is defined in this
Agreement, or (b) to reflect Wells Fargo’s judgment that any collateral report
or financial information relating to Company or its Subsidiaries and furnished
to Wells Fargo may be incomplete, inaccurate or misleading in any material
respect.

 

“Business Day” means a day on which the Federal Reserve
Bank of New York is open for business and, if such day relates to a Fixed Rate
Advance, a day on which dealings are carried on in the London interbank
eurodollar market.

 

A-1

 

“Capital
Expenditures” means, for any Person for any period, any
expenditure of money during such period for the purchase or construction of
assets, or for improvements or additions to such assets, which are capitalized
on such Person’s balance sheet.

 

“Cash-on-Hand” means all
fully collected funds deposited by Company in an account at Wells Fargo.

 

“CEO®” is defined in Section
5.1(c).

 

“Change of Control” shall mean any
one or more of the following events:

 

(a)           The
purchase or other acquisition by any one Person, or more than one Person acting
as a group, of stock of the Company that, together with stock held by such
Person or group, constitutes more than 50% of the total combined value or total
combined voting power of all classes of stock issued by the Company; provided,
however, that if any one Person or more than one Person acting as a group is
considered to own more than 50% of the total combined value or total combined
voting power of such stock, the acquisition of additional stock by the same
Person or Persons shall not be considered a Change of Control;

 

(b)           Any
one Person, or more than one Person acting as a group, acquires or has acquired
during the twelve (12) month period ending on the date of the most recent
acquisition by such Person or Persons, direct or indirect beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of stock
of the Company constituting more than 50% of the total combined voting power of
all classes of stock issued by the Company;

 

(c)           A
change in the composition of the board of directors of the Company at any time
during any consecutive twelve (12) month period such that the Continuity
Directors cease for any reason to constitute at least 66 2/3% majority of the
board of directors.

 

“Collateral” means all of
Company’s Accounts, chattel paper and electronic chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments,
Intellectual Property Rights, Inventory, Investment Property, letter-of-credit
rights, letters of credit, all sums on deposit in any Collection Account, and
any items in any Lockbox; together with (a) all substitutions and replacements
for and products of such property; (b) in the case of all goods, all
accessions; (c) all accessories, attachments, parts, Equipment and repairs now
or subsequently attached or affixed to or used in connection with any goods; (d)
all warehouse receipts, bills of lading and other documents of title that cover
such goods now or in the future; (e) all collateral subject to the Lien of any
of the Security Documents; (f) any money, or other assets of Company that come
into the possession, custody, or control of Wells Fargo now or in the future; (g)
Proceeds of any of the above Collateral; (h) books and records of Company,
including without limitation all mail or e-mail addressed to Company; and (i) all
of the above Collateral, whether now owned or existing or acquired now or in
the future or in which Company has rights now or in the future.

 

A-2

 

“Collection
Account” means “Collection Account” as defined in the Master
Agreement for Treasury Management Services and related Lockbox and Collection Account
Service Description or Collection Account Service Description, whichever is
applicable.

 

“Compliance Certificate” is defined in Section
5.1(a) and is in the form of Exhibit
E.

 

“Commercial Letter of
Credit Agreement” means an agreement governing the issuance of
commercial letters of credit entered into between Company as applicant and
Wells Fargo as issuer.

 

“Company” is defined in
the Preamble.

 

“Confidential Information” means all
non-public, confidential or proprietary information of Company and/or any
Subsidiary that is disclosed to Wells Fargo prior to or during the term of this
Agreement by Company or any Subsidiary or any of its officers, employees,
agents or representatives, and includes, without limitation, any trade secrets,
research and development test results, marketing or business plans, strategies,
forecasts, budgets, projections, customer and supplier information, and any
other analyses, computations or studies prepared by or for Company or by or for
any Subsidiary.

 

“Consolidated Group” means Company
and its consolidated Subsidiaries.

 

“Constituent Documents” means with
respect to any Person, as applicable, that Person’s certificate of
incorporation, articles of incorporation, by-laws, certificate of formation,
articles of organization, limited liability company agreement, management
agreement, operating agreement, shareholder agreement, partnership agreement or
similar document or agreement governing such Person’s existence, organization
or management or concerning disposition of ownership interests of such Person
or voting rights among such Person’s owners.

 

“Continuity Directors” means those
members of the board of directors of the Company who either:

 

(a)           were
directors at the beginning of the applicable twelve (12) month period; or

 

(b)           were
elected by, or on the nomination or recommendation of, at least a two-thirds
majority of the then-existing board of directors of the Company.

 

“Copyright Security
Agreement” means each Copyright Security Agreement given by
Company or any Subsidiary of Company in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof.

 

“Daily Three Month LIBOR” means, for any day, the rate
of interest equal to LIBOR then in effect for delivery for a three (3) month
period. When interest is determined in relation to Daily Three Month LIBOR,
each change in the interest rate shall become effective each Business Day that
Wells Fargo determines that Daily Three Month LIBOR has changed.

 

A-3

 

“Debt” means of a
Person as of a given date, all items of indebtedness or liability which in
accordance with GAAP would be included in determining total liabilities as
shown on the liabilities side of a balance sheet for such Person and shall also
include the aggregate payments required to be made by such Person at any time
under any lease that is considered a capitalized lease under GAAP.

 

“Default Period” is defined in Section
1.7(b).

 

“Default Rate” is defined in Section
1.7(b).

 

“Dilution” means, as of
any date of determination, a percentage, based upon the prior twelve (12)
months, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, net credits, and any other items with
respect to the Accounts determined to be dilutive by Wells Fargo in its sole
discretion during this period, by (b) Company’s net sales during such period
(excluding extraordinary items) plus the amount of clause (a).

 

“Dilution Reserve” means, as of
any date of determination, an amount that Wells Fargo establishes in its sole
discretion from time to time to reduce availability under the Borrowing Base to
reflect a reduction in the advance rates applicable to Eligible Billed Accounts
and/or Eligible Unbilled Accounts to accomplish a two percent (2%) reduction in
such advance rates for each percentage point by which Dilution on the date of
determination is in excess of two and one-half percent (2.5%).

 

“Director” means a
director if Company is a corporation, or a governor or manager if Company is a
limited liability company.

 

“Earnings Before Taxes” means, for any
Person for any period, pretax earnings of such Person from operations during
such period, excluding extraordinary gains, but including extraordinary losses.

 

“Electronic Record” means a Record
that is created, generated, sent, communicated, received, or stored by
electronic means, but does not include any Record that is sent,
communicated, or received by fax.

