Document:

UEIC-12.31.2012-Ex 10.36

Exhibit 10.36

AMENDED AND RESTATED CREDIT AGREEMENT
by and between
UNIVERSAL ELECTRONICS INC.
and
U.S. BANK NATIONAL ASSOCIATION
Dated as of October 2, 2012

114821-8980-2512\9

TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS    1
Section 1.1.    Defined Terms    1
Section 1.2.    Accounting Terms and Calculations    11
Section 1.3.    Computation of Time Periods    12
Section 1.4.    Other Definitional Terms    12
ARTICLE II. TERMS OF THE CREDIT FACILITIES    12
Section 2.1.    The Revolving Loan Commitment    12
Section 2.2.    Procedure for Revolving Loans    12
Section 2.3.    The Revolving Note    13
Section 2.4.    Interest Rates; Conversions and Continuations; Etc    13
Section 2.5.    Payment of Interest and Principal on Revolving Loans    15
Section 2.6.    Prepayments    15
Section 2.7.    Letters of Credit    15
Section 2.8.    Procedures for Letters of Credit    15
Section 2.9.    Terms of Letters of Credit    16
Section 2.10.    Agreement to Repay Letter of Credit Drawings    16
Section 2.11.    Obligations Absolute    16
Section 2.12.    Outstanding Letters of Credit Following Event of Default    17
Section 2.13.    Revolving Loans to Cover Unpaid Drawings    18
Section 2.14.    Letter of Credit Fees    18
Section 2.15.    Computation    18
Section 2.16.    Payments    18
Section 2.17.    Use of Proceeds    18
Section 2.18.    Taxes    19
Section 2.19.    Effect of Existing Credit Agreement    20
Section 2.20.    Yield Protection    20
Section 2.21.    Changes in Capital Adequacy Regulations    20
ARTICLE III. CONDITIONS PRECEDENT    21
Section 3.1.    Conditions of Initial Transaction    21
Section 3.2.    Conditions Precedent to all Revolving Loans and Letters of Credit    23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES    24
Section 4.1.    Organization, Standing, Etc    24
Section 4.2.    Authorization and Validity    24
Section 4.3.    No Conflict; No Default    24
Section 4.4.    Government Consent    25
Section 4.5.    Financial Statements and Condition    25

i

Section 4.6.    Litigation    25
Section 4.7.    Environmental, Health and Safety Laws    25
Section 4.8.    ERISA    26
Section 4.9.    Federal Reserve Regulations    26
Section 4.10.    Title to Property; Leases; Liens; Subordination    26
Section 4.11.    Taxes    26
Section 4.12.    Trademarks; Patents    27
Section 4.13.    Burdensome Restrictions    27
Section 4.14.    Force Majeure    27
Section 4.15.    Investment Company Act    27
Section 4.16.    Retirement Benefits    27
Section 4.17.    Full Disclosure    27
Section 4.18.    Subsidiaries    27
Section 4.19.    Labor Matters    27
Section 4.20.    Solvency    28
ARTICLE V. AFFIRMATIVE COVENANTS    28
Section 5.1.    Financial Statements and Reports    28
Section 5.2.    Existence    30
Section 5.3.    Insurance    30
Section 5.4.    Payment of Taxes and Claims    30
Section 5.5.    Inspection    31
Section 5.6.    Maintenance of Properties    31
Section 5.7.    Books and Records    31
Section 5.8.    Compliance    31
Section 5.9.    ERISA    31
Section 5.10.    Environmental Matters; Reporting    31
Section 5.11.    Further Assurances    32
Section 5.12.    Compliance with Terms of Material Contracts    32
Section 5.13.    Maintenance of Bank Accounts    32
Section 5.14.    Additional Restricted Subsidiaries    32
ARTICLE VI. NEGATIVE COVENANTS    33
Section 6.1.    Merger    33
Section 6.2.    Disposition of Assets    33
Section 6.3.    Plans    33
Section 6.4.    Change in Nature of Business    34
Section 6.5.    Negative Pledges; Subsidiary Restrictions    34
Section 6.6.    Restricted Payments; Prepayment of Indebtedness    34
Section 6.7.    Transactions with Affiliates    34
Section 6.8.    Accounting Changes    34
Section 6.9.    Subordinated Debt    34
Section 6.10.    Investments    35

ii

Section 6.11.    Indebtedness    36
Section 6.12.    Liens    36
Section 6.13.    Contingent Liabilities    38
Section 6.14.    Consolidated Cash Flow Leverage Ratio    38
Section 6.15.    Consolidated Fixed Charge Coverage Ratio    38
Section 6.16.    Consolidated Liquidity    38
Section 6.17.    Loan Proceeds    38
Section 6.18.    Sale and Leaseback Transactions    38
Section 6.19.    Rate Protection and Foreign Currency Hedging Agreements    38
ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES    38
Section 7.1.    Events of Default    38
Section 7.2.    Remedies    40
Section 7.3.    Deposit Accounts; Offset    41
ARTICLE VIII. MISCELLANEOUS    41
Section 8.1.    Modifications    41
Section 8.2.    Expenses    41
Section 8.3.    Waivers, Etc    42
Section 8.4.    Notices    42
Section 8.5.    Taxes    42
Section 8.6.    Successors and Assigns; Participations; Purchasing Banks    42
Section 8.7.    Confidentiality of Information    44
Section 8.8.    Governing Law and Construction    44
Section 8.9.    Consent to Jurisdiction    45
Section 8.10.    Judicial Reference Agreement    45
Section 8.11.    Survival of Agreement    47
Section 8.12.    Indemnification    47
Section 8.13.    Captions    48
Section 8.14.    Entire Agreement    48
Section 8.15.    Counterparts    48
Section 8.16.    Borrower Acknowledgements    48
Section 8.17.    Interest Rate Limitation    48

iii

Exhibit 10.36
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), dated as of October 2, 2012, is by and between UNIVERSAL ELECTRONICS INC., a corporation organized under the laws of the State of Delaware (the “Borrower”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”).
RECITALS
A.    The Borrower and the Bank are parties to a Credit Agreement dated as of November 1, 2010 (the “Existing Credit Agreement”).
B.    The Borrower has requested that the Bank agree to amend and restate the Existing Credit Agreement and the Bank has agreed to do so, subject to the conditions and limitations set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Article I. 
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1.    Defined Terms.  As used in this Agreement, the following terms have the following meanings (and such meanings apply to both the singular and plural forms of the term defined, as the context requires):
“Acquisition”:  Any acquisition of the assets or Equity Interests of another Person in one or more transactions.
“Acquisition Target”:  The Person from which beneficial ownership of assets or Equity Interests of another Person is acquired in an Acquisition.
“Advance”:  Any portion of the outstanding Revolving Loans as to which one of the available interest rate options and, if pertinent, a Loan Period, is applicable.  An Advance may be a LIBOR Rate Loan or an Alternate Base Rate Loan.
“Affiliate”:  When used with reference to any Person, (a) each Person that, directly or indirectly, controls, is controlled by, or is under common control with the Person referred to, (b) each Person that beneficially owns or holds, directly or indirectly, 5% or more of any class of voting Equity Interests of the Person referred to, (c) each Person, 5% or more of the voting Equity Interests (or if such Person is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held, directly or indirectly, by the Person referred to, and (d) each of such Person’s officers, directors, joint venturers, and partners.  The term “control” (including the terms “controlled by” and 

“under common control with”) means the possession, directly, of the power to direct or cause the direction of the management and policies of the Person in question.
“Alternate Base Rate”:  For any day, a rate of interest per annum equal to the highest of (a) the Prime Rate for such day, (b) the sum of the Federal Funds Rate for such day plus 0.5% per annum and (c) the LIBOR rate determined pursuant to Section 2.4(a) for a 1 month Loan Period on such day (or if such day is not a Banking Day, the immediately preceding Banking Day) for Dollars plus 1.00% per annum.
“Alternate Base Rate Loan”:  As defined in Section 2.4 (a).
“Applicable Margin”:  means, with respect to LIBOR Rate Loans and Alternate Base Rate Loans, at any time, the percentage rate per annum which is applicable at such time with respect to LIBOR Rate Loans and Alternate Base Rate Loans as set forth in the Pricing Schedule.
“Bank”:  As defined in the opening paragraph hereof.
“Banking Day”:  Any day (other than a Saturday, Sunday, or federal or state legal holiday in the State of California) on which banks are permitted to be open in the State of California and New York City, New York.
“Board”:  The Board of Governors of the Federal Reserve System or any successor thereto.
“Borrower”:  As defined in the opening paragraph hereof.
“Capital Expenditures”:  For any period, the sum of all amounts that would, in accordance with GAAP, be included as additions to property, plant, and equipment on a consolidated statement of cash flows for the Borrower during such period, in respect of (a) the acquisition, construction, improvement, replacement, or betterment of land, buildings, machinery, equipment, or any other fixed assets or leaseholds, (b) to the extent related to and not included in (a) above, materials and contract labor (excluding expenditures properly chargeable to repairs or maintenance in accordance with GAAP), and (c) other capital expenditures and other uses recorded as capital expenditures or similar terms having substantially the same effect.
“Capitalized Lease”:  A lease of (or other agreement conveying the right to use) real or personal property with respect to which at least a portion of the rent or other amounts thereon constitutes Capitalized Lease Obligations.
“Capitalized Lease Obligations”:  As to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting 

2

Standards Board).  For purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13).
“Change of Control”:  The occurrence, after the Effective Date, of any of the following circumstances:  (a) any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Equity Interests of the Borrower representing 30% or more of the combined voting power of all Equity Interests of the Borrower entitled to vote in the election of directors; (b) during any period of up to twelve consecutive months, whether commencing before or after the Effective Date, individuals who at the beginning of such twelve-month period were directors of the Borrower ceasing for any reason to constitute a majority of the board of directors of the Borrower (other than by reason of death, disability, or scheduled retirement); or (c) any Person or two or more Persons acting in concert acquiring by contract or otherwise, or entering into a contract or arrangement that upon consummation will result in its or their acquisition of, control over Equity Interests of the Borrower representing 30% or more of the combined voting power of all Equity Interests of the Borrower entitled to vote in the election of directors.
“Charges”:  As defined in Section 8.17.
“Code”:  The Internal Revenue Code of 1986, as amended.
“Commitment”:  The Revolving Commitment.
“Consolidated Cash Flow Leverage Ratio”:  The ratio of Consolidated Total Funded Debt to Consolidated EBITDA, as measured on the last day of a fiscal quarter for the four quarters then ended.
“Consolidated Current Liabilities”:  As of any date, the consolidated current liabilities of the Borrower, determined in accordance with GAAP.
“Consolidated EBITDA”:  For any period of determination, on a consolidated basis for the Borrower and without duplication, the net income of the Borrower plus income taxes, plus Consolidated Interest Expense, plus depreciation expense, plus amortization expense, plus extraordinary losses and minus extraordinary gains, all as determined in accordance with GAAP.
“Consolidated EBITDAR”:  For any period of determination, on a consolidated basis for the Borrower and without duplication, the Consolidated EBITDA plus consolidated rent or lease expense of the Borrower, all as determined for said period in accordance with GAAP.
“Consolidated Fixed Charge Coverage Ratio”:  For any period of determination, on a consolidated basis for the Borrower and without duplication, as measured on the last 

3

day of a fiscal quarter for the four quarters then ended, (a) Consolidated EBITDAR, minus cash taxes, minus Restricted Payments paid in cash, and minus Consolidated Maintenance Capital Expenditures divided by (b) the sum of consolidated required principal payments (on short and long term debt and Capitalized Leases), plus Consolidated Interest Expense, plus rental or lease expense, all as determined for said period in accordance with GAAP.
“Consolidated Interest Expense”:  For any period of determination, on a consolidated basis for the Borrower and without duplication, the aggregate consolidated amount, without duplication, of interest paid, accrued, or scheduled to be paid in respect of any Indebtedness of the Borrower, including (a) all but the principal component of payments in respect of conditional sale contracts, Capitalized Leases, and other title retention agreements, (b) commissions, discounts, and other fees and charges with respect to letters of credit and bankers’ acceptance financings, and (c) net costs under interest rate protection agreements, in each case determined in accordance with GAAP.
“Consolidated Liquidity”:  For any period of determination, on a consolidated basis for the Borrower and without duplication, the aggregate consolidated amount, without duplication, of (a) cash and marketable securities that are liquid or readily liquid within 90 days and are acceptable to the Bank, plus (b) the amount available to be borrowed as Revolving Loans under this Agreement.
“Consolidated Maintenance Capital Expenditures”:  For any period of determination, on a consolidated basis and without duplication, 50% of the consolidated equipment depreciation expense of the Borrower, determined in accordance with GAAP.
“Consolidated Total Funded Debt”:  As of any date of determination, the consolidated principal amount of all Indebtedness of the Borrower excluding Indebtedness described in clauses (h), (j) and (k) of the definition of “Indebtedness”.
“Contingent Obligation”:  With respect to any Person at the time of any determination, without duplication, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or otherwise, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or advance or supply funds for the purchase of) any direct or indirect security therefor, (b) to purchase property, securities, Equity Interests, or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain working capital, equity capital, or other financial statement condition of the primary obligor so as to enable the primary obligor to pay such Indebtedness or otherwise to protect the owner thereof against loss in respect thereof, or (d) entered into for the purpose of assuring in any manner the owner of such Indebtedness of the payment of such Indebtedness or to protect the owner against loss in respect thereof; provided, that the term “Contingent Obligation” shall not include endorsements for collection or deposit, in each case in the ordinary course of business.

4

“Default”:  Any event that with the giving of notice (whether such notice is required under Section 7.1, under some other provision of this Agreement, or otherwise) or lapse of time, or both, would constitute an Event of Default.
“Effective Date”:  Any Banking Day on which all the conditions precedent to the Bank’s obligation to make the Revolving Loans, as set forth in Article III, have been, or, on such Effective Date, will be, satisfied.
“Equity Interests”:  All shares, interests, participations, or other equivalents, however designated, of or in a corporation or limited liability company, whether or not voting, including but not limited to common stock, member interests, warrants, preferred stock, convertible debentures, and all agreements, instruments, and documents convertible, in whole or in part, into any one or more of the foregoing.
“ERISA”:  The Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”:  Any trade or business (whether or not incorporated) that is a member of a group of which the Borrower is a member and that is treated as a single employer under § 414 of the Code.
“Event of Default”:  Any event described in Section 7.1.
“Federal Funds Rate”:  For any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions, with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Banking Day, for the next preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Banking Day, the average of the quotations the Bank receives for such day on such transactions from three Federal funds brokers of recognized standing that the Bank selects.
“Foreign Currency Hedging Agreement”:  Any foreign currency swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar hedging arrangement, between the Borrower or any Restricted Subsidiary, as the case may be, and any one or more counterparties, including the Bank, provided that such agreements are entered into by such Person in the ordinary course of its business and not for purposes of speculation.
“GAAP”:  Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, statements and pronouncements of the Financial Accounting Standards Board, or such other statements by such other entity as are approved by a significant segment of the accounting profession that are applicable to the circumstances as of any date of determination.

5

“Holding Account”:  A deposit account belonging to the Bank into which the Borrower may be required to make deposits pursuant to this Agreement, such account to be under the sole dominion and control of the Bank and not subject to withdrawal by the Borrower, with any amounts therein to be held for application as specified in Sections 2.10 and 2.13.
“Immediately Available Funds”:  Funds with good value on the day and in the city in which payment is received.
“Indebtedness”:  With respect to any Person at the time of any determination, without duplication, all obligations, contingent or otherwise, of such Person that in accordance with GAAP should be classified upon the balance sheet of such Person as liabilities, but in any event including:  (a) all obligations of such Person for borrowed money (including non-recourse obligations), (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid or accrued, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, but excluding trade payables incurred in the ordinary course of business that are not more than 90 days past due, (f) all obligations of others secured by any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Capitalized Lease Obligations of such Person, (h) all obligations of such Person in respect of interest rate swap agreements, cap or collar agreements, interest rate futures or option contracts, currency swap agreements, currency futures or option agreements, and other similar contracts, (i) all obligations of such Person, actual or contingent, as an account party in respect of letters of credit or bankers’ acceptances, (j) all obligations of any partnership or joint venture as to which such Person is or may become personally liable, (k) all obligations of such Person under any Equity Interests issued by such Person, and (l) all Contingent Obligations of such Person.  
“Indemnitee”:  As defined in Section 8.12.
“Interest Differential”:  As defined in Section 2.4(d).
“Investment”:  (a) The acquisition, purchase, making, or holding of any Equity Interests or other security, or any loan, advance, contribution to capital, or extension of credit (except for trade and customer accounts receivable for inventory sold or services rendered in the ordinary course of business and payable in accordance with customary trade terms), (b) any acquisition of real or personal property (other than real and personal property acquired in the ordinary course of business), and any purchase of or commitment or option to purchase Equity Interests, securities, or other debt of or any interest in another Person or any integral part of any business or the assets constituting such business or part thereof, and (c) the formation of, or entry into, any partnership as a limited or general partner with any other Person or the entry into any joint venture with any other Person.  The amount of any Investment shall be the original cost of such 

6

Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value or write-ups, write-downs, or write-offs with respect to such Investment.
“Letter of Credit”:  A letter of credit issued by the Bank pursuant to this Agreement for the account of the Borrower.
“Letter of Credit Fee”:  As defined in Section 2.14.
“Letter of Credit Outstandings”:  The aggregate maximum amount available to be drawn under Letters of Credit outstanding on any date of determination.
“LIBOR Rate Loan”:  As defined in Section 2.4(a).
“Lien”:  With respect to any Person, any security interest, mortgage, pledge, lien, charge, encumbrance, title retention agreement, or analogous instrument or device (including the interest of each lessor under any Capitalized Lease) in, of, or on any assets or properties of such Person, now owned or hereafter acquired, whether arising by agreement or operation of law.
“Loan”:  A Revolving Loan.
“Loan Documents”:  This Agreement, the Security Documents, and the Revolving Note.
“Loan Period”:  As defined in Section 2.4(b).
“Material Adverse Occurrence”:  Any occurrence of whatsoever nature (including, without limitation, any adverse determination in any litigation, arbitration, or governmental investigation or proceeding) that could reasonably be expected to materially and adversely affect (a) the financial condition or operations of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower or any Subsidiary to perform its obligations under any Transaction Document, or any writing executed pursuant thereto, (c) the validity or enforceability of the material obligations of the Borrower or any Subsidiary under any Transaction Document, (d) the rights and remedies of the Bank against the Borrower or any Subsidiary under any Loan Document, or (e) the timely payment of the principal of and interest on the Revolving Loans or other amounts payable by the Borrower hereunder.
“Maximum Rate”:  As defined in Section 8.17.
“Multiemployer Plan”:  A multiemployer plan, as such term is defined in § 4001(a)(3) of ERISA, that is maintained (on the Effective Date, within the five years preceding the Effective Date, or at any time after the Effective Date) for employees of the Borrower or any ERISA Affiliate.
“Note”:  The Revolving Note.

7

“Obligations”:  The Borrower’s obligations in respect of the due and punctual payment of principal and interest on the Revolving Note and Unpaid Drawings when and as due, whether by acceleration or otherwise, all fees, expenses, indemnities, reimbursements, and other obligations of the Borrower under the Loan Documents, and the Rate Protection Obligations, in all cases whether now existing or hereafter arising or incurred.
“Other Taxes”:  As defined in Section 2.18(b).
“Participants”:  As defined in Section 8.6(b).
“PBGC”:  The Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof.
“Permitted Acquisition”:  (a) Any Acquisition to which the Bank has provided written consent, and (b) any Acquisition for which the following conditions are met:
(i)no Default or Event of Default exists or will result after giving effect to any such acquisition
(ii)    such Acquisition is not “hostile” and has been approved by the Acquisition Target by action of the board of directors or other similar governing body of the Acquisition Target;
(iii)    the Acquisition Target is in a line of business the same as or similar to the electronics industry or is complementary to the line of business engaged in by the Borrower as of the Effective Date;
(iv)    after giving effect to such acquisition, the Acquisition Target shall be owned directly by the Borrower or shall become a wholly-owned Subsidiary, directly or indirectly, of the Borrower and, to the extent required under Section 5.14, becomes a Restricted Subsidiary ;
(v)    the Borrower has delivered to the Bank a pro forma Compliance Certificate, certified by the chief financial officer of the Borrower, demonstrating that both immediately before and immediately after giving effect to such acquisition, on a pro forma basis as if the Acquisition Target had been a Subsidiary of the Borrower or the acquired assets were owned by the Borrower or one of its Subsidiaries as of the date (the “Assumed Acquisition Date”) of the most recent Compliance Certificate delivered to the Bank, the Borrower would have been in compliance with all of the terms, provisions, covenants and conditions contained in this Agreement and the other Loan Documents at all times from and after the Assumed Acquisition Date, which pro forma compliance shall be demonstrated by the Borrower to Bank pursuant to such financial and other information concerning such Acquisition as the Bank may reasonably require, provided that, for purposes of meeting the requirements of this clause (v), the pro 

8

forma compliance with Section 6.16 concerning the Consolidated Cash Flow Leverage Ratio shall be 0.25 less than the ratio required under Section 6.16 as of the Assumed Acquisition Date;
(vi)    all material consents, waivers and approvals required for the consummation of such Acquisition and the efficient operation of the Acquisition Target after such consummation have been obtained; and
(vii)    after giving effect to such acquisition, the total cash or other consideration paid or payable in cash or other property (including any assumed Indebtedness) in connection with (A) such Acquisition shall not exceed $5,000,000 and (B) all such Acquisitions under this clause (b) during the term of this Agreement shall not exceed $10,000,000.
“Person”:  Any natural person, corporation, partnership, limited partnership, limited liability company, joint venture, firm, association, trust, unincorporated organization, government, governmental agency or political subdivision, or other entity, whether acting in an individual, fiduciary, or other capacity.
“Plan”:  Each employee benefit plan (whether in existence on the Effective Date or thereafter instituted), as such term is defined in § 3 of ERISA, maintained for the benefit of employees, officers, or directors of the Borrower or of any ERISA Affiliate.
“Pledge Agreement”:  The Pledge Agreement dated as of November 1, 2010, given by the UEI Hong Kong Private Limited, a company organized under the laws of Hong Kong, as pledgor, and Enson Assets Limited, a company organized under the laws of the British Virgin Islands, as issuer, in favor of the Bank, as the same may be amended, restated, or otherwise modified from time to time.
“Pricing Schedule”:  Schedule 1.1 attached hereto and identified as such.
“Prime Rate”:  The “Prime Rate” announced by the Bank as such, as and when the same may change from time to time
“Prohibited Transaction”:  As defined in § 4975 of the Code and § 406 of ERISA.
“Quarterly Payment Date”:  The first day of each January, April, July and October or, if such day is not a Business Day, the next succeeding Business Day.
“Rate Protection Agreement”:  Any interest rate swap, cap, or option agreement, or other agreement pursuant to which the Borrower hedges interest rate risk with respect to a portion of the Obligations, entered into by the Borrower with a Rate Protection Provider.
“Rate Protection Obligations”:  The liabilities, indebtedness, and obligations of the Borrower, if any, to Rate Protection Providers under Rate Protection Agreements.

9

“Rate Protection Provider”:  The Bank, or any Affiliate of the Bank, that is the counterparty of the Borrower under any Rate Protection Agreement.
“Regulatory Change”:  Any change after the Effective Date in federal, state, or foreign laws or regulations or the adoption or making after such date of any interpretations, directives, or requests applying to a class of banks including the Bank under any federal, state, or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.
“Reportable Event”:  A reportable event as defined in § 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of § 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided that a failure to meet the minimum funding standard of § 412 of the Code and § 302 of ERISA shall be a Reportable Event regardless of the issuance of any waiver in accordance with § 412(d) of the Code.
“Restricted Payments”:  With respect to the Borrower and its Subsidiaries, collectively, all dividends or other distributions of any nature (whether cash, Equity Interests other than common stock of the Borrower, assets, or otherwise), and all payments on any class of Equity Interests (including warrants, options, or rights therefor) issued by the Borrower, whether or not such Equity Interests are authorized or outstanding on the Effective Date or at any time thereafter, and any redemption or purchase of, or distribution in respect of, any of the foregoing, whether directly or indirectly.
“Restricted Subsidiary”:  (a) Universal Electronics BV, (b) Enson Assets Limited, a company incorporated under the laws of the British Virgin Islands, (c) UEI Hong Kong Private Limited, a company organized under the Laws of Hong Kong, (d) C.G. Development Limited (Hong Kong), a Hong Kong company, (e) Gemstar Technology (China) Co. Ltd., a People’s Republic of China company, (f) Gemstar Technology (Yasngzhou) Co. Ltd., a People’s Republic of China company, and (g) each other Subsidiary designated in writing by the Borrower pursuant to Section 5.14. 
“Revolving Commitment”:  The Bank’s obligation to make Revolving Loans to, and issue Letters of Credit for, the Borrower in an aggregate principal amount outstanding at any time not to exceed the Revolving Commitment Amount upon the terms and subject to the conditions and limitations of this Agreement.
“Revolving Commitment Amount”:  $55,000,000.
“Revolving Commitment Ending Date”:  November 1, 2014. 
“Revolving Loan”:  As defined in Section 2.1.

10

“Revolving Loan Date”:  The date of the making of any Revolving Loan.
“Revolving Note”:  A promissory note of the Borrower in the form of Exhibit A, evidencing the Borrower’s obligation to repay the Revolving Loans, as the same may be amended, restated, or otherwise modified from time to time.
“Security Agreement”:  The Security Agreement of even date herewith given by the Borrower in favor of the Bank, as the same may be amended, restated, or otherwise modified from time to time.
“Security Documents”:  The Security Agreement and the Pledge Agreement, and each other agreement, document or instrument providing for a Lien in favor of the Bank to secure the Obligations.
“Shares Repurchase Dutch Auction”:  The Borrower’s repurchase of its Equity Interests by inviting holders of its Equity Interests to tender up to a specified number of shares of its Equity Interests, at any price within a range provided by the Borrower. The actual purchase price to be selected is the lowest price that allows the Borrower to purchase such specified number of shares, and the Borrower pays that purchase price to all holders of its Equity Interests who tendered at or below that price. If the number of shares of Equity Interests tendered to the Borrower exceeds the number it specified, then the Borrower will purchase fewer than all shares of its Equity Interests tendered at or below the purchase price on a pro rata basis to all holders of its Equity Interests who tendered at or below the purchase price. If fewer than the specified number of shares of the Borrower’s Equity Interests are tendered, then Borrower will either cancel the invitation (provided it had been made conditional on a minimum acceptance), or it will buy back all tendered shares of its Equity Interests at the maximum price.
“Standby Letter of Credit Sublimit”:  $4,500,000.
“Subordinated Debt”:  Any Indebtedness of the Borrower, now existing or hereafter created, incurred, or arising, that is subordinated in right of payment to the payment of the Obligations in a manner and to an extent (a) that the Bank has approved in writing prior to the creation of such Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the date of this Agreement, that the Bank has approved as Subordinated Debt in a writing delivered by the Bank to the Borrower on or prior to the Effective Date.
“Subsidiary”:  Any corporation or other entity of which Equity Interests having ordinary voting power for the election of a majority of the board of directors or other Persons performing similar functions are owned by the Borrower either directly or through one or more Subsidiaries.
“Taxes”:  As defined in Section 2.18(a).

11

“Termination Date”:  The earlier of (a) the Revolving Commitment Ending Date or (b) the date on which the Revolving Commitment is terminated pursuant to Section 7.2.
“Total Revolving Outstandings”:  As of any date of determination, the sum of (a) the aggregate unpaid principal balance of Revolving Loans outstanding on such date, (b) the Letter of Credit Outstandings, and (c) the aggregate amount of Unpaid Drawings on such date.
“U.S. Taxes”:  As defined in Section 2.18(e).
“Universal Electronics BV”:  Universal Electronics, B.V., a corporation organized under the laws of the Netherlands.
“Unpaid Drawing”:  As defined in Section 2.10.
Section 1.2.    Accounting Terms and Calculations.  Except as expressly provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.  To the extent any change in GAAP affects any computation or determination required to be made pursuant to this Agreement, such computation or determination shall be made as if such change in GAAP had not occurred unless the Borrower and the Bank agree in writing on an adjustment to such computation or determination to account for such change in GAAP.
Section 1.3.    Computation of Time Periods.  In this Agreement, in the computation of a period of time from a specified date to a later specified date, unless otherwise stated the word “from” means “from and including” and the words “to” and “until” mean “to but excluding.”
Section 1.4.    Other Definitional Terms.  The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision hereof.  References to sections, exhibits, and schedules and like references are to sections, exhibits, schedules, and the like of this Agreement unless otherwise provided.  The words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.”  Unless the context otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or.”  All covenants, terms, definitions, or other provisions from other agreements incorporated by reference are incorporated into this Agreement as if fully set forth herein, and such incorporation shall include all necessary definitions and related provisions from such other agreements but only amendments thereto agreed to by the Bank, and shall survive any termination of such other agreements until the obligations of the Borrower under the Loan Documents are irrevocably paid in full, all Letters of Credit have expired without renewal or been returned to the Bank, and the Bank’s commitments to advance funds to the Borrower are terminated.
ARTICLE II.     
TERMS OF THE CREDIT FACILITIES

12

Part A—Terms of Lending
Section 2.1.    The Revolving Loan Commitment.  On the terms and subject to the conditions hereof, the Bank agrees to make available to the Borrower revolving loans (each a “Revolving Loan” and collectively the “Revolving Loans”) on a revolving basis at any time and from time to time from the Effective Date to the Termination Date, during which period the Borrower may borrow, repay, and reborrow in accordance with the provisions hereof, provided, that no Revolving Loan will be made in any amount that, after giving effect thereto, would cause the Total Revolving Outstandings to exceed the Revolving Commitment Amount.
Section 2.2.    Procedure for Revolving Loans.  Any request by the Borrower for a Revolving Loan shall be in writing or by telephone and shall be received by the Bank not later than 9:00 A.M. (Pacific Time) two Banking Days prior to the requested Revolving Loan Date if the Revolving Loan (or any portion thereof) is requested as a LIBOR Rate Loan and not later than 12:00 P.M. (Pacific Time) on the requested Revolving Loan Date if the Revolving Loan is requested as an Alternate Base Rate Loan.  Each request for a Revolving Loan hereunder shall be irrevocable and shall be deemed a representation by the Borrower that on the requested Revolving Loan Date and after giving effect to the requested Revolving Loan the applicable conditions specified in Article III have been and will be satisfied.  Each request for a Revolving Loan shall specify (i) the requested Revolving Loan Date, (ii) the amount of the Revolving Loan to be made on such date, (iii) whether such Revolving Loan is to be funded as an Alternate Base Rate Loan or a LIBOR Rate Loan (and, if such Revolving Loan is to be made with more than one applicable interest rate choice, the amount to which each interest rate choice is applicable), and (iv) in the case of a LIBOR Rate Loan, the duration of the initial Loan Period applicable thereto.  The Bank may rely on any telephone request by the Borrower for a Revolving Loan that it believes in good faith to be genuine, and the Borrower hereby waives the right to dispute the Bank’s record of the terms of such telephone request.  Unless the Bank determines that any applicable condition specified in Article III has not been satisfied, the Bank will make available to the Borrower at the Bank’s principal office in Newport Beach, California in Immediately Available Funds not later than 3:00 P.M. (Pacific Time) on the requested Revolving Loan Date the amount of the requested Revolving Loan.
Section 2.3.    The Revolving Note.  The Revolving Loans shall be evidenced by a single Revolving Note payable to the order of the Bank in a principal amount equal to the Revolving Commitment Amount.  The Bank shall enter in its ledgers and records the amount of each Advance, any conversion or continuation thereof, and the payments made thereon; provided, however, that any failure by the Bank to make any such entry or any error in making such entry shall not limit or otherwise affect the obligation of the Borrower hereunder and on the Revolving Note, and, in all events, the principal amounts owing by the Borrower in respect of the Revolving Note shall be the aggregate amount of all Revolving Loans made by the Bank less all payments of principal thereof made by the Borrower.
Section 2.4.    Interest Rates; Conversions and Continuations; Etc.
(a)    Interest Rate Options.  Interest on each Advance shall accrue at one of the following per annum rates selected by the Borrower:  (i) upon notice to the 

13

Bank, the Applicable Margin plus the Alternate Base Rate (an “Alternate Base Rate Loan”); or (ii) upon a minimum of two Banking Days’ prior notice, the Applicable Margin plus the 1, 3, 6, or 12 month LIBOR rate quoted by the Bank from Reuters Screen LIBOR01 Page or any successor thereto (which shall be the LIBOR rate in effect two Banking Days prior to commencement of the advance), adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation (a “LIBOR Rate Loan”), provided, however, that no Advance may be converted into or continued as a LIBOR Rate Loan if after giving effect to such conversion or continuation there would be more than 5 LIBOR Rate Loans outstanding.  
(b)    Conversions and Continuations.  In the event the Borrower does not timely select another interest rate option at least two Banking Days before the end of the Loan Period for a LIBOR Rate Loan, the Bank may at any time after the end of the Loan Period convert such LIBOR Rate Loan to a Alternate Base Rate Loan, but until such conversion, the funds advanced under the LIBOR Rate Loan shall continue to accrue interest at the same rate as the interest rate in effect for such LIBOR Rate Loan prior to the end of the Loan Period.  The term “Loan Period” means the period commencing on the advance date of the applicable LIBOR Rate Loan and ending on the numerically corresponding day 1, 3, 6, or 12 months thereafter matching the interest rate term selected by the Borrower; provided, that (a) if any Loan Period would otherwise end on a day that is not a Banking Day, then the Loan Period shall end on the next succeeding Banking Day unless the next succeeding Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding Banking Day; or (b) if any Loan Period begins on the last Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last Banking Day of the calendar month at the end of such Loan Period.
(c)    Limitations on LIBOR Rate Loans.  No LIBOR Rate Loan may extend beyond the Termination Date.  In any event, if the Loan Period for a LIBOR Rate Loan extends beyond the Termination Date, such LIBOR Rate Loan must be prepaid on the Termination Date.  Notwithstanding anything to the contrary, the Bank’s internal records of applicable interest rates shall be determinative absent manifest error.  Notwithstanding anything to the contrary, each LIBOR Rate Loan shall be in a minimum principal amount of $500,000.
(d)    Prepayment of LIBOR Rate Loans.  If a LIBOR Rate Loan is prepaid prior to the end of the applicable Loan Period, whether voluntarily or because prepayment is required due to the Revolving Loans maturing, acceleration of the Revolving Loans upon an Event of Default, or otherwise, the Borrower shall pay all of the Bank’s costs, expenses, and Interest Differential (as determined by the Bank) incurred as a result of such prepayment.  The term “Interest Differential” means the greater of zero and the financial loss incurred by 

14

the Bank resulting from prepayment, calculated as the difference between the amount of interest the Bank would have earned (from like investments in the Money Markets as of the first day of the LIBOR Rate Loan) had prepayment not occurred and the interest the Bank will actually earn (from like investments in the Money Markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment.  Because of the short-term nature of the Revolving Loan credit facilities, the Borrower agrees that the Interest Differential shall not be discounted to its present value.  Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such LIBOR Rate Loan.  The term “Money Markets” refers to one or more wholesale funding markets available to and selected by the Bank, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate and swaps, or others.
(e)    Interest Upon Event of Default.  Upon any Event of Default, each Revolving Loan shall, at the option of the Bank (or, in the case of an Event of Default under Sections 7.1(e), (f), or (g), automatically upon such Event of Default), bear interest until paid in full at the rate otherwise applicable thereto plus 3.0% per annum.  Further, notwithstanding anything to the contrary in this Agreement, upon any Event of Default, at the Bank’s option (or, in the case of an Event of Default under Sections 7.1(e), (f), or (g), automatically upon such Event of Default), no Advance may be made, converted, or continued as a LIBOR Rate Loan.
Section 2.5.    Payment of Interest and Principal on Revolving Loans.  Interest and principal on the Revolving Loans shall be paid as follows:
(a)    Interest accrued on Alternate Base Rate Loans shall be payable (A) on each Quarterly Payment Date, and (B) on the Termination Date; provided that interest under Section 2.4(e) shall be payable on demand.  Interest accrued on each LIBOR Rate Loan shall be payable on the last day of its applicable Loan Period, on any date on which a LIBOR Rate Loan is prepaid, whether by acceleration or otherwise, and on the Termination Date.  Interest accrued on LIBOR Rate Loan having a Loan Period longer than 3 months shall also be payable on the last day of each 3-month interval during such Loan Period.
(b)    Principal on the Revolving Loans is payable on the Termination Date.
(c)    The Bank is hereby authorized by the Borrower to charge on any day the depository accounts of the Borrower maintained with the Bank for any amount of accrued and unpaid interest or principal which is due and owing, unless such amount is being disputed in good faith in writing by the Borrower.
Section 2.6.    Prepayments.