 

“Eligible Billed Accounts” means all
unpaid Billed Accounts of Company, but excluding any Billed Accounts having any
of the following characteristics:

 

(a)                                  That portion of Billed Accounts unpaid 90 days or more
after the invoice date; provided, however, the foregoing period shall be 120
days for Billed Accounts with respect to which IBM is the account debtor;

 

(b)                                 That portion of Billed Accounts related to goods or
services with respect to which Company has received notice of a claim or
dispute, which are subject to a claim of offset or a contra account, or which
reflect a reasonable reserve for warranty claims or returns;

 

A-4

 

(c)                                  That portion of Billed Accounts not yet earned by the
final delivery of goods or that portion of Billed Accounts not yet earned by
the final rendition of services by Company to the account debtor, including
with respect to both goods and services and progress billings;

 

(d)                                 Billed Accounts constituting (i) Proceeds of
copyrightable material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) Proceeds of
patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office;

 

(e)                                  Billed Accounts owed by any unit of the United States
federal government or any unit of any foreign government (except that there
shall be included in Eligible Billed Accounts that portion of Billed Accounts
owed by such units of United States federal government for which Company has
provided evidence satisfactory to Wells Fargo that (i) Wells Fargo’s Security
Interest constitutes a perfected first priority Lien in such Billed Accounts,
and (ii) such Billed Accounts may be enforced by Wells Fargo directly against
such unit of the United States federal government under all applicable laws);

 

(f)                                    Billed Accounts denominated in any currency other than
United States Dollars;

 

(g)                                 Billed Accounts owed by an account debtor located
outside the United States which are not (i) backed by a bank letter of credit
naming Wells Fargo as beneficiary or assigned to Wells Fargo, in Wells Fargo’s
possession or control, and with respect to which a control agreement concerning
the letter-of-credit rights is in effect, and acceptable to Wells Fargo in all
respects, in its sole discretion, or (ii) covered by a foreign receivables
insurance policy acceptable to Wells Fargo in its sole discretion, or (iii) covered
by an Ex-Im Bank working capital guaranty acceptable to Wells Fargo in its sole
discretion;

 

(h)                                 Billed Accounts owed by an account debtor who is
insolvent or is the subject of bankruptcy proceedings or who has gone out of
business;

 

(i)                                     Billed Accounts owed by a Subsidiary, Affiliate,
Officer, Director or employee of Company;

 

(j)                                     Billed Accounts not subject to the Security Interest
or which are subject to any Lien in favor of any Person other than Wells Fargo;

 

(k)                                  That portion of Billed Accounts that has been
restructured, extended, amended or modified;

 

(l)                                     That portion of Billed Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;

 

(m)                               Billed Accounts owed by an account debtor, regardless
of whether otherwise eligible, to the extent that (i) the aggregate balance of
such Billed Accounts of 

 

A-5

 

such
account debtor exceeds 20% of the aggregate amount of all Billed Accounts, or (ii)
the aggregate balance of such Billed Accounts and the Unbilled Accounts of such
account debtor exceeds 20% of the aggregate amount of all Billed Accounts and
Unbilled Accounts;

 

(n)                                 Billed Accounts owed by an account debtor, regardless
of whether otherwise eligible, if (i) 20% or more of the total amount of Billed
Accounts of such account debtor due from such account debtor is ineligible
under clauses (a), (b) or (k) above, or (ii) 20% or more of the total amount of
Billed Accounts and Unbilled Accounts due from such account debtor is
ineligible under clauses (a), (b) or (k) above or under clauses (a), (b) or (k)
of the definition of “Eligible Unbilled Accounts”;

 

(o)                                 Billed Accounts, or portions of Billed Accounts,
otherwise deemed ineligible by Wells Fargo in its sole discretion.

 

“Eligible Unbilled
Accounts” means all unpaid Unbilled Accounts of Company, but
excluding any Unbilled Accounts having any of the following characteristics:

 

(a)                                  That portion of Unbilled Accounts which are unbilled
40 days or more after Company’s completion of the service or the date of the
sale related to such Unbilled Account;

 

(b)                                 That portion of Unbilled Accounts related to goods or
services with respect to which Company has received notice of a claim or
dispute, which are subject to a claim of offset or a contra account, or which
reflect a reasonable reserve for warranty claims or returns;

 

(c)                                  That portion of Unbilled Accounts not yet earned by
the final delivery of goods or that portion of Accounts not yet earned by the
final rendition of services by Company to the account debtor, including with
respect to both goods and services and progress billings;

 

(d)                                 Unbilled Accounts constituting (i) Proceeds of
copyrightable material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) Proceeds of
patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office;

 

(e)                                  Unbilled Accounts owed by any unit of the United
States federal government or any unit of any foreign government;

 

(f)                                    Unbilled Accounts denominated in any currency other
than United States Dollars;

 

(g)                                 Unbilled Accounts owed by an account debtor located
outside the United States;

 

(h)                                 Unbilled Accounts owed by an account debtor who is
insolvent or is the subject of bankruptcy proceedings or who has gone out of
business;

 

A-6

 

(i)                                     Unbilled Accounts owed by a Subsidiary, Affiliate,
Officer, Director or employee of Company;

 

(j)                                     Unbilled Accounts not subject to the Security Interest
or which are subject to any Lien in favor of any Person other than Wells Fargo;

 

(k)                                  That portion of Unbilled Accounts that has been
restructured, extended, amended or modified;

 

(l)                                     That portion of Unbilled Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;

 

(m)                               Unbilled Accounts owed by an account debtor,
regardless of whether otherwise eligible, to the extent that (i) the aggregate
balance of such Unbilled Accounts of such account debtor exceeds 20% of the
aggregate amount of all Unbilled Accounts, or (ii) the aggregate balance of
such Unbilled Accounts and Billed Accounts of such account debtor exceeds 20%
of the aggregate amount of all Unbilled Accounts and Billed Accounts;

 

(n)                                 Unbilled Accounts owed by an account debtor,
regardless of whether otherwise eligible if (i) 20% or more of the total amount
of Unbilled Accounts due from such account debtor is ineligible under clauses
(a), (b) or (k) above, or (ii) 20% or more of the total amount of Unbilled
Accounts and Billed Accounts due from such account debtor is ineligible under
clauses (a), (b) or (k) above or under clauses (a), (b) or (k) of the
definition of “Eligible Billed Accounts”;

 

(o)                                 Unbilled Accounts, or portion of Unbilled Accounts,
otherwise deemed ineligible by Wells Fargo in its sole discretion.

 

“Environmental Law” means any
federal, state, local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the environment.

 

“Equipment” shall have the
meaning given it under the UCC.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means any
trade or business (whether or not incorporated) that is a member of a group
which includes Company or any Subsidiary and which is treated as a single
employer under Section 414 of the IRC.

 

“Event of Default” is defined in Section
6.1.

 

“Excess Borrowing Base
Availability” means, at any date of determination, the amount by
which the Borrowing Base exceeds the sum of the outstanding Advances and the
L/C Amount.

 

A-7

 

“Fixed Rate” is defined in Section 1.7(a).

 

“Fixed Rate Interest Period” means a three (3) month
period that commences on (and includes) the Business Day on which either a
Fixed Rate Advance is made or continued or on which a Floating Rate Advance is
converted to a Fixed Rate Advance, and ending on (but excluding) the Business
Day numerically corresponding to that date three (3) months thereafter, during
which period the outstanding principal amount of the Fixed Rate Advance shall
bear interest at the Fixed Rate; provided, however, that:

 

(a)                                  If a Fixed Rate Interest Period would otherwise end on
a day which is not a Business Day, then it shall end on the next Business Day,
unless that day is the first Business Day of a month, in which case the Fixed
Rate Interest Period shall end on the last Business Day of the preceding month;

 

(b)                                 No Fixed Rate Interest Period may have a term that
extends beyond the Maturity Date; and

 

(c)                                  No Fixed Rate Interest Period may be selected if any
part of the Fixed Rate Advance must contractually be prepaid prior to the end
of the Fixed Rate Interest Period.