15

(a)    Optional Prepayments.  The Borrower may prepay Alternate Base Rate Loans, in whole or in part, at any time, without premium or penalty.  Each partial prepayment shall be in a minimum amount of $500,000 or an integral multiple thereof.  The Borrower may prepay LIBOR Rate Loans only if it pays any indemnities payable with respect thereto pursuant to Section 2.4(d).  
(b)    Reborrowing of Amounts Prepaid.  Amounts paid (unless following an acceleration or upon termination of the Revolving Commitment in whole) or prepaid on Revolving Loans under this Section may be reborrowed upon the terms and subject to the conditions and limitations of this Agreement.
Part B—Terms of the Letter of Credit Facility
Section 2.7.    Letters of Credit.  Upon the terms and subject to the conditions of this Agreement, the Bank agrees to issue commercial and standby Letters of Credit for the account of the Borrower from time to time between the Effective Date and the Termination Date in such amounts as the Borrower requests up to an aggregate amount at any time outstanding not exceeding the Revolving Commitment Amount; provided that no Letter of Credit will be issued in any amount that, after giving effect to such issuance, would cause (a) the Total Revolving Outstandings to exceed the Revolving Commitment Amount or (b) the Letter of Credit Outstandings with respect to standby Letters of Credit to exceed the Standby Letter of Credit Sublimit.
Section 2.8.    Procedures for Letters of Credit.  The Borrower shall make each request for a Letter of Credit in writing by facsimile transmission, or electronic conveyance received by the Bank by 12:00 P.M. (Pacific Time) on a Banking Day that is not less than three Banking Days before the requested date of issuance (which shall also be a Banking Day).  Each request for a Letter of Credit shall be deemed a representation by the Borrower that on the date of issuance of such Letter of Credit and after giving effect thereto the applicable conditions specified in Article III have been and will be satisfied.  The Bank may require that such request be made on such letter of credit application and reimbursement agreement form as the Bank from time to time specifies, along with satisfactory evidence of the authority and incumbency of the officials of the Borrower making such request.
Section 2.9.    Terms of Letters of Credit.  Letters of Credit shall be issued in support of obligations of the Borrower or any Subsidiary, contingent or otherwise, and to finance the working capital and business needs of the Borrower or any Subsidiary.  All Letters of Credit must expire not later than the Banking Day preceding the Revolving Commitment Ending Date.  No standby Letter of Credit may have a term longer than 12 months.
Section 2.10.    Agreement to Repay Letter of Credit Drawings.  If the Bank has received documents purporting to draw under a Letter of Credit that the Bank believes conform to the requirements of such Letter of Credit, or if the Bank has decided that it will comply with the Borrower’s written or oral request or authorization to pay a drawing on any Letter of Credit that the Bank does not believe conforms to the requirements of the Letter of Credit, it will notify the Borrower of that fact.  The Borrower shall reimburse the Bank by 10:00 A.M. (Pacific Time) on 

16

the day on which such drawing is to be paid in Immediately Available Funds in an amount equal to the amount of such drawing.  Any amount by which the Borrower has failed to reimburse the Bank for the full amount of such drawing by 10:00 A.M. (Pacific Time) on the date on which the Bank in its notice indicated that it would pay such drawing, until reimbursed by the Borrower from the proceeds of Revolving Loans pursuant to Section 2.13 or out of funds available in the Holding Account, is an “Unpaid Drawing.”  Unpaid Drawings shall bear interest at a rate equal to the sum of (a) the Applicable Margin for Alternate Base Rate Loans plus (b) the Alternate Base Rate plus (c) 5.0% per annum.  Such interest shall be payable on demand.
Section 2.11.    Obligations Absolute.  The Borrower’s obligation under Section 2.10 to repay the Bank for any amount drawn on any Letter of Credit and for any Revolving Loans made under Section 2.13 to cover Unpaid Drawings shall be absolute, unconditional, and irrevocable, shall continue so long as any Letter of Credit is outstanding notwithstanding any termination of this Agreement, and shall be paid strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances:
(a)    Any lack of validity or enforceability of any Letter of Credit;
(b)    The existence of any claim, setoff, defense, or other right that the Borrower has or claims at any time against any beneficiary, transferee, or holder of any Letter of Credit (or any Person for whom any such beneficiary, transferee, or holder is acting), the Bank, or any other Person, whether in connection with a Letter of Credit, this Agreement, the transactions contemplated hereby, or any unrelated transaction; or
(c)    Any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever.
Neither the Bank nor its officers, directors, or employees shall be liable or responsible for, and the obligations of the Borrower to the Bank shall not be impaired by:
(a)    The use made of any Letter of Credit or any acts or omissions of any beneficiary, transferee, or holder thereof in connection therewith;
(b)    The validity, sufficiency, or genuineness of documents, or of any endorsements thereon, even if such documents or endorsements in fact prove to be in any or all respects invalid, insufficient, fraudulent, or forged;
(c)    The Bank’s acceptance of documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; or
(d)    Any other action of the Bank in making or failing to make payment under any Letter of Credit if in good faith and in conformity with U.S. or foreign laws, regulations, or customs applicable thereto.

17

Notwithstanding the foregoing, the Borrower shall have a claim against the Bank, and the Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower that the Borrower proves were caused by the Bank’s willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms thereof.
Section 2.12.    Outstanding Letters of Credit Following Event of Default.  Upon a Default or Event of Default, the Borrower shall either (a) replace all outstanding Letters of Credit with letters of credit issued by another issuer acceptable to the respective beneficiaries of such Letters of Credit (whereupon such Letters of Credit shall be canceled), or (b) provide the Bank, as security for all outstanding Letters of Credit, with a cash collateral deposit in an amount that equals at least 110% of the Letter of Credit Outstandings at all times during the continuance of such Default or Event of Default.  The Borrower hereby grants to the Bank a security interest in such cash collateral to secure all Obligations.  The Bank will apply such cash collateral to the payment of drafts drawn under such Letters of Credit and customary costs and expenses charged or incurred by the Bank in connection therewith, and apply the unused portion thereof after all such Letters of Credit have expired or been fully drawn upon, if any, to repay other Obligations.  After all such Letters of Credit have expired or been fully drawn upon, all Obligations have been paid in full in cash, and the Bank’s obligations hereunder have terminated, the balance, if any, of such cash collateral shall be returned to the Borrower.  The Borrower shall execute and deliver to the Bank such further documents and instruments as the Bank requests to evidence the creation and perfection of the security interest in such cash collateral account.
Part C—General
Section 2.13.    Revolving Loans to Cover Unpaid Drawings.  Whenever any Unpaid Drawing exists and there are not then funds in the Holding Account to cover the same, the Bank is authorized (and the Borrower does here so authorize the Bank) to, and shall, make a Revolving Loan (as an Alternate Base Rate Loan) to the Borrower in an amount equal to the amount of the Unpaid Drawing.  The Bank shall apply the proceeds of such Revolving Loan directly to reimburse itself for such Unpaid Drawing.  If at the time the Bank makes a Revolving Loan pursuant to this Section, the applicable conditions precedent specified in Article III have not been satisfied, the Borrower shall pay to the Bank interest on the funds so advanced at a floating rate per annum equal to the sum of (a) the Applicable Margin for Alternate Base Rate Loans plus (b) the Alternate Base Rate plus (c) 5.0% per annum.
Section 2.14.    Letter of Credit Fees.  For each Letter of Credit issued, the Borrower shall pay to the Bank a fee (a “Letter of Credit Fee”) equal to (a) in the case of each standby Letter of Credit, at all times such Letter of Credit is outstanding, an amount determined by multiplying 2.0 % by the original face amount of each such Letter of Credit determined on a per annum basis, payable quarterly in arrears on each Quarterly Payment Date, and (b) in the case of commercial Letters of Credit, the Bank’s standard fees as set forth on the Bank’s Commercial Letter of Credit Fee Schedule, as updated from time to time.  In addition to the Letter of Credit Fees, the Borrower shall pay to the Bank, on demand, all issuance, amendment, drawing, and other fees regularly charged by the Bank to its letter of credit customers and all reasonable out-of-pocket 

18

expenses the Bank incurs in connection with the issuance, amendment, administration, or payment of any Letter of Credit.
Section 2.15.    Computation.  Letter of Credit Fees and interest on Obligations shall be computed on the basis of actual days elapsed (or, in the case of Letter of Credit Fees that are paid in advance, actual days to elapse) and a year of 360 days.
Section 2.16.    Payments.  Payments and prepayments of principal of, and interest on, the Revolving Note and all fees, expenses, and other obligations under this Agreement payable to the Bank shall be made without setoff or counterclaim in Immediately Available Funds not later than 1:00 P.M. (Pacific Time) on the dates called for under the Loan Documents to the Bank at its main office in Newport Beach, California.  Funds received after such time shall be deemed to have been received on the next Banking Day.  Whenever any payment to be made under the Loan Documents is stated to be due on a day that is not a Banking Day, such payment shall be made on the next succeeding Banking Day, and such extension of time, in the case of a payment of principal, shall be included in the computation of any interest on such principal payment; provided, however, that if such extension would cause payment of interest on or principal of a LIBOR Rate Loan to be made in the next following calendar month, such payment shall be made on the next preceding Banking Day.
Section 2.17.    Use of Proceeds.  The initial Revolving Loan hereunder shall be used to pay in full the remaining principal balance and accrued and unpaid interest of the “Revolving Loans” and the “Term Loan,” as such terms are defined in the Existing Credit Agreement.  Revolving Loans after the initial Revolving Loan hereunder shall be used to (a) provide financing for the Borrower’s working capital, capital expenditures and other general corporate purposes, including Permitted Acquisitions, (b) support the issuance of commercial and standby Letters of Credit, (c) for the repurchase or redemption of shares of the Equity Interests of the Borrower to the extent permitted under this Agreement, and (d) for the payment of transaction fees and expenses related to this Agreement.
Section 2.18.    Taxes.
(a)    Any and all payments by the Borrower under the Loan Documents shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding, in the case of the Bank, taxes imposed on its overall net income and franchise taxes imposed on it in lieu of net income taxes (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities in respect of payments under the Loan Documents being hereinafter referred to as “Taxes”).
(b)    The Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies that arise from any payment made under the Loan Documents or from the execution, delivery, or registration of, performing under, or otherwise with respect to the Loan Documents (hereinafter referred to as “Other Taxes”).

19

(c)    The Borrower shall indemnify the Bank for the full amount of Taxes or Other Taxes imposed on or paid by the Bank and any penalties, interest, and expenses with respect thereto.  Payments on this indemnification shall be made within 30 days from the date the Bank makes written demand therefor.
(d)    Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Bank, at its address referred to on the signature page hereof, a certified copy of a receipt evidencing payment thereof.  In the case of any payment under the Loan Documents by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish or shall cause such payor to furnish to the Bank at such address an opinion of counsel reasonably acceptable to the Bank stating that such payment is exempt from Taxes.  For purposes of this subsection (d), the terms “United States” and “United States person” have the meanings specified in § 7701 of the Code.
(e)    If the Borrower is required by law or regulation to make any deduction, withholding, or backup withholding of any taxes, levies, imposts, duties, fees, liabilities, or similar charges of the United States of America, any possession or territory of the United States of America (including the Commonwealth of Puerto Rico), or any area subject to the jurisdiction of the United States of America (“U.S. Taxes”) from any payments to the Bank pursuant to any Loan Document in respect of the Obligations payable to the Bank then or thereafter outstanding, the Borrower shall make such withholdings or deductions and pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with applicable law.
Section 2.19.    Effect of Existing Credit Agreement.  This Agreement amends and replaces in its entirety the Existing Credit Agreement, provided that the obligations of the Borrower incurred under the Existing Credit Agreement shall continue under this Agreement and shall not in any circumstance be terminated, extinguished, or discharged hereby but shall hereafter be governed by the terms of this Agreement.  None of the liens created by the Existing Credit Agreement shall be terminated, extinguished, or discharged hereby.
Section 2.20.    Yield Protection.  If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline, or directive (whether or not having the force of law), or any change in the interpretation, promulgation, implementation, or administration thereof by any governmental or quasi-governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof including, notwithstanding the foregoing, all requests, rules, guidelines or directives in connection with Dodd-Frank Wall Street Reform and Consumer Protection Act regardless of the date enacted, adopted, or issued, or compliance by the Bank with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency:

20

(a)    subjects any the Bank to any taxes, or changes the basis of taxation of payments (other than with respect to taxes imposed on its overall net income and franchise taxes imposed on it in lieu of net income taxes) to the Bank in respect of the Revolving Loans or participations therein, or
(b)    imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit, or similar requirement against assets of deposits with or for the account of, or credit extended by, the Bank (other than reserves and assessments taken into account in determining the interest rate applicable to the Revolving Loans), or
(c)    imposes any other condition the result of which is to increase the cost to the Bank of maintaining the Revolving Loans, or reduces any amount receivable by the Bank in connection with the Revolving Loans or participations therein, or requires the Bank to make any payment calculated by reference to the amount of the Revolving Loans or participations therein held or interest received by it, by an amount deemed material by the Bank, and the result of any of the foregoing is to increase the cost to the Bank of maintaining the Revolving Loans or to reduce the return received by the Bank in connection with the Revolving Loans or participations therein, then, within 15 days after demand by the Bank, the Borrower shall pay the Bank such additional amount or amounts as will compensate the Bank for such increased cost or reduction in amount received.
Section 2.21.    Changes in Capital Adequacy Regulations.  If the Bank determines the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank is increased as a result of a Change, then, within 15 days after demand by the Bank, the Borrower shall pay the Bank the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital that the Bank determines is attributable to this Agreement, its outstanding credit exposure or the Revolving Loans (after taking into account the Bank’s policies as to capital adequacy).  “Change” means (a) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (b) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) or in the interpretation, promulgation, implementation, or administration thereof after the date of this Agreement that affects the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank.  Notwithstanding the foregoing, for purposes of this Agreement, all requests, rules, guidelines, or directives in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act shall be deemed to be a Change regardless of the date enacted, adopted, or issued and all requests, rules, guidelines, or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority), or the United States financial regulatory authorities shall be deemed to be a Change regardless of the date adopted, issued, promulgated, or implemented.  “Risk-Based Capital Guidelines” means (x) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (y) the corresponding capital regulations promulgated by regulatory authorities outside the United States including 

21

transition rules, and any amendments to such regulations adopted prior to the date of this Agreement.
ARTICLE III.     
CONDITIONS PRECEDENT
Section 3.1.    Conditions of Initial Transaction.  The making of the initial Revolving Loan and the issuance of the initial Letter of Credit shall be subject to the prior or simultaneous fulfillment of the following conditions:
(a)    Documents.  The Bank shall have received the following:
(i)    The Revolving Note executed by a duly authorized officer (or officers) of the Borrower and dated the Effective Date.
(ii)    The Security Agreement and Confirmatory Security Agreements (as defined in the Security Agreement), duly executed by a duly authorized officer (or officers) of the Borrower and dated the Effective Date.
(iii)    A certificate of a Secretary or Assistant Secretary of the Borrower dated of as the Effective Date and certifying as to the following:
		
	(A)
	A copy of the Borrower’s corporate resolutions authorizing the execution, delivery, and performance of the Loan Documents to which it is a party;

		
	(B)
	The incumbency, names, titles, and signatures of the Borrower’s officers authorized to execute the Loan Documents and to request Letters of Credit, Revolving Loans, and conversions and continuations of Advances hereunder;

		
	(C)
	A true and accurate copy of the Borrower’s Restated Certificate of Incorporation and all amendments thereto; and

		
	(D)
	A true and accurate copy of the Borrower’s Amended and Restated Bylaws.

(iv)    A copy of the Borrower’s Restated Certificate of Incorporation with all amendments thereto, certified by the appropriate governmental official of the State of Delaware as of a date not more than 30 days prior to the Effective Date.
(v)    Certificates of good standing for the Borrower in the States of Delaware and California certified by the appropriate governmental officials as of a date not more than 30 days prior to the Effective Date.

22

(vi)    A certificate dated the Effective Date of the chief executive officer or chief financial officer of the Borrower certifying as to the matters set forth in Sections 3.2(a) and (b) below.
(vii)    ACORD 25 and 27 certificates of insurance with respect to each of the businesses and real properties of the Borrower and its Restricted Subsidiaries in such amounts and with such carriers as are reasonably acceptable to the Bank
(b)    Opinions.  The Borrower shall have requested Richard A. Firehammer, Jr., its Senior Vice President, General Counsel and Secretary, to prepare a written opinion, addressed to the Bank and dated the Effective Date, covering the matters set forth in Exhibit B, and such opinion shall have been delivered to the Bank.
(c)    Pay Off of Indebtedness.  Proceeds of the initial Revolving Loan on the Effective Date shall be used to pay in full the remaining principal balance and accrued and unpaid interest of the “Revolving Loans” and the “Term Loan,” as such terms are defined in the Existing Credit Agreement, and all other Indebtedness of the Borrower and the Restricted Subsidiaries not permitted under this Agreement shall be paid in full.
(d)    Security Documents.  All applicable Security Documents (or financing statements with respect thereto) shall have been appropriately filed or recorded to the satisfaction of the Bank or shall have been delivered to the Bank in acceptable form for such filing and recording; any pledged collateral shall have been duly delivered to the Bank or its designee; any title insurance required by the Bank (with endorsements required by the Bank) shall have been obtained and be satisfactory to the Bank; and the priority and perfection of the Liens created by the Security Documents shall have been established to the satisfaction of the Bank and its counsel.
(e)    Compliance.  The Borrower shall have performed and complied with all agreements, terms, and conditions in this Agreement required to be performed or complied with by the Borrower prior to or simultaneously with the Effective Date.
(f)    Other Matters.  All corporate and legal proceedings, including tax and regulatory matters, relating to the Borrower and all instruments and agreements in connection with the transactions contemplated by this Agreement shall be satisfactory in scope, form, and substance to the Bank and its counsel, and the Bank shall have received all information and copies of all documents, including records of corporate proceedings, as the Bank or its counsel reasonably has requested in connection therewith, such documents where appropriate to be certified by proper corporate or governmental authorities.

23

(g)    Fees and Expenses.  The Bank shall have received all other fees and other amounts due and payable by the Borrower on or prior to the Effective Date, including the reasonable fees and expenses of counsel to the Bank payable pursuant to Section 8.2.
Any one or more of the conditions set forth above that the Borrower has not satisfied on or before the date of disbursement of the initial Revolving Loan under this Agreement shall not be deemed permanently waived by the Bank unless the Bank waives the same in a writing that expressly states that the waiver is permanent, and in all cases in which the waiver is not stated to be permanent the Bank may at any later time insist upon compliance and satisfaction of any such condition as a condition to any subsequent Revolving Loan or Letter of Credit hereunder, and the Borrower’s failure to comply with any such condition within 5 Banking Days’ written notice from the Bank to the Borrower shall constitute an Event of Default under this Agreement.
Section 3.2.    Conditions Precedent to all Revolving Loans and Letters of Credit.  The Bank’s obligation to make any Revolving Loan (including the initial Revolving Loan) or to issue any Letters of Credit (including the initial Letter of Credit) shall be subject to fulfillment of the following conditions:
(a)    Representations and Warranties.  The representations and warranties in Article IV shall be true and correct on and as of the Effective Date and on the date of each Revolving Loan and the date of issuance of each Letter of Credit with the same force and effect as if made on such dates.
(b)    No Default.  No Default or Event of Default shall have occurred on the Effective Date and on the date of each Revolving Loan and the date of issuance of each Letter of Credit or will exist after giving effect to each Revolving Loan made or Letter of Credit issued on such dates.
(c)    Notices and Requests.  The Bank shall have received the Borrower’s request for such Revolving Loan as required under Section 2.2 or its application for such Letter of Credit specified under Section 2.8.
ARTICLE IV.     
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to make the Revolving Loans, and to issue Letters of Credit, the Borrower represents and warrants to the Bank:
Section 4.1.    Organization, Standing, Etc.  The Borrower is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware and has all requisite power and authority to carry on its business as now conducted, to enter into this Agreement, to issue the Revolving Note, and to perform its obligations under the Loan Documents to which it is a party.  Each Restricted Subsidiary is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted.  Each of the Borrower and the 

24

Restricted Subsidiaries (a) holds all certificates of authority, licenses, and permits necessary to carry on its business as presently conducted in each jurisdiction in which it is carrying on such business, except where the failure to hold such certificates, licenses, or permits could not constitute a Material Adverse Occurrence and (b) is duly qualified and in good standing as a foreign corporation (or other organization) in each jurisdiction in which the character of the properties it owns, leases, or operates or the business it conducts makes such qualification necessary and the failure so to qualify could permanently preclude the Borrower or such Restricted Subsidiary from enforcing its rights with respect to any assets or expose the Borrower to any Material Adverse Occurrence.
Section 4.2.    Authorization and Validity.  The execution, delivery, and performance by the Borrower of the Loan Documents to which it is a party have been duly authorized by all necessary corporate action by the Borrower.  This Agreement constitutes, and the Revolving Note when executed will constitute, the legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to limitations as to enforceability that might result from bankruptcy, insolvency, moratorium, and other similar laws affecting creditors’ rights generally and subject to limitations on the availability of equitable remedies.
Section 4.3.    No Conflict; No Default.  The Borrower’s execution, delivery, and performance of the Loan Documents to which it is a party will not (a) violate any provision of any law, statute, rule, or regulation or any order, writ, judgment, injunction, decree, determination, or award of any court, governmental agency, or arbitrator presently in effect applying to the Borrower, (b) violate or contravene any provision of the Borrower’s Restated Certificate of Incorporation or Amended and Restated Bylaws, or (c) result in a breach of or constitute a default under any indenture, loan or credit agreement, or other agreement, lease, or instrument to which the Borrower is a party or by which it or any of its properties may be bound or result in the creation of any Lien thereunder.  Neither the Borrower nor any Restricted Subsidiary is in default under or in violation of any such law, statute, rule, regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, loan or credit agreement, or other agreement, lease, or instrument in any case in which the consequences of such default or violation could constitute a Material Adverse Occurrence.
Section 4.4.    Government Consent.  No order, consent, approval, license, authorization, or validation of, filing, recording, or registration with, or exemption by any governmental or public body or authority is required on the Borrower’s part to authorize, or is required in connection with, the execution, delivery, and performance of, or the legality, validity, binding effect, or enforceability of, the Loan Documents.
Section 4.5.    Financial Statements and Condition.
(a)    The December 31, 2011, audited consolidated financial statements of the Borrower and its Subsidiaries, and the Borrower’s unaudited financial statements dated as of June 30, 2012, heretofore delivered to the Bank were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of 