 

“Fixed Rate Advance” is defined in Section
1.3(a).

 

“Floating Rate” is defined in Section 1.7(a).

 

“Floating Rate Advance” is defined in Section 1.3(a).

 

“GAAP” means generally
accepted accounting principles, applied on a basis consistent with the
accounting practices applied in the financial statements described on Exhibit D.

 

“General
Intangibles” shall have the meaning given it under the UCC.

 

“Guarantor” means, as the
context may require, Analysts International Business Solution Services, LLC,
Analysts International Business Resource Services, LLC, Analysts International
Management Services, LLC, Analysts International Strategic Sourcing Services,
LLC, Medical Concepts Staffing, Inc. and any other Person now or in the future guaranteeing any Indebtedness
through the issuance of a Guaranty (and “Guarantors”
means all of foregoing collectively).

 

“Guaranty” means a
guaranty executed by a Guarantor in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof (and “Guaranties”
means all of the guaranties collectively).

 

“Hazardous Substances” means
pollutants, contaminants, hazardous substances, hazardous wastes, or petroleum,
and all other chemicals, wastes, substances and materials listed in, regulated
by or identified in any Environmental Law.

 

A-8

 

“IBM” means
International Business Machines Corp., a New York corporation.

 

“Indebtedness” is used in its
most comprehensive sense and means any debts, obligations and liabilities of
Company and/or any of its Subsidiaries to Wells Fargo, whether incurred in the
past, present or future, whether voluntary or involuntary, and however arising,
and whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and including without limitation all obligations
arising under any Rate Hedge Agreement, derivative, foreign exchange, deposit,
treasury management or similar transaction or arrangement however described or
defined that Company and/or any of its Subsidiaries may enter into at any time
with Wells Fargo, whether or not Company and/or any of its Subsidiaries may be
liable individually or jointly with others, or whether recovery upon such
Indebtedness may subsequently become unenforceable.

 

“Indemnified Liabilities” is defined in Section
7.8.

 

“Indemnitee” is defined in Section
7.8.

 

“Infringement” or “Infringing” when used with respect to
Intellectual Property Rights means any infringement or other violation of
Intellectual Property Rights.

 

“Intellectual
Property Rights” means all actual or prospective
rights arising in connection with any intellectual property or other
proprietary rights, including without limitation all rights arising in
connection with copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.

 

“Interest Payment Date” means (i) with respect to
each Floating Rate Advance, the first day of each month and (ii) with respect to each Fixed Rate Advance, the last day of the applicable Fixed Rate Interest Period; provided, however, that if a
Fixed Rate Interest Period is in
excess of one month, and is not subject to a Rate Hedge, then the Interest
Payment Date with respect to such Fixed Rate Advance shall be the first day of
each month, and (iii) with respect to Fixed Rate Interest Period subject to a Rate Hedge, the earlier of the last day of
the Fixed Rate Interest Period or the Termination Date.

 

“Inventory” shall have the
meaning given it under the UCC.

 

“Investment
Property” shall have the meaning given it under the UCC.

 

“IRC” means the
Internal Revenue Code of 1986, as amended, or any successor federal tax code,
and any reference to any statutory provision shall be deemed to be a reference
to any successor provision or provisions.

 

“L/C Amount” means the sum
of (a) the Aggregate Face Amount of any outstanding Letters of Credit, plus (b)
the amount of each Obligation of Reimbursement that either remains unreimbursed
or has not been paid through an Advance on the Line of Credit.

 

“L/C Application” means an
application for the issuance of standby or commercial Letters of Credit
pursuant to the terms of a Standby Letter of Credit Agreement or Commercial
Letter of Credit Agreement, as applicable, in form acceptable to Wells Fargo.

 

A-9

 

“Letter of Credit” and “Letters of
Credit” are each defined in Section 1.11(a).

 

“Licensed Intellectual Property” is defined in Exhibit D.

 

“LIBOR” means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8th of one
percent (1%)) determined pursuant to the following formula:

 

	
  LIBOR = 

  	
  Base LIBOR

  
	
  100% – LIBOR Reserve Percentage

  

 

(a)                                  “Base LIBOR” means the rate per annum for United
States dollar deposits quoted by Wells Fargo (i) for the purpose of calculating
the effective Floating Rate for loans that reference Daily Three Month LIBOR as
the Inter-Bank Market Offered Rate in effect from time to time for three (3) month
delivery of funds in amounts approximately equal to the principal amount of
such loans, or (ii) for the purpose of calculating the effective Fixed Rate for
loans making reference to LIBOR as the Inter-Bank Market Offered Rate on the
first day of a Fixed Rate Interest Period for delivery of funds on said date
for a period of time approximately equal to the number of days in the Fixed
Rate Interest Period and in an amount approximately equal to the principal
amount to which the Fixed Rate Interest Period applies.  Company understands and agrees that Wells
Fargo may base its quotation of the Inter-Bank Market Offered Rate upon such
offers or other market indicators of the Inter-Bank Market Offered Rate as
Wells Fargo in its discretion deems appropriate, including but not limited to
the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

 

(b)                                 “LIBOR Reserve Percentage” means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of
the Federal Reserve Board, as amended), adjusted by Wells Fargo for expected
changes in such reserve percentage during the applicable term of the Revolving
Note.

 

“Lien” means any
security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance,
title retention agreement or analogous instrument or device, including without
limitation the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or subsequently
acquired and whether arising by agreement or operation of law.

 

“Line of Credit” is defined in
the Recitals.

 

“Loan Documents” means this
Agreement, the Revolving Note, the Master Agreement for Treasury Management
Services, the Guaranties, the Subordination Agreements, if any, the Standby
Letter of Credit Agreement, the Commercial Letter of Credit Agreement,  the L/C Applications, and the Security Documents, together
with every other agreement, note, document, contract or instrument to which
Company or any Subsidiary of Company now or in the future may be a party and
which may be required by Wells Fargo.

 

A-10

 

“Loan
Manager” means the treasury management service defined in
the Master Agreement for Treasury Management Services and related Loan Manager
Service Description.

 

“Lockbox” means “Lockbox”
as defined in the Master Agreement for Treasury Management Services and related
Lockbox and Collection Account Service Description.

 

“Margin” means a rate
per annum, expressed as a percentage, as more fully defined in Section 1.7(a).

 

“Master Agreement for
Treasury Management Services” means the Master Agreement
for Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by Company.

 

“Maturity Date” means September
30, 2012.

 

“Maximum Line Amount” means $15,000,000.

 

“Multiemployer Plan” means a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which Company
or any Subsidiary of Company or any ERISA Affiliate contributes or is obligated
to contribute.

 

“Obligation of
Reimbursement” is defined in Section 1.11(b).

 

“OFAC” is defined in Section
5.12(b).

 

“Officer” means with respect to Company, an officer if
Company is a corporation, a manager if Company is a limited liability company,
or a partner if Company is a partnership.

 

“Operating
Account” is defined in Section 1.3(a), maintained in
accordance with the terms of Wells Fargo’s Commercial Account Agreement in
effect for demand deposit accounts.

 

“Overadvance”
means the amount, if any, by which the outstanding principal amount of the
Revolving Note, plus the L/C Amount, is in excess of the then-existing
Borrowing Base.

 

“Owned
Intellectual Property” is defined in Exhibit D.

 

“Patent
and Trademark Security Agreement” means each
Patent and Trademark Security Agreement given by Company or any Subsidiary of
Company in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof.

 

“Payroll Reserve”
means an amount determined by Wells Fargo in its sole discretion, based on
historical information of Company, equal to two (2) weeks of payroll and
payroll taxes of Company.

 

A-11

 

“Pension Plan” means a
pension plan (as defined in Section 3(2) of ERISA) maintained for employees of
Company or any ERISA Affiliate and covered by Title IV of ERISA.

 

“Permitted Lien” and “Permitted Liens” are defined in Section 5.3(a).

 

“Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision of a governmental entity.

 

“Plan” means an
employee benefit plan (as defined in Section 3(3) of ERISA) maintained for
employees of Company or any ERISA Affiliate.

 

“Premises” is defined in Section
2.4(a).

 

“Proceeds” shall have the
meaning given it under the UCC.

 

“Rate Hedge” means any interest rate swap or interest rate
collar agreement applicable to borrowings advanced by Wells Fargo under the
Line of Credit.

 

“Rate Hedge Agreement” is an agreement entered
into between Wells Fargo (or any of its affiliates) and Company and/or any of
its Subsidiaries for purposes of providing Company and/or any of its
Subsidiaries with a Rate Hedge.

 

“Record” means
information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Company to Wells Fargo
pursuant to Section 5.1.

 

“Reportable Event” means a
reportable event (as defined in Section 4043 of ERISA), other than an event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the Pension Benefit Guaranty Corporation.

 

“Revolving Note” is defined in Section
1.1(d).

 

“Security Agreement” means any
security agreement of any Person in favor of Wells Fargo, granting Wells Fargo
a security interest in property described therein, together with all
amendments, modifications and restatements thereof.

 

“Security Documents” means this
Agreement, the Copyright Security Agreements, the Patent and Trademark Security
Agreements, all other Security Agreements  and
any other document delivered to Wells Fargo from time to time to secure the
Indebtedness or any guaranty of the Indebtedness.

 

“Security Interest” is defined in Section
2.1.

 

“Shareholder” means with
respect to Company, each Person having legal or beneficial title to an
ownership interest in Company or a right to acquire such an interest.

 

A-12

 

“Special Account” means a
specified cash collateral account maintained with Wells Fargo or another
financial institution acceptable to Wells Fargo in connection with each undrawn
Letter of Credit issued by Wells Fargo, as more fully defined in Section 1.11.

 

“Standby Letter of Credit
Agreement” means an agreement governing the issuance of standby
letters of credit by Wells Fargo entered into between Company as applicant and
Wells Fargo as issuer.

 

“Subcontractor Payables” means, at any
date of determination, the aggregate amount of accounts payable owed by Company
to subcontractors of Company.

 

“Subordinated Creditor” means  any Person now or in the future subordinating indebtedness
of Company or any Subsidiary of Company held by that Person to the payment of
the Indebtedness pursuant to a Subordination Agreement.

 

“Subordinated Debt” means
indebtedness owed by Company that has been subordinated to Wells Fargo by a
Subordinated Creditor pursuant to a Subordination Agreement.

 

“Subordination
Agreement” means a subordination
agreement in form and content acceptable to Wells Fargo in its sole discretion,
executed by a Subordinated Creditor in favor of Wells Fargo (and “Subordination Agreements” means all of the
subordination agreements collectively).

 

“Subsidiary” means any
Person of which more than 50% of the outstanding ownership interests having
general voting power under ordinary circumstances to elect a majority of the
board of directors or the equivalent of such Person, irrespective of whether or
not at the time ownership interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

 

“Termination Date” is defined in Section
1.1(b).

 

“UCC” means the
Uniform Commercial Code in effect in the state designated in this Agreement as
the state whose laws shall govern this Agreement, or in any other state whose
laws are held to govern this Agreement or any portion of this Agreement.

 

“Unbilled Account” means an
unpaid Account of Company arising from the sale or lease of goods or the
performance of services, net of any credits, with respect to which Company has
earned full payment but has not issued an invoice to the applicable account
debtor.

 

“Unused Amount” is defined in Section
1.8(b).

 

“Wells Fargo” means Wells Fargo Bank, National Association
in its broadest and most comprehensive sense as a legal entity, and is not
limited in its meaning to the Wells Fargo Business Credit operating division,
or to any other operating division of Wells Fargo.

 

A-13

 

Exhibit B to Credit and Security Agreement

 

PREMISES

 

The Premises referred to in
the Credit and Security Agreement have an address of 3601 West 76th Street, Minneapolis, Minnesota 55435, and are
legally described as follows:

 

South Edina Development 3rd ADD, Lot 001
Block 001

 

In the event of any conflict
between the address and the legal description, the legal description shall
control.

 

B-1

 

Exhibit C to Credit and Security
Agreement

 

CONDITIONS PRECEDENT

 

Wells
Fargo’s obligation to make an initial Advance shall be subject to the condition
that Wells Fargo shall have received the following, executed and in form and
content satisfactory to Wells Fargo.  The
following descriptions are limited descriptions for reference purposes only and
should not be construed as limiting in any way the subject matter that Wells
Fargo requires each document to address.

 

A.                                    Loan Documents to be Executed by Company
and Subsidiaries:

 

(1)                                 The Revolving Note.

 

(2)                                 The Credit and Security
Agreement.

 

(3)                                 The Master Agreement for
Treasury Management Services, the Acceptance
of Services, and the related Service Description for each deposit or
treasury management related product or service that Company will subscribe to,
including without limitation the Lockbox and Collection
Account Service Description.

 

(4)                                 The Copyright Security
Agreement.

 

(5)                                 The Patent and Trademark
Security Agreement.

 

(6)                                 A Standby Letter of Credit
Agreement and a Commercial Letter of
Credit Agreement, together with a separate L/C
Application for each Letter of Credit that Company has requested
that Wells Fargo issue.

 

(7)                                 The Collateral Pledge
Agreement of Company, pursuant to which Company grants Wells Fargo a
security interest in the ownership interests in the Subsidiaries more fully
described in the Collateral Pledge Agreement, together with the stock
certificates and stock powers.

 

(8)                                 The Guaranties of Analysts
International Business Solution Services, LLC, Analysts International Business
Resource Services, LLC, Analysts International Management Services, LLC,
Analysts International Strategic Sourcing Services, LLC and of Medical Concepts Staffing, Inc.

 

(9)                                 The Security Agreements
of Analysts International Business Solution Services, LLC, Analysts International
Business Resource Services, LLC, Analysts International Management Services,
LLC, Analysts International Strategic Sourcing Services, LLC and of Medical Concepts Staffing, Inc.

 

B.                                    Loan Documents to be Executed by Third
Parties:

 

C-1

 

(1)                                 A Landlord’s Disclaimer and
Consent with respect to each lease entered into by Company or any
Subsidiary with respect to Company’s chief executive office located at 3601
West 76th Street, Minneapolis, Minnesota 55435.