25

the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended.
(b)    Since December 31, 2011, there has been no Material Adverse Occurrence with respect to the Borrower.
(c)    The consolidated financial projections (including an operating budget and a cash flow budget) of the Borrower delivered pursuant to Section 5.1(d) of the Existing Credit Agreement were prepared by the Borrower in good faith utilizing assumptions believed by the Borrower to be reasonable at the time.  
Section 4.6.    Litigation.  Other than as set forth in the Borrower’s financial statements described in Section 4.5, there are no actions, suits, or proceedings pending or, to the Borrower’s knowledge, threatened against or affecting the Borrower, any Subsidiary, or any of their properties before any court or arbitrator or any governmental department, board, agency, or other instrumentality that, if determined adversely to the Borrower or any Subsidiary, could constitute a Material Adverse Occurrence, and there are no unsatisfied judgments against the Borrower or any Subsidiary the satisfaction or payment of which could constitute a Material Adverse Occurrence.
Section 4.7.    Environmental, Health and Safety Laws.  There exists no violation by the Borrower or any Restricted Subsidiary of any applicable federal, state, or local law, rule or regulation, or order of any government, governmental department, board, agency, or other instrumentality relating to environmental, pollution, health, or safety matters that has imposed, will impose, or threatens to impose a material liability on the Borrower or a Restricted Subsidiary or that has required or would require a material expenditure by the Borrower or a Restricted Subsidiary to cure.  Neither the Borrower nor any Restricted Subsidiary has received any notice to the effect that any part of its operations or properties is not in material compliance with any such law, rule, regulation, or order or notice that it or its property is the subject of any governmental investigation evaluating whether any remedial action is needed to respond to any release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could constitute a Material Adverse Occurrence.  Except as set out on Schedule 4.7, the Borrower has no knowledge that it, its property, any Restricted Subsidiary, or any Restricted Subsidiary’s property will become subject to environmental laws or regulations during the term of this Agreement, compliance with which could require Capital Expenditures that could constitute a Material Adverse Occurrence.
Section 4.8.    ERISA.  Each Plan is in substantial compliance with all applicable requirements of ERISA and the Code and with all material applicable rulings and regulations issued under the provisions of ERISA and the Code setting forth those requirements.  No Reportable Event has occurred and is continuing with respect to any Plan.  All of the minimum funding standards applicable to such Plans have been satisfied and there exists no event or condition that would reasonably be expected to result in the institution of proceedings to terminate any Plan under § 4042 of ERISA.  With respect to each Plan subject to Title IV of ERISA, as of the most recent valuation date for such Plan, the present value (determined on the basis of reasonable assumptions employed by the independent actuary for such Plan and 

26

previously furnished in writing to the Bank) of such Plan’s projected benefit obligations did not exceed the fair market value of such Plan’s assets.
Section 4.9.    Federal Reserve Regulations.  Neither the Borrower nor any Subsidiary is engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying margin stock (as defined in Regulation U of the Board).  The value of all margin stock owned by the Borrower does not constitute more than 25% of the value of the assets of the Borrower.
Section 4.10.    Title to Property; Leases; Liens; Subordination.  Each of the Borrower and its Restricted Subsidiaries has (a) good and marketable title to its real properties and (b) good and sufficient title to, or valid, subsisting, and enforceable leasehold interest in, its other material properties, including all real properties and other properties and assets referred to as owned by the Borrower or any of its Restricted Subsidiaries in the most recent financial statement referred to in Section 4.5 or 5.1 (other than property disposed of since the date of such financial statements in the ordinary course of business).  None of such properties is subject to a Lien, except as allowed under Section 6.12.  The Borrower has not subordinated any of its rights under any obligation owing to it to the rights of any other person.
Section 4.11.    Taxes.  Each of the Borrower and the Subsidiaries has filed all federal, state, and local tax returns required to be filed and has paid or made provision for the payment of all taxes due and payable pursuant to such returns and pursuant to any assessments made against it or any of its property and all other taxes, fees, and other charges imposed on it or any of its property by any governmental authority (other than taxes, fees, or charges the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of the Borrower).  No tax Liens have been filed and no material claims are being asserted with respect to any such taxes, fees, or charges.  The charges, accruals, and reserves on the books of the Borrower in respect of taxes and other governmental charges are adequate, and the Borrower knows of no proposed material tax assessment against it or any Subsidiary or any basis therefor.
Section 4.12.    Trademarks; Patents.  Each of the Borrower and the Restricted Subsidiaries possesses or has the right to use all of the patents, trademarks, trade names, service marks, and copyrights, and applications therefor, and all technology, know-how, processes, methods, and designs used in or necessary for the conduct of its business, without known conflict with the rights of others.
Section 4.13.    Burdensome Restrictions.  Neither the Borrower nor any Restricted Subsidiary is a party to or otherwise bound by any indenture, loan or credit agreement, or lease or other agreement or instrument or subject to any charter, corporate, or partnership restriction that could constitute a Material Adverse Occurrence.
Section 4.14.    Force Majeure.  Since the date of the most recent financial statement referred to in Section 4.5 or 5.1, the business, properties, and other assets of the Borrower and the Restricted Subsidiaries have not been materially and adversely affected in any way as the 

27

result of any fire or other casualty, strike, lockout, or other labor trouble, embargo, sabotage, confiscation, condemnation, riot, civil disturbance, activity of armed forces, or act of God.
Section 4.15.    Investment Company Act.  Neither the Borrower 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.
Section 4.16.    Retirement Benefits.  Except as required under § 4980B of the Code, § 601 of ERISA, or applicable state law, the Borrower is not obligated to provide post-retirement medical or insurance benefits with respect to employees or former employees.
Section 4.17.    Full Disclosure.  Subject to the following sentence, neither the financial statements referred to in Section 4.5 or Section 5.1, nor any other certificate, written statement, exhibit, or report furnished by or on behalf of the Borrower in connection with or pursuant to this Agreement, contains any untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading.  Certificates or statements furnished by or on behalf of the Borrower to the Bank consisting of projections or forecasts of future results or events have been prepared in good faith and based on good faith estimates and assumptions of the management of the Borrower, and the Borrower has no reason to believe that such projections or forecasts are not reasonable.
Section 4.18.    Subsidiaries.  Schedule 4.18 sets forth as of the date of this Agreement a list of all Subsidiaries, the number and percentage of the shares of each class of Equity Interests owned beneficially or of record by the Borrower or any Subsidiary therein and the jurisdiction of incorporation of each Subsidiary, and designates whether such Subsidiary is a Restricted Subsidiary.
Section 4.19.    Labor Matters.  There are no pending or threatened strikes, lockouts, or slowdowns against the Borrower or any Restricted Subsidiary.  Neither the Borrower nor any Restricted Subsidiary has been or is in violation in any material respect of the Fair Labor Standards Act or any other applicable federal, state, local, or foreign law dealing with such matters. All payments due from the Borrower or any Restricted Subsidiary on account of wages and employee health and welfare insurance and other benefits (in each case, except for de minimis amounts) have been paid or accrued as a liability on the books of the Borrower or such Restricted Subsidiary. The consummation of the transactions contemplated under the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Restricted Subsidiary is bound.
Section 4.20.    Solvency.  As of the Effective Date, after the making of the initial Revolving Loan and giving effect thereto, (a) the fair value of the assets of the Borrower will exceed its debts and liabilities, subordinated, contingent, or otherwise; (b) the present fair saleable value of the property of the Borrower will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent, or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower will be able to pay its debts and liabilities, subordinated, contingent, or otherwise, as such debts and 

28

liabilities become absolute and matured; and (d) the Borrower will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is proposed to be conducted following the Effective Date.
ARTICLE V.     
AFFIRMATIVE COVENANTS
Until any obligation of the Bank hereunder to make the Revolving Loans and to issue Letters of Credit has expired or terminated, the Revolving Note and all of the other Obligations have been paid in full, and all outstanding Letters of Credit have expired or the liability of the Bank thereon has otherwise been discharged, unless the Bank otherwise consents in writing:
Section 5.1.    Financial Statements and Reports.  The Borrower will furnish to the Bank:
(a)    As soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, (i) the consolidated financial statements of the Borrower and the Subsidiaries consisting of at least statements of income, cash flow, and changes in stockholders’ equity, and a consolidated balance sheet as at the end of such year, setting forth in each case in comparative form corresponding figures from the previous annual audit, certified without qualification by independent certified public accountants of recognized national standing selected by the Borrower and acceptable to the Bank, and (ii) unaudited consolidating financial statements for the Borrower.
(b)    As soon as available and in any event within 60 days after the end of each fiscal quarter, unaudited consolidated statements of income, cash flow, and changes in stockholders’ equity for the Borrower and the Subsidiaries for such quarter and for the period from the beginning of such fiscal year to the end of such quarter, and a consolidated balance sheet of the Borrower as at the end of such quarter, setting forth in comparative form figures for the corresponding period for the preceding fiscal year, accompanied by a certificate signed by the chief financial officer of the Borrower stating that such financial statements present fairly the financial condition of the Borrower and the Subsidiaries and that the same have been prepared in accordance with GAAP (except for the absence of footnotes and subject to year-end audit adjustments as to the interim statements).
(c)    As soon as practicable and in any event within 60 days after the end of the first three fiscal quarters of the Borrower, and within 120 days after the end of each fiscal year of the Borrower, a Compliance Certificate in the form of Exhibit C signed by the chief financial officer of the Borrower and demonstrating in reasonable detail compliance (or noncompliance, as the case may be) with Sections 5.14, 6.14, 6.15, and 6.16 as at the end of such quarter and stating that as at the end of such quarter there existed no Default or Event of Default or, if a Default or Event of Default existed, specifying the nature and period of existence thereof and what action the Borrower proposes to take with respect thereto, and addressing such other matters as set forth in such Compliance Certificate.

29

(d)    As soon as practicable and in any event within 120 days after the beginning of each fiscal year of the Borrower, statements of forecasted consolidated income for the Borrower and the Subsidiaries on a quarterly basis in such fiscal year and a forecasted consolidated balance sheet of the Borrower and the Subsidiaries, together with supporting assumptions, as at the end of each fiscal quarter, all in reasonable detail and reasonably satisfactory in scope to the Bank.
(e)    As soon as practicable and in any event within 30 days after the beginning of each fiscal year of the Borrower ACORD 24 and 25 certificates of insurance with respect to each of the businesses and real properties of the Borrower and its Restricted Subsidiaries in such amounts and with such carriers as are reasonably acceptable to the Bank.
(f)    Immediately upon any officer of the Borrower becoming aware of any Default or Event of Default, a notice describing the nature thereof and what action the Borrower proposes to take with respect thereto.
(g)    Immediately upon any officer of the Borrower becoming aware of the occurrence, with respect to any Plan, of any Reportable Event or any Prohibited Transaction, a notice specifying the nature thereof and what action the Borrower proposes to take with respect thereto, and, when received, copies of any notice from PBGC of intention to terminate or have a trustee appointed for any Plan.
(h)    Immediately upon any officer of the Borrower becoming aware of any matter that has resulted or could result in a Material Adverse Occurrence, a notice from the Borrower describing the nature thereof and what action Borrower proposes to take with respect thereto.
(i)    Immediately upon any officer of the Borrower becoming aware of (i) the commencement of any action, suit, investigation, proceeding, or arbitration before any court or arbitrator or any governmental department, board, agency, or other instrumentality affecting the Borrower, any Subsidiary, or any property of such Person, or to which the Borrower or any Subsidiary is a party (other than litigation where insurance insures against the damages claimed and the insurer has assumed defense of the litigation without reservation), in each case in which an adverse determination or result could individually or in the aggregate constitute a Material Adverse Occurrence; or (ii) any adverse ruling that occurs in any litigation, arbitration, or governmental investigation or proceeding previously disclosed by the Borrower or any Subsidiary that, if determined adversely to the Borrower or a Subsidiary, could constitute a Material Adverse Occurrence, a notice from the Borrower describing the nature and status thereof and what action the Borrower proposes to take with respect thereto, to the extent such notice does not violate any confidentiality agreement, order of the court or breach any attorney-client privileged communication provided that the Borrower or such Subsidiary has undertaken good faith efforts to obtain consent to disclosure under 

30

such confidentiality agreement or court order and to prepare a disclosure which would not breach attorney-client privileged communication.
(j)    Promptly upon the mailing or filing thereof, copies of all financial statements, reports, and proxy statements mailed to the Borrower’s shareholders, and copies of all registration statements, periodic reports, and other documents filed with the Securities and Exchange Commission (or any successor thereto) or any national securities exchange.
(k)    From time to time, such other information regarding the business, operation, and financial condition of the Borrower and the Subsidiaries as the Bank reasonably requests.
Section 5.2.    Existence.  The Borrower shall maintain, and cause each Restricted Subsidiary to maintain, its corporate existence in good standing under the laws of its jurisdiction of organization and its qualification to transact business in each jurisdiction where failure so to qualify would permanently preclude the Borrower or such Restricted Subsidiary from enforcing its rights with respect to any material asset or would expose the Borrower or such Restricted Subsidiary to any material liability; provided, however, that nothing herein shall prohibit the merger or liquidation of any Subsidiary allowed under Section 6.1.
Section 5.3.    Insurance.  The Borrower shall maintain, and cause each Restricted Subsidiary to maintain, with financially sound and reputable insurance companies such insurance as is required by law and such other insurance in such amounts and against such hazards as is reasonably customary in the case of reputable firms engaged in the same or similar business and similarly situated.
Section 5.4.    Payment of Taxes and Claims.  The Borrower shall file, and cause each Subsidiary to file, all tax returns and reports required by law to be filed by it and shall pay, and cause each Subsidiary to pay, before they become delinquent all taxes, assessments, and governmental charges and levies imposed upon it or its property and all claims or demands of any kind (including but not limited to those of suppliers, mechanics, carriers, warehouses, landlords, and other like Persons) that, if unpaid, might result in the creation of a Lien upon its property; provided that the foregoing items need not be paid if they are being contested in good faith by appropriate proceedings, as long as the Borrower’s or such Subsidiary’s title to its property is not materially adversely affected, its use of such property in the ordinary course of its business is not materially interfered with, and adequate reserves with respect thereto have been set aside on its books in accordance with GAAP.
Section 5.5.    Inspection.  The Borrower shall permit any Person designated by the Bank to visit and inspect any of the properties, books, and financial records of the Borrower and the Subsidiaries, to examine and to make copies of the books of accounts and other financial records of the Borrower and the Subsidiaries, and to discuss the affairs, finances, and accounts of the Borrower and the Subsidiaries with, and to be advised as to the same by, its officers at such reasonable times and intervals as the Bank designates.

31

Section 5.6.    Maintenance of Properties.  The Borrower shall maintain, and cause each Restricted Subsidiary to maintain, its properties used or useful in the conduct of its business in good condition, repair, and working order, and supplied with all necessary equipment, and make all necessary repairs, renewals, replacements, betterments, and improvements thereto, all as reasonably necessary for the business carried on in connection therewith to be properly and advantageously conducted at all times.
Section 5.7.    Books and Records.  The Borrower shall keep, and cause each Subsidiary to keep, adequate and proper records and books of account in which full and correct entries will be made of its dealings, business, and affairs.
Section 5.8.    Compliance.  The Borrower shall comply, and cause each Restricted Subsidiary to comply, in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees, or awards to which it may be subject; provided, however, that failure so to comply shall not be a breach of this covenant if such failure could not constitute a Material Adverse Occurrence and the Borrower or such Restricted Subsidiary is acting in good faith and with reasonable dispatch to cure such noncompliance.
Section 5.9.    ERISA.  The Borrower shall maintain, and cause each Subsidiary to maintain, each Plan in compliance with all material applicable requirements of ERISA and of the Code and with all applicable rulings and regulations issued under the provisions of ERISA and of the Code and shall not, and shall not permit any of the ERISA Affiliates to, (a) engage in any transaction in connection with which the Borrower or any of the ERISA Affiliates would be subject to either a civil penalty assessed pursuant to § 502(i) of ERISA or a tax imposed by § 4975 of the Code, in either case in an amount exceeding $50,000, (b) fail to make full payment when due of all amounts that, under the provisions of any Plan, the Borrower or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency (as defined in § 302 of ERISA and § 412 of the Code), whether or not waived, with respect to any Plan in an aggregate amount exceeding $50,000, or (c) fail to make any payments in an aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower or any of the ERISA Affiliates is required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.10.    Environmental Matters; Reporting.  The Borrower shall observe and comply with, and cause each Restricted Subsidiary to observe and comply with, all laws, rules, regulations, and orders of any government or government agency relating to health, safety, pollution, hazardous materials, or other environmental matters to the extent non-compliance could result in a material liability or otherwise constitute a Material Adverse Occurrence.  The Borrower shall give the Bank prompt written notice of any violation as to any environmental matter by the Borrower or any Restricted Subsidiary and of the commencement of any judicial or administrative proceeding relating to health, safety, or environmental matters (a) in which an adverse determination or result could result in the revocation of or have a material adverse effect on any operating permits, air emission permits, water discharge permits, hazardous waste permits, or other permits held by the Borrower or any Restricted Subsidiary that are material to the operations of the Borrower or such Restricted Subsidiary, or (b) that will or threatens to 

32

impose a material liability on the Borrower or such Restricted Subsidiary to any Person or that will require a material expenditure by the Borrower or such Restricted Subsidiary to cure any alleged problem or violation.
Section 5.11.    Further Assurances.  The Borrower shall promptly correct any defect or error that is discovered in any Loan Document or in the execution, acknowledgment, or recordation thereof.  Promptly upon request by the Bank, the Borrower also shall, and shall cause each Restricted Subsidiary to, do, execute, acknowledge, deliver, record, re-record, file, re-file, register, and re-register such deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances, and other instruments as the Bank reasonably requires from time to time (a) to carry out more effectively the purposes of the Loan Documents; and (b) to better assure, convey, grant, assign, transfer, preserve, protect, and confirm unto the Bank the rights granted now or hereafter intended to be granted to the Bank under any Loan Document or under any other instrument executed in connection with any Loan Document or that the Borrower may be or become bound to convey, mortgage, or assign to the Bank to carry out the intention or facilitate the performance of the provisions of any Loan Document.  The Borrower shall furnish to the Bank evidence satisfactory to the Bank of every such recording, filing, or registration.
Section 5.12.    Compliance with Terms of Material Contracts.  The Borrower shall, and shall cause each Restricted Subsidiary to, make all payments and otherwise perform all obligations in respect of all material contracts to which the Borrower or any Restricted Subsidiary is a party.
Section 5.13.    Maintenance of Bank Accounts.  The Borrower shall maintain its primary United States borrowing, depository, treasury management, and foreign exchange relationships with the Bank.
Section 5.14.    Additional Restricted Subsidiaries.  In the event that upon (a) the delivery of a Compliance Certificate pursuant to Section 5.1(c) or (b) the completion of any transaction involving the Borrower or any of its Subsidiaries, including the formation or acquisition of any Subsidiary, the aggregate amount of the consolidated assets or aggregate Consolidated EBITDA of the Borrower and the Restricted Subsidiaries existing as of the date for which such Compliance Certificate was prepared or upon giving effect to such transaction was, respectively, either less than (i) 70% of the aggregate amount of the consolidated assets of the Borrower and the Borrower's Subsidiaries or (ii) 70% of the Consolidated EBITDA of the Borrower and the Borrower's Subsidiaries, then the Borrower shall, within 30 days thereafter, designate one or more additional Subsidiaries as Restricted Subsidiaries, and each such additional Restricted Subsidiary shall thereafter be a Restricted Subsidiary for all purposes under this Agreement.  
ARTICLE VI.     
NEGATIVE COVENANTS
Until any obligation of the Bank hereunder to make the Revolving Loans and to issue Letters of Credit has expired or terminated, the Revolving Note and all of the other Obligations 

33

have been paid in full, and all outstanding Letters of Credit have expired or the liability of the Bank thereon has otherwise been discharged, unless the Bank otherwise consents in writing:
Section 6.1.    Merger.  The Borrower shall not merge, consolidate, or enter into any analogous reorganization or transaction with any Person or liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution) nor permit any Restricted Subsidiary to do any of the foregoing; provided, however, any Subsidiary may be merged with or liquidated into the Borrower or any wholly-owned Subsidiary (if the Borrower or such wholly-owned Subsidiary is the surviving corporation) and after giving effect to such transaction, the Borrower complies with Section 5.14.
Section 6.2.    Disposition of Assets.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer, or otherwise dispose of (whether in one transaction or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except:
(a)    dispositions of inventory or used, worn-out, or surplus equipment and other equipment no longer useful in the business of the Borrower or a Restricted Subsidiary, in each case determined and disposed of in the ordinary course of business;
(b)    the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are applied with reasonable promptness to the purchase price of such replacement equipment; and
(c)    other dispositions of property during the term of this Agreement whose net book value in the aggregate does not exceed 5% of the Borrower’s total consolidated assets as shown on its balance sheet for its most recent prior fiscal quarter.
Section 6.3.    Plans.  The Borrower shall not permit, and shall not allow any Subsidiary to permit, any event to occur or condition to exist that would permit any Plan to terminate under any circumstances that would cause the Lien provided for in § 4068 of ERISA to attach to any assets of the Borrower or any Subsidiary; and the Borrower shall not permit, as of the most recent valuation date for any Plan subject to Title IV of ERISA, the present value (determined on the basis of reasonable assumptions employed by the independent actuary for such Plan and previously furnished in writing to the Bank) of such Plan’s projected benefit obligations to exceed the fair market value of such Plan’s assets.
Section 6.4.    Change in Nature of Business.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, make any material change in the nature of the business of the Borrower or such Restricted Subsidiary, as carried on at the date hereof.

34

Section 6.5.    Negative Pledges; Subsidiary Restrictions.  The Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement, bond, note, or other instrument with or for the benefit of any Person other than the Bank that would (a) except in connection with Liens permitted under Section 6.12, prohibit the Borrower or such Subsidiary from granting, or otherwise limit the ability of the Borrower or such Subsidiary to grant, to the Bank any Lien on any assets or properties of the Borrower or such Subsidiary, or (b) require the Borrower or such Subsidiary to grant a Lien to any other Person if the Borrower or such Subsidiary grants any Lien to the Bank.  The Borrower shall not permit any Subsidiary to place or allow any restriction, directly or indirectly, on the ability of such Subsidiary to (x) pay dividends or any distributions on or with respect to such Subsidiary’s capital stock or (y) make loans or other cash payments to the Borrower.
Section 6.6.    Restricted Payments; Prepayment of Indebtedness.  The Borrower shall not make any Restricted Payment if a Default or Event of Default has occurred or is continuing or a Default or Event of Default would exist after giving effect to the making of any such Restricted Payment immediately or by reference to pro forma compliance with under the most recent Compliance Certificate delivered by the Borrower pursuant to Section 5.1(c), provided that, all redemptions and repurchases by the Borrower of its Equity Interests, measured as of the last day of each fiscal year, may not exceed (a) $20,000,000 in the aggregate for the fiscal year ending on December 31, 2012; and (b) $40,000,000 in the aggregate for the two fiscal years ending on December 31, 2013, provided further that redemptions and repurchases for the purposes of the preceding proviso shall only include those shares of its Equity Interests repurchased pursuant to Shares Repurchase Dutch Auctions, and shall not include redemptions and repurchases under ongoing and specific redemption and repurchase programs of the Borrower related to its Equity Interests.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, prepay or redeem in advance of maturity or regular installments of principal in effect as of the date of this Agreement, or establish a sinking fund for such purpose, with respect to any Indebtedness other than Indebtedness owing to the Bank.
Section 6.7.    Transactions with Affiliates.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any transaction with any Affiliate of the Borrower, except upon fair and reasonable terms no less favorable than the Borrower, or such Restricted Subsidiary, would obtain in a comparable arm’s-length transaction with a Person not an Affiliate.
Section 6.8.    Accounting Changes.  The Borrower shall not, and shall not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change its fiscal year or the fiscal year of any Subsidiary.
Section 6.9.    Subordinated Debt.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, (a) make any scheduled payment of the principal of or interest on any Subordinated Debt that would be prohibited by the terms of such Subordinated Debt and any related subordination agreement; (b) directly or indirectly make any prepayment on or purchase, redeem, or defease any Subordinated Debt or offer to do so (whether such prepayment, purchase or redemption, or offer with respect thereto is voluntary or mandatory); (c) amend or cancel the subordination provisions applicable to any Subordinated Debt; (d) take or omit to take any action 

35

if as a result of such action or omission the subordination of such Subordinated Debt, or any part thereof, to the Obligations might be terminated, impaired, or adversely affected; or (e) omit to give the Bank prompt notice of any notice received from any holder of Subordinated Debt, or any trustee therefor, or of any default under any agreement or instrument relating to any Subordinated Debt by reason whereof such Subordinated Debt might become or be declared to be due or payable.
Section 6.10.    Investments.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, acquire for value, make, have, or hold any Investments, except:
(a)    Investments existing on the date of this Agreement identified on Schedule 6.10.
(b)    Investments in Subsidiaries after the date of this Agreement, whether through the formation or acquisition of such Subsidiaries, as long as the Borrower has complied with Section 5.14, no Default or Event of Default then exists or would occur as a result of any such Investment, and if any such Investment occurs through an Acquisition, such Acquisition is a Permitted Acquisition.
(c)    Investments in joint ventures, provided that no Default or Event of Default then exists or would occur as a result of any such Investment.
(d)    Travel advances to management personnel and employees in the ordinary course of business.
(e)    Investments in readily marketable direct obligations issued or guaranteed by the United States or any agency thereof and supported by the full faith and credit of the United States.
(f)    Certificates of deposit or bankers’ acceptances issued by any commercial bank organized under the laws of the United States or any State thereof that has (i) combined capital and surplus of at least $1,000,000,000, and (ii) a credit rating with respect to its unsecured indebtedness from a nationally recognized rating service that is reasonably satisfactory to the Bank.
(g)    Commercial paper given the highest rating by a nationally recognized rating service.
(h)    Repurchase agreements relating to securities issued or guaranteed as to principal and interest by the United States of America with a term of not more than 7 days; provided all such agreements shall require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System.

36

(i)    Other readily marketable Investments in debt securities that are reasonably acceptable to the Bank.
(j)    Any Investment that constitutes a Permitted Acquisition.
(k)    Any Investment arising under a Rate Protection Agreement or Foreign Currency Hedging Agreement permitted under Section 6.19.
(l)    Other Investments if the aggregate consideration therefor does not exceed $11,500,000, provided that no Default or Event of Default then exists or would occur as a result of any such Investment.
Any Investments under clauses (e), (f), (g), or (h) above must mature within one year of the acquisition thereof by the Borrower or a Restricted Subsidiary.
Section 6.11.    Indebtedness.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, incur, create, issue, assume, or suffer to exist any Indebtedness, except:
(a)    The Obligations.
(b)    Consolidated Current Liabilities, other than for borrowed money, incurred in the ordinary course of business.
(c)    Indebtedness existing on the date of this Agreement and disclosed on Schedule 6.11, including any extension or refinancing thereof as long as the interest rates and other financing charges and fees and the principal amount thereof are not increased.
(d)    Indebtedness for the purchase price of equipment used in the ordinary course of the Borrower’s business, provided, that in no event shall the amount of such purchase-money indebtedness with respect to any equipment exceed 100% of the fair market value of such equipment.
(e)    Indebtedness secured by Liens permitted under Section 6.12.
(f)    Indebtedness up to a maximum aggregate amount of $1,000,000 outstanding at any time incurred in the ordinary course of business and secured by Liens relating to purchase money financing or Capital Lease Obligations.
(g)    Any Indebtedness arising under a Rate Protection Agreement or Foreign Currency Hedging Agreement permitted under Section 6.19.
Section 6.12.    Liens.  The Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume, or suffer to exist any Lien, or enter into, or make any commitment to enter into, any arrangement for the acquisition of any property through conditional sale, lease-purchase, or other title retention agreements, with respect to any property now owned or hereafter acquired by the Borrower or a Subsidiary, except:

37

(a)    Liens at any time created in favor of the Bank.
(b)    Liens existing on the date of this Agreement and disclosed on Schedule 6.12.
(c)    Deposits or pledges to secure payment of workers’ compensation, unemployment insurance, old age pensions, or other social security obligations, in the ordinary course of business of the Borrower or a Subsidiary.
(d)    Liens for taxes, fees, assessments, and governmental charges not delinquent or to the extent that payment therefor is not at the time required to be made in accordance with Section 5.4.
(e)    Liens of carriers, warehousemen, mechanics, and materialmen, and other like Liens arising in the ordinary course of business, for sums not due or to the extent that payment therefor is not at the time required to be made in accordance with Section 5.4.
(f)    Liens incurred or deposits or pledges made or given in connection with, or to secure payment of, indemnity, performance, or other similar bonds.
(g)    Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off, or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that, as to each deposit account not maintained with the Bank, (i) such deposit account is not a dedicated cash collateral account and is not subject to restriction against access by the Borrower or a Subsidiary in excess of those set forth by regulations promulgated by the Board, and (ii) such deposit account is not intended by the Borrower or any Subsidiary to provide collateral to the depository institution.
(h)    Encumbrances in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property and landlord’s Liens under leases on the premises rented that do not materially detract from the value of such property or impair the use thereof in the business of the Borrower or a Subsidiary.
(i)    The interest of any lessor under any Capitalized Lease entered into after the Effective Date or purchase money Liens on property acquired after the Effective Date; provided, that (i) the Indebtedness secured thereby is permitted by Section 6.11(f) and (ii) such Liens are limited to the property acquired and do not secure Indebtedness other than the related Capitalized Lease Obligations or the purchase price of such property.
Section 6.13.    Contingent Liabilities.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, be or become liable on any Contingent Obligations except Contingent 

38

Obligations existing on the date of this Agreement and described on Schedule 6.13 and Contingent Obligations for the Bank’s benefit.
Section 6.14.    Consolidated Cash Flow Leverage Ratio.  The Borrower shall not permit the Consolidated Cash Flow Leverage Ratio to be more than 1.50 to 1.0 as of the last day of any fiscal quarter.
Section 6.15.    Consolidated Fixed Charge Coverage Ratio.  The Borrower shall not permit the Consolidated Fixed Charge Coverage Ratio, as of the last day of any fiscal quarter for the four consecutive fiscal quarters ending on that date, to be less than 2.00 to 1.0.
Section 6.16.    Consolidated Liquidity.  The Borrower shall not permit Consolidated Liquidity, as of the end of each fiscal quarter to be less than (a) $30,000,000 as of the last day of each fiscal quarter for the period from the Effective Date to and including March 31, 2013; (b) $35,000,000 as of June 30 and September 30, 2013; and (c) $40,000,000 as of the last day of each fiscal quarter ending on and after December 31, 2013.
Section 6.17.    Loan Proceeds.  The Borrower shall not, and shall not permit any Subsidiary to, use any part of the proceeds of the Revolving Loans directly or indirectly, and whether immediately, incidentally, or ultimately, (a) to purchase or carry margin stock (as defined in Regulation U of the Board) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose or (b) for any purpose that entails a violation of, or that is inconsistent with, the provisions of Regulations U or X of the Board.
Section 6.18.    Sale and Leaseback Transactions.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, whereby it sells or transfers any property, real or personal, and thereafter leases such property for the same or a substantially similar purpose or purposes as the property sold or transferred.
Section 6.19.    Rate Protection and Foreign Currency Hedging Agreements.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any hedging arrangements, other than any Rate Protection Agreements and Foreign Currency Hedging Agreements.
ARTICLE VII.     
EVENTS OF DEFAULT AND REMEDIES
Section 7.1.    Events of Default.  The occurrence of any one or more of the following events shall constitute an Event of Default:
(d)    The Borrower fails to make when due, whether by acceleration or otherwise, any payment of principal of or interest on the Revolving Note or any other Obligation required to be paid to the Bank pursuant to this Agreement.

39

(e)    Any representation or warranty made by or on behalf of the Borrower or any Subsidiary in this Agreement, any other Loan Document, or any certificate, statement, report, or document herewith or hereafter furnished to the Bank pursuant to this Agreement or any other Loan Document proves to have been false or misleading in any material respect on the date as of which the facts set forth are stated or certified.
(f)    The Borrower fails to comply with Sections 5.2 or 5.3 or any section of Article VI hereof, a default, however denominated, exists under any other Loan Document, or the Borrower is in default, however denominated, under any other agreement with the Bank related to Indebtedness owed by the Borrower or any of its Subsidiaries to the Bank.
(g)    The Borrower fails to comply with any agreement, covenant, condition, provision, or term in this Agreement (other than those hereinabove set forth in this Section 7.1), and such failure continues for 30 calendar days after the earliest of (i) the date the Borrower gives notice of such failure to the Bank, (ii) the date the Borrower should have given notice of such failure to the Bank pursuant to Section 5.1, or (iii) the date the Bank gives notice of such failure to the Borrower.
(h)    The Borrower or any Subsidiary (i) becomes insolvent or generally does not pay its debts as they mature, (ii) applies for, consents to, or acquiesces in the appointment of a custodian, trustee, or receiver of the Borrower or such Subsidiary or for a substantial part of the property thereof, or, in the absence of such application, consent, or acquiescence, a custodian, trustee, or receiver is appointed for the Borrower or a Subsidiary or for a substantial part of the property thereof and is not discharged within 45 days, or (iii) makes an assignment for the benefit of creditors.
(i)    Any bankruptcy, reorganization, debt arrangement, or other proceeding under any bankruptcy or insolvency law is instituted by or against the Borrower or any Subsidiary, and, if instituted against the Borrower or any Subsidiary, (i) the Borrower or such Subsidiary has consented thereto or acquiesced therein, (ii) remains undismissed for 60 days, or (iii) an order for relief therein has been entered against the Borrower or such Subsidiary.
(j)    Any dissolution or liquidation proceeding not permitted by Section 6.1 is instituted by or against the Borrower or a Subsidiary, and, if instituted against the Borrower or any Subsidiary, is consented to or acquiesced in by the Borrower or such Subsidiary or remains for 45 days undismissed.
(k)    A judgment or judgments for the payment of money in excess of the sum of $500,000 in the aggregate is rendered against the Borrower or a Restricted Subsidiary and either (i) the judgment creditor executes on such judgment or (ii) such judgment remains unpaid or undischarged for more than 60 

40

days from the date of entry thereof or such longer period during which execution of such judgment is stayed during an appeal from such judgment.
(l)    The maturity of any material Indebtedness of the Borrower (other than Indebtedness under this Agreement) or a Restricted Subsidiary is accelerated, or the Borrower or a Restricted Subsidiary fails to pay any such material Indebtedness when due (after the lapse of any applicable grace period) or, in the case of Indebtedness payable on demand, when demanded (after the lapse of any applicable grace period), or any event occurs or condition exists and continues for more than the period of grace, if any, applicable thereto and has the effect of causing such material Indebtedness to become due prior to its stated maturity, or permitting the holder of any such Indebtedness or any trustee or other Person acting on behalf of such holder to cause such material Indebtedness to become due prior to its stated maturity or to realize upon any collateral given as security therefor.  For purposes of this Section, Indebtedness of the Borrower or a Restricted Subsidiary shall be deemed “material” if it exceeds $500,000 as to any item of Indebtedness or in the aggregate for all items of Indebtedness with respect to which any of the events described in this Section 7.1(i) has occurred.
(m)    Any execution or attachment is issued whereby any substantial part of the property of the Borrower or any Restricted Subsidiary is taken or attempted to be taken and the same is not vacated or stayed within 30 days after the issuance thereof.
(n)    This Agreement at any time ceases to be in full force and effect or is judicially declared null and void, or the Borrower contests the validity or enforceability thereof.
(o)    Any Security Document, at any time, ceases to be in full force and effect or is judicially declared null and void, the Borrower contests the validity or enforceability thereof, or the Bank ceases to have a valid and perfected security interest having the priority contemplated thereunder in all of the collateral described therein.
(p)    Any Change of Control occurs.
(q)    The Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs.
(r)    Any Material Adverse Occurrence occurs.
Section 7.2.    Remedies.  If (a) any Event of Default described in Sections 7.1 (e), (f) or (g) occurs with respect to the Borrower, the Revolving Commitment shall automatically terminate, the Revolving Note and all other Obligations shall automatically become immediately due and payable, and the Borrower shall without demand pay into the Holding Account an 

41

amount equal to the aggregate face amount of all outstanding Letters of Credit; or (b) any other Event of Default occurs and is continuing, the Bank may (i) declare the Revolving terminated, whereupon the Revolving Commitment shall terminate, (ii) declare the outstanding unpaid principal balance of the Revolving Note the accrued and unpaid interest thereon, and all other Obligations to be forthwith due and payable, whereupon the Revolving Note, all accrued and unpaid interest thereon, and all such Obligations shall immediately become due and payable, in each case without presentment, demand, protest, or other notice of any kind, all of which are hereby expressly waived, anything in this Agreement or in the Revolving Note to the contrary notwithstanding, and (iii) demand that the Borrower pay into the Holding Account an amount equal to the aggregate face amount of all outstanding Letters of Credit.  Upon the occurrence of any of the events described in clause (a) or (b) of the preceding sentence the Bank may exercise all rights and remedies under any of the Loan Documents, and enforce all rights and remedies under any applicable law.
Section 7.3.    Deposit Accounts; Offset.  In addition to the remedies set forth in Section 7.2, upon any Event of Default and thereafter while the same is continuing, the Borrower hereby irrevocably authorizes the Bank to set off any Obligations against all Deposits and any and all claims of the Borrower against the Bank.  Such right shall exist whether or not the Bank has made any demand hereunder or under any other Loan Document, whether or not the Obligations, or any part thereof, or Deposits are matured or unmatured, and regardless of the existence or adequacy of any collateral, guaranty, or other security, right, or remedy available to the Bank.  The Bank agrees that, as promptly as is reasonably possible after the exercise of any such setoff or enforcement right, it shall notify the Borrower of its exercise of such setoff or enforcement right; provided, however, that the failure of the Bank to provide such notice shall not affect the validity of the exercise of such setoff or enforcement rights.  Nothing in this Agreement shall be deemed a waiver or prohibition of or restriction on the Bank’s rights of banker’s lien, setoff, and counterclaim available pursuant to law.
ARTICLE VIII.     
MISCELLANEOUS
Section 8.1.    Modifications.  Notwithstanding any provisions to the contrary herein, any term of this Agreement may be amended with the written consent of the Borrower; provided that no amendment, modification, or waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same is in writing and signed by the Bank, and then such amendment, modification, waiver, or consent shall be effective only in the specific instance and for the purpose for which given.
Section 8.2.    Expenses.  Whether or not the transactions contemplated hereby are consummated, the Borrower agrees to pay or reimburse the Bank upon demand for all reasonable out-of-pocket expenses paid or incurred by the Bank, including audit and appraisal fees, filing and recording costs and fees, charges and disbursements of outside counsel to the Bank (determined on the basis of such counsel’s generally applicable rates, which may be higher than the rates such counsel charges the Bank in certain matters), and/or the allocated costs of in-house counsel incurred from time to time, in connection with the negotiation, preparation, approval, 