 

(2)                                 Certificates of Insurance required under this Agreement, with all hazard
insurance containing a lender’s interest endorsement in Wells Fargo’s favor and
with all liability insurance naming Wells Fargo as additional insured.

 

C.                                    Documents Related to the Premises:

 

(1)                                 Copies of any lease pursuant
to which Company or any Subsidiary is leasing the Premises from a lessor.

 

D.                                    Federal Tax, State Tax, Judgment, UCC and
Intellectual Property Lien Searches:

 

(1)                                 Current searches of Company and each Subsidiary in appropriate filing offices showing
that (i) no Liens have been filed and remain in effect against the property of
Company or any Subsidiary except Permitted Liens or Liens held by Persons who
have agreed in an Authenticated Record that upon receipt of proceeds of the
initial Advance, they will satisfy, release or terminate such Liens in a manner
satisfactory to Wells Fargo, and (ii) Wells Fargo has filed all UCC financing statements necessary to perfect the Security
Interest in the Collateral under this Agreement and the security interests and
Liens in all other collateral under the other Security Documents, to the extent
the Security Interest or such other security interest or Lien is capable of
being perfected by filing.

 

E.                                    Constituent Documents:

 

(1)                                 The Certificate of Authority
of Company, which shall include as part of the Certificate or as
exhibits to the Certificate, (i) the Resolution of
Company’s Directors authorizing the execution, delivery and performance of
those Loan Documents and other documents or agreements described in or related
to this Agreement to which Company is a party, (ii) an Incumbency
Certificate containing the signatures of Company’s Officers or
agents authorized to execute and deliver those instruments, agreements and
certificates referenced in (i) above, as well as Advance requests, on Company’s
behalf, (iii) Company’s Constituent Documents,
(iv) a current Certificate of Good Standing or Certificate of Status issued by the secretary of state or
other appropriate authority for Company’s state of organization, certifying
that Company is in good standing and in compliance with all applicable
organizational requirements of the state of organization, and (v) a Secretary’s Certificate of Company’s secretary or assistant
secretary certifying that the Certificate of Authority of Company is true,
correct and complete.

 

(2)                                 The Certificate of Authority
of Corporate Guarantor for each Guarantor, which shall include as
part of the Certificate or as exhibits to the Certificate, (i) the Resolution of Guarantor’s Directors authorizing the
execution, delivery and performance of the Guaranty of Corporation, (ii) an Incumbency Certificate containing the signatures of
Guarantor’s Officers or agents authorized to execute and deliver the Guaranty by
Corporation on Guarantor’s behalf, (iii) Guarantor’s Constituent
Documents, (iv) a current Certificate of Good
Standing or Certificate of Status issued
by the secretary of 

 

C-2

 

state or other appropriate authority for Guarantor’s
state of organization, certifying that Guarantor is in good standing and in
compliance with all applicable organizational requirements of the state of
organization, and (v) a Secretary’s Certificate
of Guarantor’s secretary or assistant secretary, or equivalent Officer,
certifying that the Certificate of Authority of Corporate Guarantor and all
attached exhibits are true, correct and complete.

 

(3)                                 Current Evidence that Company and each Guarantor is licensed or
qualified to transact business in the jurisdiction where organized.

 

(4)                                 A Customer Identification
Information Form for Company and each Subsidiary and such other
forms and verification as Wells Fargo may need to comply with the U.S.A.
Patriot Act.

 

F.                                     Miscellaneous Matters or Documents:

 

(1)                                 Payment of fees due under this Agreement through the
date of initial Advance or issuance of a Letter of Credit.

 

(2)                                 Evidence that, as of September 5, 2009, and after
satisfying all obligations owed to Company’s prior lender, if any, paying all
trade payables older than 30 days from invoice date, and paying all book
overdrafts and closing costs, Cash-on-Hand and Excess Borrowing Base
Availability under the Line of Credit is not less than $13,000,000.

 

(3)                                 Such other documents and items as Wells Fargo in its
sole discretion may require.

 

C-3

 

Exhibit D to Credit and
Security Agreement

 

REPRESENTATIONS
AND WARRANTIES

 

Company represents and
warrants to Wells Fargo as follows:

 

(a)                                 Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Federal Employer Identification Number and
Organizational Identification Number.  Company and
each of its Subsidiaries is a corporation or limited liability company,
organized, validly existing and in good standing under the laws of the State of
Minnesota,  and each is licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary. 
Company and each of its Subsidiaries has all requisite power and
authority to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, those Loan Documents and
any other documents or agreements that it has entered into with Wells Fargo
related to this Agreement.  During their
existence, Company and each of its Subsidiaries has done business solely under
the names set forth below in addition to its correct legal name.  The chief executive office and principal
place of business of Company and each of its Subsidiaries is located at the
address set forth below, and all of the records of Company and each of its
Subsidiaries relating to its business or its properties are kept at that
location.  All Inventory and Equipment of
Company and each of its Subsidiaries is located at that location or at one of
the other locations set forth below.  The
name, Federal Employer Identification Number and Organization Identification
Number of Company and each of its Subsidiaries are correctly set forth below.

 

Trade Names

 

·                  AIC

·                  Analysts International

·                  Analysts International Corporation

 

Chief Executive Office / Principal Place of Business

 

3601
West 76th Street

Minneapolis, MN 55435

 

Other Inventory and Equipment Locations

 

1.              3252 University Drive, Suite
200, Auburn Hills, MI 48326

2.              3101 Technology Blvd., Lansing, MI 48910

3.              5445 DTC Parkway, Suite 320, Denver, CO 80111

4.              3169 Holcomb Bridge Road, Suite 210, Norcross, GA
30071

5.              1101 Perimeter Drive, Suites 830 and 835, Schaumburg,
IL 60173

6.              8720 Castle Creek Parkway, Suite 120, Indianapolis, IN
46250

7.              2365 Harrodsburg Road, Southcreek Park Bldg G,
Lexington, KY 40504

 

D-1

 

Other Inventory and Equipment Locations

 

8.              229 W. Main Street, Suite 203, Frankfort, KY 40601

9.              1530 Greenview Drive SW, Suite 112A, Rochester, MN
55902

10.       2345 Grand Blvd., Suite 750, Kansas City, MO 64108

11.       1065 Executive Parkway, Suite 300, St. Louis, MO 63141

12.       2200 Gateway Center Blvd., Suite 209, Morrisville, NC
27560

13.       702 N. 129th Street, Suite 123, Omaha, NE 68154

14.       99 Wood Ave. S., Suite 303, Iselin, NJ 08830

15.       Tri West Plaza, 3030 LBJ Frwy, Suite 820, Dallas, TX
75234

16.       Westpark Office Complex Bldg., 8140 N. Mopac, Suite 245,
Austin, TX 78759

17.       1177 W. Loop Building & 1177 W. Loop South, Suite 725,
Houston, TX 77027

18.       4136 Innslake Drive, Glen Allen, VA 23060

19.       600 108th Ave. NE, Suite 345, Bellevue, WA 98004

 

Name, Federal Employer Identification Number and Organization
Identification Number

 

Analysts
International Corporation

FEIN: 41-0905408

Organizational ID: NAICS 561330 / SIC 7363

 

(b)                                 Capitalization.  The
Capitalization Chart below constitutes a correct and complete list of all
ownership interests of Company and each of its Subsidiaries and all rights to
acquire ownership interests, including the record holder, number of interests
and percentage interests on a fully diluted basis, and the Organizational Chart
below shows the ownership structure of all Subsidiaries of Company.