42

review, execution, delivery, administration, amendment, modification, interpretation, collection, and enforcement of this Agreement and the other Loan Documents and any commitment letters relating thereto paid or incurred by the Bank in connection with the collection and enforcement of this Agreement and any other Loan Document.  The Borrower’s obligations under this Section shall survive any termination of this Agreement.  
Section 8.3.    Waivers, Etc.  No failure on the part of the Bank or the holder of the Revolving Note to exercise and no delay in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right.  The remedies herein and in the other Loan Documents provided are cumulative and not exclusive of any remedies provided by law.
Section 8.4.    Notices.  Except when telephonic notice is expressly authorized by this Agreement, any notice or other communication to any party in connection with this Agreement shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier, or United States mail (postage prepaid) addressed to such party at the address specified on the signature page hereof, or at such other address as such party specifies to the other party hereto in writing.  All periods of notice shall be measured from the date of delivery if manually delivered, from the date of sending if sent by facsimile transmission, from the first Banking Day after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed; provided, however, that any notice to the Bank under Article II hereof shall be deemed to have been given only when received by the Bank.
Section 8.5.    Taxes.  The Borrower agrees to pay, and save the Bank harmless from all liability for, any stamp or other taxes that may be payable with respect to the execution or delivery of this Agreement or the issuance of the Revolving Note, which obligation of the Borrower shall survive the termination of this Agreement.
Section 8.6.    Successors and Assigns; Participations; Purchasing Banks.
(a)    This Agreement shall be binding upon and inure to the benefit of the Borrower, the Bank, all future holders of the Revolving Note, and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Bank.
(b)    The Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other financial institutions (“Participants”) participating interests in a minimum amount of $500,000 in any Revolving Loan or other Obligation owing to the Bank, the Revolving Note, the Revolving Commitment, or any other interest of the Bank hereunder.  In the event of any such sale by the Bank of participating interests to a Participant, (i) the Bank’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, (ii) the Bank shall remain solely responsible for the performance thereof, (iii) the Bank 

43

shall remain the holder of the Revolving Note for all purposes under this Agreement, (iv) the Borrower shall continue to deal solely and directly with the Bank in connection with the Bank’s rights and obligations under this Agreement, and (v) the agreement pursuant to which such Participant acquires its participating interest herein shall provide that the Bank shall retain the sole right and responsibility to enforce the Obligations, including, without limitation, the right to consent or agree to any amendment, modification, consent, or waiver with respect to this Agreement or any other Loan Document, provided that such agreement may provide that the Bank will not consent or agree to any such amendment, modification, consent, or waiver with respect to the matters set forth in Sections 8.2(a) through (e) without the prior consent of such Participant.  The Borrower agrees that if amounts outstanding under this Agreement, the Revolving Note, or the Loan Documents are due and unpaid, or have been declared or have become due and payable upon an Event of Default, each Participant shall be deemed to have, to the extent permitted by applicable law, the right of setoff in respect of its participating interest in amounts owing under this Agreement and the Revolving Note and other Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement, the Revolving Note, or any other Loan Document.  The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.4, 2.6, 2.18, 2.20 and 2.21 with respect to its participation in the Revolving Commitment and Revolving Loans; provided, that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the Bank would have been entitled to receive in respect of the amount of the participation transferred by the Bank to such Participant had no such transfer occurred.
(c)    The Borrower shall not be liable for any costs incurred by the Bank in effecting any participation under subparagraph (b) of this subsection and the Bank will reimburse the Borrower for such costs unless the Borrower has, by separate written agreement, agreed to pay such costs.
(d)    The Bank may disclose to any assignee or Participant and to any prospective assignee or Participant any and all financial information in the Bank’s possession concerning the Borrower or any Subsidiary that has been delivered to the Bank by or on behalf of the Borrower or any Subsidiary pursuant to this Agreement or that has been delivered to the Bank by or on behalf of the Borrower or any Subsidiary in connection with the Bank’s credit evaluation of the Borrower or any Subsidiary prior to entering into this Agreement, provided that prior to disclosing such information, the Bank shall first obtain the agreement of such prospective assignee or Participant to comply with the provisions of Section 8.7.
(e)    Notwithstanding any other provision in this Agreement, the Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any note held by it in favor of any federal reserve bank in accordance with Regulation A of the Board or U.S. 

44

Treasury Regulation 31 C.F.R § 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.
(f)    In connection with this Agreement, the other Loan Documents, and the transactions and any litigation relating thereto (including in connection with (i) the negotiation, preparation, and execution of the Loan Documents, (ii) the perfection of security interests, if any is hereafter granted, (iii) the completion of any filings or registrations, (iv) the obtaining of any consents, and (v) any present or future legal representation relating to the administration, amendment, modification, waiver, or enforcement of, or any restructuring or forbearance arrangement relating to, any Loan Document), Dorsey & Whitney LLP and any other counsel retained by the Bank in connection with any of such matters (collectively, the “Bank’s Counsel”) has only represented and shall only represent the Bank.  The Borrower and each assignee or Participant of the Bank (by accepting an assignment or a participation under Section 8.6 hereof) agrees and acknowledges that the Bank’s Counsel does not represent it, and no attorney-client relationship exists between it and the Bank’s Counsel, in connection with any of the matters described in the preceding sentence.
Section 8.7.    Confidentiality of Information.  The Bank shall use reasonable efforts, but in no event efforts that are less than the efforts the Bank exerts to maintain or protect the confidentiality of its own confidential information, to assure that information about the Borrower and its operations, affairs, and financial condition not generally disclosed to the public or to trade and other creditors that is furnished to the Bank pursuant to the provisions hereof is used only for the purposes of this Agreement, and any other relationship between the Bank and the Borrower shall not be divulged to any Person other than the Bank, its Affiliates, and their respective officers, directors, employees, and agents, except:  (a) to their attorneys and accountants, (b) in connection with the enforcement of the rights of the Bank under the Loan Documents or otherwise in connection with applicable litigation, (c) in connection with assignments and participations and the solicitation of prospective assignees and Participants referred to in the immediately preceding Section but only after such prospective assignee or Participant has executed the agreement referred to in Section 8.6(d), (d) if such information is generally available to the public other than as a result of disclosure by the Bank or any Participant, (e) to any direct or indirect contractual counterparty in any hedging arrangement or such contractual counterparty’s professional advisor but only after such prospective counterparty or professional advisor has executed an agreement similar to the agreement described in Section 8.6(d), (f) to any nationally recognized rating agency that requires information about the Bank’s investment portfolio in connection with ratings issued with respect to the Bank, and (g) as may otherwise be required or requested by any regulatory authority having jurisdiction over the Bank or by any applicable law, rule, regulation, or judicial process, the opinion of the Bank’s counsel concerning the making of such disclosure to be binding on the parties hereto.  The Bank shall not incur any liability to the Borrower by reason of any disclosure permitted by this Section.

45

Section 8.8.    Governing Law and Construction.  THE VALIDITY, CONSTRUCTION, AND ENFORCEABILITY OF THIS AGREEMENT AND THE REVOLVING NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.  Whenever possible, each provision of this Agreement and the other Loan Documents and any other statement, instrument, or transaction contemplated thereby or relating thereto shall be interpreted so as to be effective and valid under such applicable law, but, if any provision of this Agreement, the other Loan Documents, or any other statement, instrument, or transaction contemplated thereby or relating thereto is held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement, the other Loan Documents, or any other statement, instrument, or transaction contemplated thereby or relating thereto.
Section 8.9.    Consent to Jurisdiction.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR CALIFORNIA STATE COURT SITTING IN ORANGE COUNTY, CALIFORNIA OR LOS ANGELES COUNTY, CALIFORNIA; AND THE PARTIES CONSENT TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION MAY HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
Section 8.10.    Judicial Reference Agreement.
(j)    Any and all disputes, claims, and controversies arising out of the Loan Documents or the transactions contemplated thereby (including, but not limited to, actions arising in contract or tort and any claims by the Borrower against the Bank related in any way to the Revolving Loans) (individually, a “Dispute”) that are brought before a forum in which pre-dispute waivers of the right to trial by jury are invalid under applicable law shall be subject to the terms of this Section 8.10.
(k)    Any and all Disputes shall be heard by a referee and resolved by judicial reference pursuant to California Code of Civil Procedure Sections 638 et seq.  The referee shall be a retired California state court judge or an attorney licensed to practice law in the State of California with at least 10 years’ experience practicing commercial law.  Neither the Borrower nor the Bank shall seek to appoint a referee that may be disqualified pursuant to California Code of Civil Procedure Section 641 or 641.2 without the prior written consent of the 

46

other party.  If the Bank and the Borrower are unable to agree upon a referee within 10 calendar days after one party serves a written notice of intent for judicial reference upon the other party, then the referee will be selected by the court in accordance with California Code of Civil Procedure Section 640(b).
(l)    The referee shall render a written statement of decision and shall conduct the proceedings in accordance with the California Code of Civil Procedure, the Rules of Court, and California Evidence Code, except as otherwise specifically agreed by the parties and approved by the referee.  The referee’s statement of decision shall set forth findings of fact and conclusions of law.  The decision of the referee shall be entered as a judgment in the court in accordance with the provisions of California Code of Civil Procedure Sections 644 and 645.  The decision of the referee shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the superior court.
(m)    Nothing in this Section 8.10 shall be deemed to apply to or limit the right of the Bank (i) to exercise self-help remedies such as (but not limited to) setoff, (ii) to foreclose judicially or nonjudicially against any real or personal property collateral, or to exercise judicial or nonjudicial power of sale rights, (iii) to obtain from a court provisional or ancillary remedies (including, but not limited to, injunctive relief, a writ of possession, prejudgment attachment, a protective order, or the appointment of a receiver), or (iv) to pursue rights against any party in a third-party proceeding in any action brought against the Bank (including actions in bankruptcy court).  The Bank may exercise the rights set forth in the foregoing clauses (i) through (iv), inclusive, before, during, or after the pendency of any judicial reference proceeding.  Neither the exercise of self-help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies or the opposition to any such provisional remedies shall constitute a waiver of the right of any party, including, but not limited to, the claimant in any such action, to require submission to judicial reference of the merits of the Dispute occasioning resort to such remedies.  No provision in the Loan Documents regarding submission to jurisdiction and/or venue in any court is intended or shall be construed to be in derogation of the provisions in any Loan Document for judicial reference of any of Dispute.
(n)    If a Dispute includes multiple claims, some of which are found not subject to this Section 8.10, the Parties shall stay the proceedings of such Dispute or the part or parts thereof not subject to this Section 8.10 until all other Disputes or parts thereof are resolved in accordance with this Section 8.10.  If there are Disputes by or against multiple parties, some of which are not subject to this Section 8.10, the Borrower and the Bank shall sever the Disputes subject to this Section 8.10 and resolve them in accordance with this Section 8.10.  During the pendency of any Dispute that is submitted to judicial reference in accordance with this Agreement, each of the parties to such Dispute shall bear equal shares of the 

47

fees charged and costs incurred by the referee in performing the services described in this Section 8.10.  The compensation of the referee shall not exceed the prevailing rate for like services.  The prevailing party shall be entitled to reasonable court costs and legal fees, including customary attorney fees, expert witness fees, paralegal fees, the fees of the referee, a reimbursement of fees and costs paid during the pendency of a dispute in accordance with this Section 8.10(d), and other reasonable costs and disbursements charged to the party by its counsel, in such amount as the Referee determines.
(o)    In the event of any challenge to the legality or enforceability of this Section 8.10, the prevailing party shall be entitled to recover the costs and expenses from the non-prevailing party, including reasonable attorneys’ fees, incurred by it in connection with such challenge.
(p)    THIS SECTION 8.10 CONSTITUTES A “REFERENCE AGREEMENT” BETWEEN THE BORROWER AND THE BANK WITHIN THE MEANING OF AND FOR PURPOSES OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638.
Section 8.11.    Survival of Agreement.  All representations, warranties, covenants, and agreements made by the Borrower herein, in the other Loan Documents, and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be deemed to have been relied upon by the Bank and shall survive the making of the Revolving Loans by the Bank and the execution and delivery to the Bank by the Borrower of the Revolving Note, regardless of any investigation made by or on behalf of the Bank, and shall continue in full force and effect as long as any Obligation is outstanding and unpaid and so long as the Revolving Commitment has not been terminated; provided, however, that the obligations of the Borrower under Sections 2.18, 2.20, 2.21, 8.2, 8.6, and 8.12 shall survive payment in full of the Obligations and the termination of the Revolving Commitment.
Section 8.12.    Indemnification.  The Borrower hereby agrees to defend, protect, indemnify, and hold harmless the Bank and its Affiliates and the directors, officers, employees, attorneys, and agents of the Bank and its Affiliates (collectively, the “Indemnitees”) from and against any and all claims, actions, damages, liabilities, judgments, costs, and expenses (including all reasonable fees and disbursements of counsel that may be incurred in the investigation or defense of any matter) imposed upon, incurred by, or asserted against any Indemnitee, whether direct, indirect, or consequential and whether based on any federal, state, local, or foreign laws or regulations (including securities laws, environmental laws, commercial laws, and regulations), under common law or on equitable cause, or on contract or otherwise:
(f)    by reason of, relating to, or in connection with the execution, delivery, performance, or enforcement of any Loan Document, any commitments relating thereto, or any transaction contemplated by any Loan Document; or

48

(g)    by reason of, relating to, or in connection with any credit extended or used under the Loan Documents or any act done or omitted by any Person, or the exercise of any rights or remedies thereunder;
provided, however, that the Borrower shall not be liable to any Indemnitee for any portion of such claims, damages, liabilities, and expenses resulting from such Indemnitee’s gross negligence or willful misconduct.  In the event this indemnity is unenforceable as a matter of law as to a particular matter or consequence referred to herein, it shall be enforceable to the full extent permitted by law.
This indemnification applies, without limitation, to any act, omission, event, or circumstance existing or occurring on or prior to the later of the Termination Date or the date of payment in full of the Obligations, including specifically Obligations arising under clause (b) of this Section.  The indemnification provisions set forth above shall be in addition to any liability the Borrower otherwise has.  Without prejudice to the survival of any other obligation of the Borrower hereunder, the indemnities and obligations of the Borrower in this Section shall survive the payment in full of the other Obligations.
Section 8.13.    Captions.  The captions or headings herein and any table of contents hereto are for convenience only and in no way define, limit, or describe the scope or intent of any provision of this Agreement.
Section 8.14.    Entire Agreement.  This Agreement and the other Loan Documents embody the entire agreement and understanding between the Borrower and the Bank with respect to the subject matter thereof.  This Agreement supersedes all prior agreements and understandings relating to the subject matter hereof.  Nothing in this Agreement or in any other Loan Document, expressed or implied, is intended to confer upon any Persons other than the parties hereto any rights, remedies, obligations, or liabilities hereunder or thereunder.
Section 8.15.    Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.
Section 8.16.    Borrower Acknowledgements.  The Borrower hereby acknowledges that (a) it has been advised by counsel in the negotiation, execution, and delivery of this Agreement and the other Loan Documents, (b) the Bank has no fiduciary relationship to the Borrower, the relationship being solely that of debtor and creditor, (c) no joint venture exists between the Borrower and the Bank, and (d) the Bank undertakes no responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the business or operations of the Borrower, the Borrower shall rely entirely upon its own judgment with respect to its business, and any review, inspection, or supervision of, or information supplied to, the Borrower by the Bank is for the protection of the Bank, and neither the Borrower nor any third party is entitled to rely thereon.
Section 8.17.    Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Revolving Loan, together with all fees, charges, 

49

and other amounts that are treated as interest on such Revolving Loan under applicable law (collectively, the “Charges”), exceeds the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received, or reserved by the Bank in accordance with applicable law, the rate of interest payable in respect of such Revolving Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate, and, to the extent lawful, the interest and Charges that would have been payable in respect of such Revolving Loan but were not payable as a result of the operation of this Section shall be cumulated, and the interest and Charges payable to the Bank in respect of other Revolving Loans or periods shall be increased (but not above the Maximum Rate therefor) until the Bank has received such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment.
[The remainder of this page is intentionally left blank.]

50

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
UNIVERSAL ELECTRONICS INC.
By:    /s/ Bryan Hackworth        
Name:    Bryan Hackworth        
Title:    SVP & CFO            
Address for Borrower: 
 
Universal Electronics Inc. 
at its World Headquarters address found  
on its website – www.ueic.com 
Attention:  Chief Financial Officer
with a required copy to: 
 
Universal Electronics Inc. 
at its World Headquarters address found  
on its website – www.ueic.com 
Attention:  General Counsel

S-1
Amended and Restated Credit Agreement

U.S. BANK NATIONAL ASSOCIATION
By:    /s/ Steven G. Krenik        
Name:    Steven G. Krenik
Title:    Vice President
Address for Bank: 
 
4100 Newport Place, Suite 900 
Newport Beach, California 92660 
Fax:  (949) 863-2335 
Attention:  Steven G. Krenik

S-2
Amended and Restated Credit Agreement

List of Exhibits and Schedules
Exhibit A – Form of Revolving Note
Exhibit B – Matters to Be Covered by Opinion of Counsel to the Borrower
Exhibit C – Form of Compliance Certificate
Schedule 1.1 – Pricing Schedule
Schedule 4.7 – Environmental Compliance
Schedule 4.18 – Subsidiaries
Schedule 6.10 – Investments
Schedule 6.11 – Indebtedness
Schedule 6.12 – Liens
Schedule 6.13 – Contingent Obligations

EXHIBIT A TO 
CREDIT AGREEMENT
REVOLVING NOTE
$55,000,000    October [ ], 2012
Newport Beach, California
FOR VALUE RECEIVED, UNIVERSAL ELECTRONICS INC., a corporation organized under the laws of the State of Delaware, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”) at its main office in Newport Beach, California, in lawful money of the United States of America in Immediately Available Funds (as such term and each other capitalized term used herein are defined in the Credit Agreement hereinafter referred to) on the Termination Date the principal amount of FIFTY-FIVE MILLION AND NO/100 DOLLARS ($55,000,000) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Bank under the Credit Agreement, and to pay interest (computed on the basis of actual days elapsed and a year of 360 days) in like funds on the unpaid principal amount hereof from time to time outstanding at the rates and times set forth in the Credit Agreement.
This note is the Revolving Note referred to in the Credit Agreement dated concurrently herewith (as the same may hereafter be from time to time amended, restated, or otherwise modified, the “Credit Agreement”) between the undersigned and the Bank.  This note is subject to acceleration, upon the terms provided in the Credit Agreement.
In the event of default hereunder, the undersigned agrees to pay all costs and expenses of collection, including reasonable attorneys’ fees, in accordance with the terms and conditions set forth in the Credit Agreement.  Except as otherwise expressly set forth under the terms and conditions set forth in the Credit Agreement, the undersigned waives demand, presentment, notice of nonpayment, protest, notice of protest, and notice of dishonor.
This note amends and restates the Revolving Note given by the undersigned in favor of the Bank dated November 1, 2010 , in the original principal amount of $20,000,000 (the “Prior Note”).  It is expressly intended, understood, and agreed that this note shall replace the Prior Note as evidence of such indebtedness of the undersigned to the Bank, and all indebtedness heretofore represented by the Prior Note, as of the date hereof, shall be considered outstanding hereunder from and after the date hereof and shall not be considered paid (nor shall the undersigned’s obligation to pay the same be considered discharged or satisfied) as a result of the issuance of this note.  
THE VALIDITY, CONSTRUCTION, AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

Ex A-1

	
			
	 
	 
	UNIVERSAL ELECTRONICS INC.