 

Capitalization Chart

 

Publicly
traded company: NASDAQ: ANLY

 

D-2

 

 

(c)                                  Authorization of Borrowing; No Conflict as to Law or
Agreements.  The execution, delivery and performance by
Company and each of its Subsidiaries of the Loan Documents and any other
documents or agreements described in or related to this Agreement, and all
borrowing under the Line of Credit have been authorized and do not (i) require
the consent or approval of Company’s or any Subsidiary’s Shareholders; (ii) require
the authorization, consent or approval by, or registration, declaration or
filing with, or notice to, any governmental agency or instrumentality, whether
domestic or foreign, or any other Person, except to the extent obtained,
accomplished or given prior to the date of this Agreement; (iii) violate any
provision of any law, rule or regulation (including Regulation X of the Board
of Governors of the Federal Reserve System) or of any order, writ, injunction
or decree presently in effect having applicability to Company or to any
Subsidiary or of Company’s or such Subsidiary’s Constituent Documents; (iv) result
in a breach of or constitute a default or event of default under any indenture
or loan or credit agreement or any other material agreement, lease or instrument
to which Company or any Subsidiary is a party or by which it or its properties
may be bound or affected; or (v) result in, or require, the creation or
imposition of any Lien (other than the Security Interest or any other security
interest in favor of Wells Fargo) upon or with respect to any of the properties
now owned or subsequently acquired by Company or any Subsidiary.

 

(d)                                 Legal Agreements.  This
Agreement, the other Loan Documents, and any other document or agreement
described in or related to this Agreement, will constitute the legal, valid and
binding obligations of Company and each of its Subsidiaries which is a party
thereto, enforceable against Company and each of its Subsidiaries in accordance
with their respective terms.

 

(e)                                  Subsidiaries.  Except as
disclosed below, Company has no Subsidiaries.

 

D-3

 

Subsidiaries

 

Analysts
International Business Solution Services, LLC, Analysts International Business
Resource Services, LLC, Analysts International Management Services, LLC,
Analysts International Strategic Sourcing Services, LLC, Medical Concepts Staffing, Inc. and AiC
Analysts Ltd.

 

(f)                                   Financial Condition; No Adverse Change. 
Company has furnished to Wells Fargo its audited financial statements for
its fiscal year ended December 31, 2008 and unaudited financial statements for
the fiscal-year-to-date period ended July 4, 2009 and those statements fairly
present the financial condition of Company and its Subsidiaries as of those
dates and the results of Company and its Subsidiaries’ operations and cash
flows for the periods then ended and were prepared in accordance with
GAAP.  Since the date of the most recent
financial statements, there has been no material adverse change  in business, properties or condition (financial or
otherwise) of Company or its Subsidiaries.

 

(g)                                  Litigation.  There are no
actions, suits or proceedings pending or, to Company’s knowledge, threatened
against or affecting Company or any of its Subsidiaries or any of its
Affiliates or the properties of Company or any of its Subsidiaries or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to Company or any of its Subsidiaries or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of Company or any of its Subsidiaries or any of its Affiliates.

 

Litigation Matters in Excess of $100,000

 

None.

 

(h)                                 Intellectual Property Rights.

 

(i)                                     Owned Intellectual Property.  Set forth below is a complete list of all
patents, applications for patents, trademarks, applications to register
trademarks, service marks, applications to register service marks, mask works,
trade dress and copyrights for which Company or any Subsidiary is the owner of
record (the “Owned Intellectual Property”).  Except as set forth below, (A) Company or
such Subsidiary, as applicable, owns the Owned Intellectual Property free and
clear of all restrictions (including without limitation covenants not to sue
any Person), court orders, injunctions, decrees, writs or Liens, whether by
agreement memorialized in a Record Authenticated by Company or such Subsidiary,
as applicable, or otherwise, (B) no Person other than Company or such
Subsidiary, as applicable, owns or has been granted any right in the Owned
Intellectual Property, (C) all Owned Intellectual Property is valid, subsisting
and enforceable, and (D) Company or such Subsidiary, as applicable, has taken
all commercially reasonable action necessary to maintain and protect the Owned
Intellectual Property.

 

D-4

 

(ii)                                  Agreements with Employees and Contractors.  To the best of Company’s and each
Subsidiary’s knowledge, Company and each Subsidiary has entered into a legally
enforceable agreement with each Person that is an employee or subcontractor
obligating that Person to assign to Company or such Subsidiary, as applicable,
without additional compensation, any Intellectual Property Rights created,
discovered or invented by that Person in the course of that Person’s employment
or engagement with Company or such Subsidiary (except to the extent prohibited
by law), and further obligating that Person to cooperate with Company or such
Subsidiary, without additional compensation, to secure and enforce the
Intellectual Property Rights on behalf of Company or such Subsidiary, unless
the job description of the Person is such that it is not reasonably foreseeable
that the employee or subcontractor will create, discover, or invent
Intellectual Property Rights.

 

(iii)                               Intellectual Property Rights Licensed from Others.  Set forth below is a complete list
of all agreements under which Company or any Subsidiary has licensed Intellectual
Property Rights from another Person (“Licensed Intellectual
Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing
accounting, word processing and similar administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
payments Company or such Subsidiary is obligated to make with respect to
Licensed Intellectual Property.  Except
as set forth below or in any other Record, copies of which have been given to
Wells Fargo, the licenses of Company or any Subsidiary to use the Licensed
Intellectual Property are free and clear of all restrictions, Liens, court
orders, injunctions, decrees, or writs, whether agreed to in a Record
Authenticated by Company or such Subsidiary or otherwise.  Except as disclosed below, neither Company
nor any Subsidiary is contractually obligated to make royalty payments of a
material nature, or pay fees to any owner of, licensor of, or other claimant
to, any Intellectual Property Rights.

 

(iv)                              Other Intellectual Property Needed for Business.  Except for Off-the-shelf Software
and as disclosed below, the Owned Intellectual Property and the Licensed
Intellectual Property constitute all Intellectual Property Rights used or necessary
to conduct the business of Company and each Subsidiary as it is presently
conducted or as Company or such Subsidiary reasonably foresees conducting it.

 

(v)                                 Infringement. 
Except as disclosed below, neither Company nor any Subsidiary has
knowledge of, or has received notice either orally or in a Record alleging, any
Infringement of another Person’s Intellectual Property Rights (including any
claim set forth in a Record that Company or any Subsidiary must license or
refrain from using the Intellectual Property Rights of any Person) and, to the
knowledge of Company and each Subsidiary, there is not any threatened claim or
any reasonable basis for any such claim.

 

Intellectual
Property Disclosures

 

	
  MARK

  	
   

  	
  SERIAL

  NO.

  	
   

  	
  REG. NO.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
   

  	
   

  	
   

  

 

D-5

 

Intellectual
Property Disclosures

 

	
   

  	
   

  	
  80140200

  	
   

  	
  TMA493176

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  77/388,676

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  77/742,368

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  1022263

  	
   

  	
  TMA574540

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  1291240

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  379226

  	
   

  	
  618271

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  379227

  	
   

  	
  624875

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  75/629,884

  	
   

  	
  2,354,918

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  78/818,975

  	
   

  	
  3,227,276

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL CORPORATION

  	
   

  	
  801403

  	
   

  	
  TMA578633

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL CORPORATION

  	
   

  	
  74/713,939

  	
   

  	
  2,074,968

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NEW
  EQUITIES

  	
   

  	
  78/434,089

  	
   

  	
  3,047,008

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RADD

  	
   

  	
  882044

  	
   

  	
  TMA529369

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RADD

  	
   

  	
  75/459,783

  	
   

  	
  2,253,368

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SYMMETRY
  WORKFORCE SOLUTIONS

  	
   

  	
  78/954,702

  	
   

  	
  3,352,428

  

 

Licensed Intellectual
Property:  None.

 

(i)                                     Taxes.  Company, its
Subsidiaries and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them.  Company, its
Subsidiaries and its Affiliates have filed all federal, state and local tax
returns which to the knowledge of the Officers of Company, any Subsidiary or
any Affiliate, as the case may be, are required to be filed, and Company, its
Subsidiaries

 

D-6

 

and its Affiliates have
paid or caused to be paid to the respective taxing authorities all taxes as
shown on these returns or on any assessment received by any of them to the
extent such taxes have become due.

 

(j)                                    Titles and Liens. 
Company has good and absolute title to all Collateral free and clear of
all Liens other than Permitted Liens. 
Each Subsidiary has good and absolute title to all collateral granted to
Wells Fargo under any Security Document free and clear of all Liens other than
Permitted Liens.  No financing statement
naming Company or any Subsidiary as debtor is on file in any office except to
perfect only Permitted Liens.

 

(k)                                 No Defaults. 
Company and each of its Subsidiaries is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or
default of which could have a material adverse effect on the financial
condition, properties or operations of Company or such Subsidiary.

 

(l)                                     Submissions to Wells Fargo. 
All financial and other information provided to Wells Fargo by or on
behalf of Company and each Subsidiary in connection with this Agreement
(i) is true and correct in all material respects, (ii) does not
knowingly omit any material fact that would cause such information to be
misleading, and (iii) as to projections, valuations or proforma financial
statements, presents a good faith opinion as to such projections, valuations
and proforma condition and results.

 

(m)                             Financing Statements. 
Company and each Subsidiary has previously authorized the filing of
financing statements sufficient when filed to perfect the Security Interest and
other security interests and Liens created by the Security Documents.  When such financing statements are filed,
Wells Fargo will have a valid and perfected security interest in all Collateral
under this Agreement and all Collateral under the other Security Documents
which is capable of being perfected by the filing of financing statements.  None of the Collateral or any other such
collateral is or will become a fixture on real estate, unless a sufficient
fixture filing has been filed with respect thereto.

 

(n)                                 Rights to Payment. 
To the best of Company’s knowledge, each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral under this Agreement or collateral under any other
Security Document is (or, in the case of all future Collateral or other such
collateral, will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, setoff or counterclaim of the
account debtor or other obligor named in that instrument.

 

(o)                                 Employee Benefit Plans.

 

(i)                                     Maintenance and
Contributions to Plans.  Except as disclosed below, no
Company, Subsidiary or ERISA Affiliate (A) maintains or has maintained any
Pension Plan, (B) contributes or has contributed to any Multiemployer
Plan, or (C) provides or has provided post-retirement medical or insurance
benefits to employees or former employees (other than benefits required under
Section 601 of ERISA, Section 4980B of the IRC, or applicable state
law).

 

D-7

 

(ii)                                  Knowledge of Plan
Noncompliance with Applicable Law.  Except as
disclosed below, no Company, Subsidiary or ERISA Affiliate has
(A) knowledge that Company, any Subsidiary or any ERISA Affiliate is not
in full compliance with the requirements of ERISA, the IRC, or applicable state
law with respect to any Plan, (B) knowledge that a Reportable Event
occurred or continues to exist in connection with any Pension Plan, or
(C) sponsored a Plan that it intends to maintain as qualified under the
IRC that is not so qualified, and no fact or circumstance exists which may have
an adverse effect on such Plan’s tax-qualified status.

 

(iii)                               Funding Deficiencies
and Other Liabilities.  No Company, Subsidiary or
ERISA Affiliate has liability for any (A) accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the IRC) under
any Plan, whether or not waived, (B) withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan under
Section 4201 or 4243 of ERISA, or (C) event or circumstance which
could result in financial obligation to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or any
participant in connection with any Plan (other than routine claims for benefits
under the Plan).

 

Employee
Benefit Plans

 

1.              Analysts International Corporation
Savings and Investment Plan

2.              Special Executive Retirement Plan

3.              Supplemental Medicare Coverage Plan

4.              Supplemental Dental Coverage Plan

5.              Analysts International Corporation
Retiree Medical and Dental Benefit Program

 

(p)                                 Environmental Matters.

 

(i)                                     Hazardous Substances on
Premises.  Except as disclosed below, there are not
present in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any material liability or obligation for Company, any
Subsidiary or Wells Fargo under the common law of any jurisdiction or under any
Environmental Law, and no Hazardous Substances have ever been stored, buried,
spilled, leaked, discharged, emitted or released in, on or under the Premises
in such a way as to create a material liability.

 

(ii)                                  Disposal of Hazardous
Substances.  Except as disclosed below, neither Company
nor its Subsidiaries have disposed of Hazardous Substances in such a manner as
to create any material liability under any Environmental Law.

 

(iii)                               Claims and Proceedings
with Respect to Environmental Law Compliance. Except as disclosed below, there have not existed in
the past, nor are there any threatened or impending requests, claims, notices,
investigations, demands, administrative proceedings, hearings or litigation
relating in any way to the Premises, Company or any Subsidiary, alleging
material liability under, violation of, or noncompliance with any Environmental

 

D-8

 

Law or any license,
permit or other authorization issued pursuant to such an Environmental Law.

 

(iv)                              Compliance with
Environmental Law; Permits and Authorizations.  Except as
disclosed below, Company and each of its Subsidiaries (A) conducts its
business at all times in compliance with applicable Environmental Law,
(B) possesses valid licenses, permits and other authorizations required
under applicable Environmental Law for the lawful and efficient operation of
its business, none of which are scheduled to expire, or withdrawal, or material
limitation within the next 12 months, and (C) has not been denied
insurance on grounds related to potential environmental liability.

 

(v)                                 Status of Premises. 
Except as disclosed below, the Premises are not and never have been
listed on the National Priorities List, the Comprehensive Environmental
Response, Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.

 

(vi)                              Environmental Audits,
Reports, Permits and Licenses.  Company has
delivered to Wells Fargo all environmental assessments, audits, reports,
permits, licenses and other documents describing or relating in any way to the
Premises or Company’s businesses.

 

Environmental
Matters

 

None.