	 
	 
	 

	 
	By
	 

	 
	 
	 

	 
	Title
	 

Ex A-2

EXHIBIT B TO 
CREDIT AGREEMENT
MATTERS TO BE COVERED BY 
OPINION OF COUNSEL 
TO THE BORROWER AND ITS SUBSIDIARIES
The opinion of counsel to the Borrower and its Subsidiaries called for by Article III of the Credit Agreement shall be addressed to the Bank and dated the Effective Date.  It shall be satisfactory in form and substance to the Bank and shall cover the matters set forth below, subject to such assumptions, exceptions, and qualifications as are acceptable to the Bank and its counsel.  Capitalized terms used herein have the respective meanings given such terms in the Credit Agreement.
1.The Borrower is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted, to enter into the Loan Documents, and to perform all of its obligations under each and all of the foregoing.  The Borrower is duly qualified and in good standing as a foreign corporation in all of the jurisdictions in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would permanently preclude the Borrower from enforcing its rights with respect to any material asset or expose the Borrower to any material liability.
2.    The Borrower has duly authorized by all necessary corporate action its execution, delivery, and performance of the Loan Documents.
3.    The Loan Documents constitute the legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.
4.    The execution, delivery, and performance by the Borrower of the Loan Documents will not (i) violate any provision of any law, statute, rule, or regulation or, to the best knowledge of such counsel, any order, writ, judgment, injunction, decree, determination, or award of any court, governmental agency, or arbitrator presently in effect applicable to the Borrower, (ii) violate or contravene any provision of the certificate of incorporation or bylaws of the Borrower, or (iii) result in a breach of or constitute a default under any indenture, loan, or credit agreement or any other agreement, lease, or instrument known to such counsel to which the Borrower is a party or by which it or any of its properties may be bound or result in the creation of any Lien thereunder.
5.    No order, consent, approval, license, authorization, or validation of, filing, recording, or registration with, or exemption by any governmental or public body or authority is required on the part of the Borrower to authorize, or is required in connection with the execution, delivery, and performance of or the legality, validity, binding effect, or enforceability of, the Loan Documents.

Ex B-1

6.    To the best knowledge of such counsel, there are no actions, suits, or proceedings pending or threatened against or affecting the Borrower or any of its properties before any court or arbitrator, or any governmental department, board, agency, or other instrumentality, that (i) challenge the legality, validity, or enforceability of the Loan Documents, or (ii) if determined adversely to the Borrower could constitute a Material Adverse Occurrence.
7.    Each Subsidiary is a corporation duly incorporated and validly existing and in good standing under the laws of its jurisdiction of incorporation indicated on Schedule 4.18 to the Credit Agreement and has all requisite corporate power and authority to carry on its business as now conducted and to perform all of its obligations under each and all of the foregoing.  Each Subsidiary is duly qualified and in good standing as a foreign corporation in all of the jurisdictions in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would permanently preclude such Subsidiary from enforcing its rights with respect to any material asset or expose such Subsidiary to any material liability.
8.    The Security Documents create the Liens they purport to create upon the properties and interests specifically described therein.  The descriptions of properties and interests in the Security Documents and any related financing statements are adequate for the purpose of such instruments and for perfection of the Liens of the Bank.  

Ex B-2

EXHIBIT C TO 
CREDIT AGREEMENT
COMPLIANCE CERTIFICATE
To:  U.S. Bank National Association:
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1)I am the duly elected chief financial officer of Universal Electronics Inc. (the “Borrower”);
(2)    I have reviewed the Credit Agreement dated as of October 2, 2012, between the Borrower and U.S. Bank National Association (the “Credit Agreement”), and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower during the accounting period covered by the attachment hereto;
(3)    The examination described in paragraph (2) did not disclose, and I have no knowledge, whether arising out of such examinations or otherwise, of the existence of any condition or event that constitutes a Default or an Event of Default (as such terms are defined in the Credit Agreement) during or at the end of the accounting period covered by the attachment hereto or as of the date of this Certificate, except as described below (or on a separate attachment to this Certificate).  The exceptions, listing, in detail, the nature of the condition or event, the period during which it has existed, and the action the Borrower has taken, is taking, or proposes to take with respect to each such condition or event, are as follows:
 
     
    
(4)    Since the [Closing Date] [Compliance Certificate of most recent date], the Borrower has acquired or created the additional United States patents, patent applications, trademarks and trademark registrations, described on Exhibit A hereto.
The foregoing certification, together with the computations in the attachment hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this____ day of_______________, ______ pursuant to Section 5.1(c) of the Credit Agreement.
	
			
	 
	 
	UNIVERSAL ELECTRONICS INC.

	 
	 
	 

	 
	By
	 

	 
	 
	 

	 
	Title
	 

Exh C-1

ATTACHMENT TO COMPLIANCE CERTIFICATE 
 
AS OF ______________, ____WHICH PERTAINS 
TO THE PERIOD FROM ________________, ______ 
TO ________________, _______
Sections identified are Sections of the Credit Agreement to which reference  
should be made for a more complete description of requirements.
	
				
	Covenant
	Actual
	Required
	Compliance 
(Yes/No)

	Borrower and Restricted Subsidiaries (pursuant to Section 5.14)
	______ % of the aggregate amount of the consolidated assets of the Borrower and the Borrower's Subsidiaries and ______ % of the aggregate Consolidated EBITDA of the Borrower and the Borrower's Subsidiaries
	The Borrower and Restricted Subsidiaries must at least constitute both (i) 70% of the aggregate amount of the consolidated assets of the Borrower and the Borrower's Subsidiaries and (ii) 70% of the aggregate Consolidated EBITDA of the Borrower and the Borrower's Subsidiaries
	 

	Consolidated Cash Flow Leverage Ratio (pursuant to Section 6.14)
	_______ to 1.0
	Not more than 1.50 to 1.0 as of the last day of any fiscal quarter
	 

	Consolidated Fixed Charge Coverage Ratio (pursuant to Section 6.15)
	_______ to 1.0
	Not less than 2.00 to 1.0
	 

	Consolidated Liquidity (pursuant to Section 6.16)
	_______ to 1.0
	Not less than (a) $30,000,000 as of the last day of each fiscal quarter for the period from the Effective Date to and including March 31, 2013; (b) $35,000,000 as of June 30 and September 30, 2013; and (c) $40,000,000 as of the last day of each fiscal quarter ending on and after December 31, 2013.
	 

Ex C-2

EXHIBIT A TO 
COMPLIANCE CERTIFICATE
A.    United States Patents

	
					
	Title
	Application
Filing Date
	Issue Date
	Patent No.
	Owner

	

	 
	 
	 
	 

B.    United States Patent Applications

	
				
	Title
	Application Filing Date
	Application Serial No.
	Owner

	

	 
	 
	 

C.    Foreign Patents

	
						
	Country or
Jurisdiction
	Title
	Application Filing Date
	Issue Date
	Patent No.
	Owner

	

	 
	 
	 
	 
	 

D.    Foreign Patent Applications

	
					
	Country or
Jurisdiction
	Title
	Filing Date
	Application No.
	Owner

	

	 
	 
	 
	 

E.    Patent Licenses
[Describe]

F.    United States Copyright Registrations

	
				
	Copyright
	Registration Date
	Registration No.
	Owner

	

	 
	 
	 

G.    Foreign Copyrights

Ex C-3

	
					
	Country or Jurisdiction
	Copyright
	Registration Date
	Registration No.
	Owner

	 
	

	 
	 
	 

H.    Copyright Licenses
[Describe]

I.    United States Trademarks

	
				
	Mark
	Registration Date
	Registration No.
	Owner

	

	 
	 
	 

J.     United States Trademark Applications

	
				
	Mark
	Application Filing Date
	Serial No.
	Owner

	

	 
	 
	 

K.    United States Common Law Trademarks

	
		
	Mark
	Owner

	

	 

L.    Foreign Trademarks

	
					
	Country or Jurisdiction
	Mark
	Registration Date
	Registration No.
	Owner

	 
	

	 
	 
	 

M.    Trademark Licenses
[Describe]

N.    Trade Secrets
[Describe category]

O.    Domain Names
[Describe]

P.    Proprietary Computer Software
[Describe]

Ex C-4

Schedule 1.1 – Pricing Schedule
PRICING SCHEDULE
	
				
	Applicable 
Margin
	Level I 
Status
	Level II 
Status
	Level III 
Status

	LIBOR Rate Loan
	1.25%
	1.50%
	1.75%

	Alternate Base Rate Loan
	(0.250)%
	0.00%
	0.25%

References to Sections and the Credit Agreement refer to the Credit Agreement to which this Schedule is attached, and Sections therein.  For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule:
“Financials” means the annual or quarterly financial statements of the Borrower delivered pursuant to Section 5.1(a) or (b).
“Level I Status” exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in its most recent financial statement, the Consolidated Cash Flow Leverage Ratio is less than 1.00 to 1.00.
“Level II Status” exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in its most recent financial statements, the Consolidated Cash Flow Leverage Ratio is less than 1.50 to 1.00 and is greater than or equal to 1.00 to 1.00.
“Level III Status” exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in its most recent financial statements, the Consolidated Cash Flow Leverage Ratio is greater than or equal 1.50 to 1.00.
“Status” means either Level I Status, Level II Status or Level III Status.
The Applicable Margin shall be determined in accordance with the foregoing table based on the Borrower’s Status as reflected in the then most recent financial statements.  Adjustments, if any, to the Applicable Margin shall be effective from and after the first day of the first month immediately following the date on which the delivery of such financial statements is required until the first day of the first month immediately following the next such date on which delivery of such financial statements of the Borrower is so required.  If the financial statements (the “initial Financials”) on which a determination of the Status are restated (the “restated Financials”), and as a result the Applicable Margin based on the initial Financials would have been determined by reference to a different Status, then on the first day of the first month immediately following delivery to the Bank of such restated Financials either (i) the Borrower shall pay additional interest, determined by reference to such different Status if such different Status is at a higher Status than the Status determined by reference to the initial Financials,  or (ii) the Bank shall credit the Borrower 

Sch 1.1-1

for the additional interest paid to the Bank as determined by reference to such different Status if such different Status is at a lower Status than the Status determined by reference to the initial Financials.  If the Borrower fails to deliver the financial statements to the Bank at the time required pursuant to Section 5.1, then the Applicable Margin shall be the highest Applicable Margin set forth in the foregoing table until five days after such financial statements are so delivered. Subject to the preceding sentence, from and after the date of the Credit Agreement to and including the first day of the first month immediately following the delivery of financial statements for the fiscal quarter ending on September 30, 2012, the Status shall be Level I Status.

Sch 1.1-2

Schedule 4.7 – Environmental Compliance
None*

__________________________ 
*Universal Electronics Inc. and its Subsidiaries lease its real property and thus are obligated under the respective leases for environmental compliance under standard provisions contained within the leases.  Such provisions are customary for leases of this nature.

Sch 4.7-1

Schedule 4.18 – Subsidiaries*
UNIVERSAL ELECTRONICS INC. SUBSIDIARIES 
Universal Electronics BV (The Netherlands)RS 
UNIVERSAL ELECTRONICS BV SUBSIDIARIES
		
	One For All Argentina SRL (Argentina) – 
	95.92% Universal Electronics BV; 4.08% Universal Electronics Inc.

One For All France S.A.S. (France)
One For All GmbH (Germany)
One For All Iberia SL (Spain)
One For All UK, Ltd. (England and Wales)
Ultra Control Consumer Electronics GmbH (Germany)
Universal Electronics Italia S.R.L. (Italy)
UEI Hong Kong Private Limited (Hong Kong)RS 
UEI Hong Kong Holdings Co Private Limited (Hong Kong)
Universal Electronics Holdings, LLC
		
	UEI Brasil Controles Remotos Ltda. – 
	99% Universal Electronics BV; 1% Universal Electronics Holdings, LLC

UEI HONG KONG PRIVATE LIMITED SUBSIDIARIES
UE Singapore Private Limited Ltd. (Republic of Singapore)
Enson Assets Limited (British Virgin Islands)RS 
UEI HONG KONG HOLDINGS CO PRIVATE LIMITED SUBSIDIARIES
Universal Electronics (Shenzhen) LLC (Republic of China)
UE SINGAPORE PRIVATE LIMITED. LTD. SUBSIDIARIES
		
	UEI Electronics Private Limited (India) – 
	99% UE Singapore Private Limited Ltd.; 1% Universal Electronics Inc.

ENSON ASSETS LIMITED SUBSIDIARIES
Gemstar Polyfirst Limited (Hong Kong)
C. G. Technology Limited (Hong Kong)
C. G. Development Limited (Hong Kong)RS 
CG Group Limited (British Virgin Islands)
C. G. DEVELOPMENT LIMITED SUBSIDIARIES
Gemstar Technology (China) Co. Limited (PRC)RS 
Gemstar Technology (Yasngzhou) Co. Limited (PRC)RS 
Gemstar Technology (Quinzhao) Co. Limited (PRC)RS 
UEI Cayman Inc. (Cayman Islands)
CG GROUP LIMITED SUBSIDIARIES
C. G. Timepiece Limited (Hong Kong)
CG Asia Limited (British Virgin Islands)
______________________ 
* Subsidiary is 100% owned by its parent unless otherwise set forth herein 
RS Restricted Subsidiary

Sch 4.18-1

Schedule 6.10 – Investments
None

Sch 6.10-1

Schedule 6.11 – Indebtedness
None

Sch 6.11-1

Schedule 6.12 – Liens
None

Sch 6.12-1

Schedule 6.13 – Contingent Obligations
None* 

______________________
		
	*
	From time to time, Borrower has guaranteed the performance of its wholly-owned subsidiary Universal Electronics BV to customers of Universal Electronics BV for the sale, service and warranting of products sold by Universal Electronics BV to its customers.

Sch 6.13-1TBIO-EX10.39_2012.12.31-10K

LOAN AND SECURITY AGREEMENT 
(TERM LOAN AND REVOLVING LOAN) 
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of March 13, 2013 (the "Effective Date") by and among THIRD SECURITY SENIOR STAFF 2008 LLC, as administrative agent ("Agent"), and a lender, and the other lenders party hereto from time to time (each a "Lender", and collectively the "Lenders"), and TRANSGENOMIC, INC., a Delaware corporation with offices located at 12325 Emmet Street, Omaha, Nebraska 68164 ("Borrower"), provides the terms on which Lenders agree to lend to Borrower and Borrower shall repay Lenders. The parties agree as follows: 
1     ACCOUNTING AND OTHER TERMS 
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. 
2    TERM LOAN, REVOLVING LOAN AND TERMS OF PAYMENT 
2.1     Promise to Pay Term Loan.     Borrower hereby unconditionally promises to pay to each Lender in accordance with its Pro Rata Share, the outstanding principal amount of the Term Loan made by the Lenders and accrued and unpaid interest thereon, and any other amounts due hereunder, as and when due in accordance with this Agreement. 
2.2     Term Loan. 
(a)     Availability.  Subject to the terms and conditions of this Agreement, on the Effective Date, the Lenders agree, severally and not jointly, to make one (1) term loan to the Borrower in an aggregate amount of Four Million Dollars ($4,000,000.00) according to each Lender's Term Loan Commitment as set forth on Schedule 1 hereto (the "Term Loan"). After repayment, no Term Loan may be re-borrowed. 
(b)     Interest Payments and Repayment.  Commencing on the first (1st) Payment Date following the Effective Date, and continuing on the Payment Date of each successive month thereafter through and including the Maturity Date, Borrower shall make monthly payments of interest to each Lender in accordance with its respective Pro Rata Share, in arrears, and calculated as set forth in Section 2.3. Commencing on the Amortization Date, and continuing on the Payment Date of each successive month thereafter through and including the Maturity Date, Borrower shall make consecutive monthly payments of principal to each Lender in accordance with its respective Pro Rata Share, as calculated by Agent based upon: (i) the amount of such Lender's Term Loan, and (ii) a straight-line amortization schedule for the Term Loan, beginning on the Amortization Date and ending on the Maturity Date. All unpaid principal and accrued interest with respect to the Term Loan is due and payable in full on the

 Maturity Date. The Term Loan may be prepaid only in accordance with Sections 2.2(c) and 2.2(d). 

(c)     Mandatory Prepayments.   If the Term Loan is accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loan and all other Obligations, and all accrued and unpaid interest thereon, plus (ii) the Final Payment, plus (iii) the Prepayment Fee, plus (iv) all other sums that shall have become due and payable hereunder, including Lenders' Expenses. 

(d)    Permitted Prepayment of the Term Loan.  Borrower shall have the option to prepay all or any portion of the Term Loans advanced by the Lenders under this Agreement; provided. however, that Borrower (i) provides written notice to Agent of its election to prepay the Term Loans at least thirty (30) days prior to such prepayment, and (ii) pays to Agent, for payment to each Lender in accordance with its respective Pro Rata Share, on the date of such prepayment, an amount equal to the sum of: (A) the amount of the Term Loan (plus accrued and unpaid interest thereon) being prepaid, plus (B) the Final Payment applicable to the amount being prepaid, plus (C) the Prepayment Fee applicable to the amount being prepaid, plus (D) all other sums that shall have become due and payable hereunder, including Lenders' Expenses. 
2.3     Payment of Interest on the Term Loan. 
(a)     Computation of Interest.  Interest on the Term Loan and all fees payable hereunder shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which such interest accrues. In computing interest on the Term Loan, the date of the making of the Term Loan shall be included and the date of payment shall be excluded; provided, that if the Term Loan is repaid on the same day on which it is made, such day shall be included in computing interest on the Term Loan. 
(b)     Interest Rate Determination.  Subject to the provisions of Section 2.3( c) below, the Term Loan shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a rate per annum equal to the sum of (i) the greater of (A) the LIBOR Rate in effect for the applicable Interest Period and (B) three percent (3.00%), plus (ii) the LIBOR Rate Margin. The foregoing subpart (i) will be adjusted on the first (1st) day of each Interest Period and fixed for the duration of each such Interest Period. As of each Interest Rate Determination Date, Agent shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Term Loan for which an interest rate is then being determined for the applicable Interest Period. In the event that Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), as of any Interest Rate Determination Date with respect to any Term Loan, that adequate and fair means do not exist for ascertaining the interest rate applicable to such Term Loan on the basis provided for in the definition of Base LIBOR Rate, then Agent may select a comparable replacement index and corresponding margin. 
(c)     Default Rate.  Upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum that is five hundred (500) basis points above the rate that is otherwise applicable thereto (the "Default Rate"). Payment or 

-  2 -

acceptance of the increased interest rate provided in this Section 2.3 (c) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agent or Lenders. 
(d)    Debit of Accounts.  Any Lender may debit or issue automated clearing house ("ACH") orders to any of Borrower's Deposit Accounts, including the Designated Deposit Account, for principal and interest payments when due or any other amounts Borrower owes the Lenders under the Loan Documents when due. These debits shall not constitute a set-off. Borrower shall execute and deliver to each Lender such authorizations and forms as any Lender may deem necessary for any such ACH orders. 
2.4     Fees on Term Loan. Borrower shall pay to each Lender: 
(a)     Closing Fee.  A non-refundable closing fee to each Lender, in accordance with its respective Pro Rata Share of the Term Loan, equal to the product of (i) one percent (1.00%) multiplied by (ii) the aggregate Term Loan Commitment of such Lender on the Effective Date; 
(b)     Final Payment. The Final Payment, when due under Section 2.2( c) or 2.2( d), or otherwise on the Maturity Date, to each Lender, in accordance with its respective Pro Rata Share of the Term Loan; 
(c)     Prepayment Fee.  The Prepayment Fee, when due under Section 2.2(c) or 2.2(d), to each Lender, in accordance with its respective Pro Rata Share of the Term Loan immediately prior to application of the corresponding prepayment; and 
(d)     Fees Fully Earned.  Unless otherwise provided in this Agreement or in a separate writing by the Lenders, Borrower shall not be entitled to any credit, rebate, or repayment of any fees paid to or earned by any Lender pursuant to this Agreement notwithstanding any termination of this Agreement. Each Lender may deduct amounts owing by Borrower under the clauses of this Section 2.4 pursuant to the terms of Section 2.3( d). Agent shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.4. 