 

(q)                                 Regulation U. 
Neither Company nor any of its Subsidiaries is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

 

(r)                                    Investment Company and Public Utility
Holding Company Acts.  Neither Company nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended, or a
“holding company” or a “subsidiary company” of a “holding company” or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding
company”, within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

 

D-9

 

Exhibit E
to Credit and Security Agreement

 

COMPLIANCE
CERTIFICATE

 

	
  To:

  	
  Wells Fargo Bank,
  National Association

  	 

	 
	
  Date:

  	
  [                                      ,
  20        ]

  
	 
	
  Subject:

  	
  Financial Statements

  
					

 

In accordance with our
Credit and Security Agreement dated September 30, 2009  (as
amended from time to time, the “Credit Agreement”),
attached are the financial statements of Analysts International Corporation (“Company”) dated [                              ,
20        ] (the “Reporting Date”) and the year-to-date
period then ended (the “Current Financials”).  All terms used in this certificate and not
otherwise defined herein have the meanings given in the Credit Agreement.

 

A.                                    Preparation and Accuracy
of Financial Statements.  I certify that the Current
Financials have been prepared in accordance with GAAP, subject to year-end
audit adjustments, and fairly present Company’s financial condition as of the
Reporting Date.

 

B.                                    Name of Company; Merger
and Consolidation.  I certify that:

 

(Check
one)

 

o                                    Company has not, since the date of the
Credit Agreement, changed its name or jurisdiction of organization, nor has it
consolidated or merged with another Person.

 

o                                    Company has, since the date of the Credit
Agreement, either changed its name or jurisdiction of organization, or both, or
has consolidated or merged with another Person, which change, consolidation or
merger: o was consented to in advance by
Wells Fargo in an Authenticated Record, and/or o is
more fully described in the statement of facts attached to this Certificate.

 

C.                                    Events of Default.  I
certify that:

 

(Check
one)

 

o                                    I have no knowledge of the occurrence of
an Event of Default under the Credit Agreement, except as previously reported
to Wells Fargo in a Record.

 

o                                    I have knowledge of an Event of Default
under the Credit Agreement not previously reported to Wells Fargo in a Record,
as more fully described in the statement of facts attached to this Certificate,
and further, I acknowledge that Wells Fargo may under the terms of the Credit
Agreement impose the Default Rate at any time during the resulting Default
Period.

 

E-1

 

D.                                    Litigation Matters. 
I certify that:

 

(Check
one)

 

o                                    I have no knowledge of any material
adverse change to the litigation exposure of Company or any of its Affiliates
or of any Guarantor.

 

o                                    I have knowledge of material adverse
changes to the litigation exposure of Company or any of its Affiliates or of any
Guarantor not previously disclosed in Exhibit D, as more fully described
in the statement of facts attached to this Certificate.

 

E.                                    Financial
Covenants.  I further certify that:

 

(Check and complete each
of the following)

 

1.                                      Minimum Year-to-Date Earnings Before
Taxes.  Pursuant to Section 5.2(a) of the
Credit Agreement, Company’s Earnings Before Taxes for the  year-to-date  period ending on the Reporting Date, was  [$                          ],
which o  satisfies o  does not satisfy the requirement that such
amount be not less than  the
applicable year-to-date amount set forth in the table below (numbers appearing
between “< >“ are negative) on the Reporting Date:

 

[* —
table omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission]

 

2.                                      Capital Expenditures. 
Pursuant to Section 5.2(b) of the Credit Agreement, for the
year-to-date period ending on the Reporting Date, Company has expended or
contracted to expend during the  fiscal  year ended
[                              ,
200      ], for Capital Expenditures,
[$                                      ]
in the aggregate and at most
[$                              ]
in any one transaction, which o satisfies o does
not satisfy the requirement that such expenditures not exceed $2,000,000  in the aggregate and $2,000,000  for any one transaction during such year.

 

3.                                      Minimum Excess Borrowing Base
Availability.  Pursuant to Section 5.2(c) of the
Credit Agreement, the current Excess Borrowing Base Availability [$                                      ],
which o satisfies o does
not satisfy the requirement Company maintain an Excess Borrowing Base
Availability of at least $5,000,000.

 

4.                                      Salaries.  Company o is o is not in compliance with
Section 5.9 of the Credit Agreement, which requires that Company not pay
excessive or unreasonable salaries, bonuses, commissions, consultant fees or
other compensation.

 

Attached are statements
of all relevant facts and computations in reasonable detail sufficient to
evidence Company’s compliance with the financial covenants referred to above,
which computations were made in accordance with GAAP.

 

E-2

 

	
   

  	
  ANALYSTS
  INTERNATIONAL

  	 

	 
	
   

  	
  CORPORATION

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Its: Chief Financial
  Officer

  	 

						

 

E-3

 

Exhibit F
to Credit and Security Agreement

 

PERMITTED
LIENS

 

	
  Creditor

  	
   

  	
  Collateral

  	
   

  	
  Jurisdiction

  	
   

  	
  Filing
  Date

  	
   

  	
  Filing
  No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  None.

  

 

INDEBTEDNESS

 

	
  Creditor

  	
   

  	
  Current

  Principal

  Amt.

  	
   

  	
  Maturity

  Date

  	
   

  	
  Monthly

  Payment

  	
   

  	
  Collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  None.

  

 

GUARANTIES

 

	
  Primary
  Obligor

  	
   

  	
  Amount
  and Description of

  Obligation Guaranteed

  	
   

  	
  Beneficiary
  of Guaranty

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  None.

  

 

F-1

 

Exhibit G
to Credit and Security Agreement

 

REVOLVING
NOTE

 

	
  $15,000,000

  	
   

  	
  September 30,
  2009

  

 

FOR
VALUE RECEIVED,
the undersigned, ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (“Company”), hereby promises to pay to the
order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), acting through its WELLS FARGO BUSINESS CREDIT
operating division, on the Termination Date described in the Credit and
Security Agreement dated as of September 30, 2009 (as amended from time to
time, the “Credit Agreement”) and
entered into between Wells Fargo and Company, at Wells Fargo’s office at MAC
N9312-040, 109 South Seventh Street, Minneapolis, Minnesota 55402, or at any
other place designated at any time by the holder, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Fifteen Million Dollars  ($15,000,000)
or the aggregate unpaid principal amount of all Advances under the Line of
Credit made by Wells Fargo to Company under the terms of the Credit Agreement,
together with interest on the principal amount computed on the basis of actual
days elapsed in a 360-day year, from the date of this Revolving Note until this
Revolving Note is fully paid at the rate or rates from time to time in effect
under the terms of the Credit Agreement. 
Principal and interest accruing on the unpaid principal balance amount
of this Revolving Note shall be due and payable as provided in the Credit
Agreement.  This Revolving Note may be
prepaid only in accordance with the Credit Agreement.

 

This Revolving Note is
the Revolving Note referred to in the Credit Agreement, and is subject to the
terms of the Credit Agreement, which provides, among other things, for the
acceleration of this Revolving Note. 
This Revolving Note is secured, among other things, by the Credit
Agreement and the Security Documents as defined in the Credit Agreement, and by
any other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements that may subsequently be given for good and valuable
consideration as security for this Revolving Note.

 

Company shall pay all
costs of collection, including without limitation reasonable attorneys’ fees
and legal expenses, if this Revolving Note is not paid when due, whether or not
legal proceedings are commenced.

 

Presentment or other
demand for payment, notice of dishonor and protest are expressly waived.

 

	
   

  	
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  Its:

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