2.5     Promise to Pay Revolving Line.   Borrower hereby unconditionally promises to pay to each Lender its Pro Rata Share of the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereof as and when due in accordance with this Agreement. 
2.6     Revolving Advances. 
(a)     Availability.  Subject to the terms and conditions of this Agreement and to deduction of Reserves, the Lenders agree, severally and not jointly, to make Advances not exceeding the Availability Amount to the Borrower according to each Lender's Pro Rata Share of the Revolving Line Commitment as set forth on Schedule 1 hereto. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. 

-  3 -

(b)     Termination; Repayment.  The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable. 

2.7     Overadvances.  If, at any time, the outstanding principal amount of any Advances exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower shall immediately pay to the Lenders in cash the amount of such excess (such excess, the "Overadvance"). Without limiting Borrower's obligation to repay Lenders any Overadvance, Borrower agrees to pay Lenders interest on the outstanding amount of any Overadvance, on demand, at the Default Rate. 
2.8     Payment of Interest on Advances. 
(a)     Advances. Subject to Section 2.8(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of 
(i) (x) the Prime Rate plus (y) one percent (1.00%) and (ii) 4.25%, which interest shall be payable monthly in accordance with Section 2.8(d) below. 

(b)     Default Rate.   Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at the Default Rate. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Lender Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.8(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Lenders. 

(c)     Adjustment to Interest Rate.   Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change. 
2.9     Fees on Revolving Line. Borrower shall pay to Agent for the benefit of Lenders: 
(a)     Commitment Fee. A fully earned, non-refundable commitment fee of Twenty Thousand Dollars ($20,000) on the Effective Date; 
(b)     Anniversary Fee.  A fully earned, non-refundable anniversary fee of Twenty Thousand Dollars ($20,000) on each anniversary of the Effective Date; 
(c)     Unused Revolving Line Facility Fee. Payable quarterly in arrears on the first calendar day of the fiscal quarter occurring after the Effective Date, on the first day of each calendar quarter occurring thereafter prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the "Unused Revolving Line Facility Fee") in an amount equal to one-half of one percent (0.50%) per annum of the average unused portion of the Revolving Line during such quarter, as determined by Agent. The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and 

-  4 -

shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding; and 
(c)     Fees Fully Earned.   Unless otherwise provided in this Agreement or in a separate writing by Agent, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Lenders pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Lenders' obligation to make loans and advances hereunder. Lenders may deduct amounts owing by Borrower under the clauses of this Section 2.9. 
2.10    Lenders' Expenses.   All of Lenders' Expenses (including reasonable attorneys' fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due (and in the absence of any other due date specified herein, such Lenders' Expenses shall be due upon demand). 
2.11     Payments.   All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 noon Pacific time on the date when due. Payments of principal and/or interest received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid. 
2.12     Withholding.  Payments received by any Lender from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to any Lender, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request; furnish each Lender with proof reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement. 
2.13     Secured Promissory Notes. Each Lender's Pro Rata Share of the Term Loan and Revolving Line may at such Lender's request be evidenced by a Secured Promissory Note in the form attached as Exhibit C hereto (each a "Secured Promissory Note"), and shall be repayable as set forth herein. Agent has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied. Borrower shall have no right to

-  5 -

specify the order or the accounts to which Agent shall allocate or apply any payments required to be made by Borrower to the Lenders or otherwise received by the Lenders under this Agreement when any such allocation or application is not specified elsewhere in this Agreement provided that no voluntary prepayment may be made to the Term Loan without the Borrower's consent. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Effective Date or at the time of receipt of any payment of principal on such Lender's Secured Promissory Note, an appropriate notation on such Lender's Secured Promissory Note Record reflecting the making of the Term Loan, Revolving Line or (as the case may be) the receipt of such payment. The outstanding principal amount of the Term Loan set forth on such Lender's Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower hereunder or under any Secured Promissory Note to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor. 
3     CONDITIONS TO CREDIT EXTENSIONS 
3.1     Conditions Precedent to Initial Credit Extension. Lenders' obligation to make the initial Credit Extension is subject to the condition precedent that Agent shall have received, in form and substance satisfactory to Agent, such documents, and completion of such other matters, as Agent may reasonably deem necessary or appropriate, including, without limitation: 
(a)    duly executed original signatures to the Loan Documents;

(b)    duly adopted Borrowing Resolutions for Borrower;

(c)    the Operating Documents and long form good standing certificate of Borrower certified by the Secretary of State of the State of Delaware and each jurisdiction in which the Borrower is qualified to do business;
 
(d)     duly executed signature pages to a payoff letter from PGxHealth or its successors and assigns of the debt owed by the Borrower (the "Prior Lender"); 
(e)     evidence that (i) the Liens securing Indebtedness owed by Borrower to the Prior Lender, and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements, have or will, concurrently with the initial Credit Extension, be terminated; 

(f)    certified copies, dated as of a recent date, of financing statement searches, as Agent may request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released; 
(g)     a legal opinion of Borrower's counsel dated as of the Effective Date; 
(h)     the Perfection Certificate of Borrower, together with the duly executed original signatures thereto; and 

-  6 -

(i)    payment of the fees and Lender Expenses then due as specified in Section 2.5 hereof.

3.2    Conditions Precedent to all Credit Extensions.   Lenders' obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a)     the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and warranties in this
 Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and 
(b)     Agent determines to its reasonable satisfaction that any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by. Borrower from the most recent business plan of Borrower presented to and accepted by Agent. 

3.3     Covenant to Deliver. 
Borrower agrees to deliver to Agent each item required to be delivered to Agent under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Agent of any such item shall not constitute a waiver by Agent of Borrower's obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Agent's sole discretion. 
3.4     Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower shall notify Agent (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Pacific time one day prior to the Funding Date of the Advance. Lenders shall wire transfer proceeds of an Advance to an account designated by Borrower. Lenders may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due. 
3.5     Post-Closing Conditions.  Within 30 days after the date of this Agreement, or such longer period of time as Agent agrees in its sole discretion, Borrower shall provide Agent with (i) a Control Agreement for its accounts (other than payroll and Medicare accounts) at 

-  7 -

Silicon Valley Bank, in form reasonably satisfactory to Agent, (ii) a landlord consent in favor of Agent for its headquarters in Omaha, Nebraska and its facility in New Haven, Connecticut, in form reasonably satisfactory to Agent, and (iii) loss payable endorsements and certificates of insurance for Borrower's insurance, in form reasonably satisfactory to Agent. 
4    CREATION OF SECURITY INTEREST 
4.1    Grant of Security Interest.   Borrower hereby grants Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now .owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that may have superior priority to Agent's Liens by operation of law. If Borrower shall acquire a commercial tort claim (as defined in the Code), Borrower shall promptly notify Agent in a writing signed by Borrower of the general details thereof (and further details as may be required by Agent) and grant to Agent, for the ratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Agent. If this Agreement is terminated, Agent's Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Agent shall, at Borrower's sole cost and expense, unless another Person shall have become subrogated to Agent's rights under this Agreement and entitled to the benefit of the security thereof, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. 
4.2     Authorization to File Financing Statements. Borrower hereby authorizes Agent to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect the Agent's interest or rights hereunder, including a notice that any disposition of the Collateral not permitted under this Agreement, by either Borrower or any other Person, shall be deemed to violate the rights of Agent under the Code. Such financing statements may indicate the Collateral as "all assets of the Debtor" or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Agent's sole discretion. 
5     REPRESENTATIONS AND WARRANTIES 
Borrower represents and warrants as follows: 
5.1     Due Organization, Authorization; Power and Authority. Borrower and each Guarantor is duly existing and in good standing in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower's business. In connection with this Agreement, Borrower has delivered to Agent completed certificates each signed by Borrower and Guarantor, respectively, entitled "Perfection Certificate". Borrower represents and warrants to Agent and each Lender that (a) Borrower's and each Guarantor's exact legal name is that indicated on the Perfection Certificate and on the signature page hereof;

-  8 -

 (b) Borrower and each Guarantor is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower's and each Guarantor's organizational identification number or accurately states that Borrower or the relevant Guarantor has none; (d) the Perfection Certificate accurately sets forth Borrower's and each Guarantor's place of business, or, if more than one, its chief executive office as well as Borrower's and each Guarantor's mailing address (if different than its chief executive office); (e) Borrower and Guarantor (and each of their predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to. time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Agent of such occurrence and provide Agent with Borrower's organizational identification number.  
The execution, delivery and performance by Borrower and each Guarantor of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower's or such Guarantor's organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any Guarantor or any of their respective property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material agreement by which Borrower or any Guarantor is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower's business. 
5.2     Collateral. Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at or with any bank or financial institution other than the Collateral Accounts described in the Perfection Certificate delivered to Agent in connection herewith and, subject to Section 3.5 hereof, which Borrower has taken such actions as are necessary to give Agent, for the ratable benefit of the Lenders, a perfected security interest therein, pursuant to the term of Section 6.8. The Accounts are bona fide, existing obligations of the Account Debtors. 
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. 
All Inventory is in all material respects of good and marketable quality, free from material defects. 

-  9 -

Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, and (b) over-the-counter software that is commercially available to the public. All material Intellectual Property licensed to Borrower is noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrower's business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower's business has been judged invalid or unenforceable, in whole or in part. To the best of Borrower's knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except as noted on the Perfection Certificate, and all such claims, if any, noted on the Perfection Certificate would not reasonably be expected to have a material adverse effect on Borrower's business. 
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License. 
All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Accounts are and shall be true and correct in all material respects and all such invoices, instruments and other documents, and all of Borrower's Books are genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor. To the best of Borrower's knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms. 
5.3     Accounts Receivable. 
(a)     For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be an Eligible Account. 
(b)     All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible Accounts are and shall be true and correct in all material respects and all such invoices, instruments and other documents, and all of Borrower's Books are genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts. To the best of Borrower's knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms. 

5.4     Litigation.  There are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Borrower or any of its Subsidiaries that are reasonably likely to result in a liability to the Borrower involving more than, individually or in the aggregate, One Hundred Fifty Thousand Dollars ($150,000). 
5.5     Financial Statements; Financial Condition.   All consolidated financial statements for Borrower and any of its Subsidiaries delivered to the Agent fairly present in all material respects 

-  10 -

Borrower's consolidated financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to the Agent. 
5.6     Solvency.   The fair salable value of Borrower's consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrower's liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 
5.7     Regulatory Compliance.   Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower's or any of its Subsidiaries' properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Government Authorities that are necessary to continue their respective businesses as currently conducted. 
5.8     Subsidiaries; Investments.   Borrower does not own any stock, partnership, or other ownership interest or other equity securities except for Permitted Investments. 
5.9     Tax Returns and Payments; Pension Contributions.   Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and material local taxes, assessments, deposits and contributions owed by Borrower except to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. 
To the extent Borrower defers payment of any contested taxes, Borrower shall  (i) notify the Agent in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other-than a "Permitted Lien." Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.  

-  11 -

5.10     Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely to repay the Prior Lender, as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes. 
5.11     Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Agent and each Lender that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results). 
5.11    Definition of "Knowledge." For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower's knowledge or awareness, to the "best of' Borrower's knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer. 
6     AFFIRMATIVE COVENANTS 
Borrower shall do all of the following and require its Subsidiaries to do all of the following: 
6.1     Government Compliance. 
(a)     Maintain its and all its Subsidiaries' legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower's business or operations. Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject. 
(b)     Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Agent, for the ratable benefit of the Lenders in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Agent. 

6.2     Financial Statements, Reports, Certificates.   Provide Agent and each Lender with the following: 
(a)     Monthly Financial Statements.  As soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower's and each of its Subsidiary's operations for such month, certified by a Responsible Officer and in a form acceptable to the Lenders (the "Monthly Financial Statements"); 

(b)     Monthly Compliance Certificate. Within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed

-  12 -

 Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as the Lenders may reasonably request, a statement that at the end of such month there were no held checks; 

(c)     Annual Operating Budget and Financial Projections. Within thirty (30) days after completion, but in any event within ninety (90) days after the end of each fiscal year of Borrower, (i) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower, as approved by Borrower's board of directors (collectively, the "Annual Financial Projections"); 

(d)     Annual Audited Financial Statements.  As soon as available, but no later than one hundred twenty (120) days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to the Lenders; 

(e)     Other Statements. Within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt; 

(f)     SEC Filings.  Within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower's website on the Internet at Borrower's website address; provided, however, Borrower shall promptly notify the Lenders in writing (which may be by electronic mail) of the posting of any such documents; 

(g)     Legal Action Notice.  A prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more; and 
(h)     Other Financial Information.  Other financial information reasonably requested by Agent or the Lenders. 

6.3     Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower's customary practices as they exist at the Effective Date. Borrower must promptly notify Agent of all returns, recoveries, disputes and claims that involve more than One Hundred Fifty Thousand Dollars ($1\50,000). 

6.4     Accounts Receivable. 
(a)     Schedules and Documents Relating to Accounts. If requested by Agent, Borrower shall furnish Agent with copies (or, at Agent's request, originals) of all contracts,

-  13 -

 orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Agent, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos. 
(b)     Disputes.  Borrower shall promptly notify Agent of all material disputes or claims relating to Accounts. Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm's-length transactions, and reports the same to Agent in the regular reports provided to Agent; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing Base.

(c)     Collection of Accounts.  Borrower shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox or via electronic deposit into a deposit account of Borrower that is, subject to Section 3.5 hereof, subject to a Control Agreement. Borrower shall deliver all payments on and proceeds of Accounts received by it to its deposit accounts. 

(d)     Returns.  Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Agent, upon request from Agent. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Lenders, and immediately notify Agent of the return of the Inventory. 

(e)     Verification.  Agent may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Lenders or such other name as Agent may choose, and notify any Account Debtor of Agent's security interest in such Account.

(f)    No Liability.  Lenders shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Lenders be deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Lenders from liability for its own gross negligence or willful misconduct. 

(g)     Remittance. Borrower shall deliver all proceeds arising from the disposition of any Collateral, in the original form received no later than the following Business 

-  14 -

Day after receipt by Borrower, to a deposit account of Borrower that is, subject to Section 3.5 hereof, subject to a Control Agreement. 

6.5     Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and material local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to the Lenders, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms. 

6.6     Insurance. 
(a)     Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower's industry and location and as the Lenders may reasonably request. Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts that are satisfactory to the Lenders. All property policies shall have a lender's loss payable endorsement showing Agent as an additional lender loss payee. All liability policies shall show, or have endorsements showing, Agent and each Lender as an additional insured. Agent shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral. 

(b)     Ensure that proceeds payable under any property policy are, at the Lenders' option, payable to Agent, for the ratable benefit of the Lenders, on account of the Obligations. 

(c)     At Lenders' request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each provider of any such insurance required under this Section 6.6 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Lenders, that it will give the Lenders thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled. If Borrower fails to obtain insurance as required under this Section 6.6 or to pay any amount or furnish any required proof of payment to third persons and any Lender, any Lender may make all or part of such payment or obtain such insurance policies required in this Section 6.6, and take any action under the policies such Lender deems prudent. 

6.7     Access to Collateral; Books and Records.  At reasonable times, on one (1) Business Day's notice (provided no notice is required if an Event of Default has occurred and is continuing), Agent, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower's Books. The foregoing inspections and audits shall be conducted at Borrower's expense and no more often than once every six (6) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Agent shall determine is necessary. 

6.8     Operating Accounts. Provide Agent five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution. Subject to Section 3.5, for each Collateral Account that Borrower at any time maintains (other than its current account at First National Bank and its accounts which receive Medicare payments), 

-  15 -

Borrower shall cause the applicable bank or financial institution at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Agent's Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Agent; provided that if such bank or financial institution refuses to enter into such a Control Agreement, then Borrower shall, at the request of Agent, move its accounts to a different financial institution that will provide a Control Agreement. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Borrower's employees and identified to Agent by Borrower as such. 
6.9     Financial Covenants. Maintain at all times, subject to periodic reporting as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to Borrower and its Subsidiaries: 
(a)     Minimum Liquidity Ratio. A ratio of (i) unrestricted and unencumbered cash and cash equivalents plus Eligible Accounts divided by (ii) all Funded Indebtedness (the "Minimum Liquidity Ratio") of not less than the following amounts at the end of each month during the applicable periods below: 
	
		
	Monthly Period Ending
	Minimum Liquidity Ratio

	February 28, 2013 through December 31, 2013
	0.90:1.00

	January 31, 2014 and there after
	1.00:1.00

(b) Minimum Net Revenue. Achieve at least the amounts set forth below during the applicable periods. 
	
		
	Six Month Period Ending
	Net Revenue

	March 31, 2013
	$14,000,000

	April 30, 2013
	$14,400,000

	May 31, 2013
	$14,800,000

	June 30, 2013
	$15,200,000

	July 31, 2013
	$15,488,000

	August 31, 2013
	$15,888,000

	September 30, 2013
	$16,340,000

-  16 -

	
		
	October 31, 2013
	$16,959,000

	January 31, 2014
	$17,825,000

	February 28, 2014
	$18,814,000

	March 31, 2014
	$19,254,000

	April 30, 2014
	$19,870,000

	May 31, 2014
	$20,573,000

	June 30, 2014
	$20,702,000

	July 31, 2014
	$20,881,000

	August 31, 2014
	$21,086,000

	September 30, 2014
	$21,275,000

	October 31, 2014
	$21,540,000

	November 30, 2014
	$21,843,000

	December 31, 2014
	$22,055,000

For each monthly period in each fiscal year ending thereafter, the minimum revenue, measured on a trailing six-month basis, shall be based on an amount that is equal to the greater of (i) eighty-five percent (85%) of the board approved Annual Financial Projections applicable to such monthly period in such fiscal year and (ii) $22,690,000. 
6.10     Protection and Registration of Intellectual Property Rights. 
(a)     (i) Protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Agent in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its material Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower's business to be abandoned, forfeited or dedicated to the public without Agent's written consent. 
(b)    To the extent not already disclosed in writing to the Lenders, if Borrower  (i) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any 

-  17 -

pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall immediately provide written notice thereof to the Lenders and shall execute such intellectual property security agreements and other documents and take such other actions as the Lenders or the Agent may request in their good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Agent (for the ratable benefit of the Lenders) in such property. 
(c)     Provide written notice to the Lenders within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as the Lenders or the Agent request to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed "Collateral" and for the Agent to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) the Agent to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with the Agent's or the Lenders' rights and remedies under this Agreement and the other Loan Documents. 

6.11     Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to the Agent and the Lenders, without expense to the Agent or the Lenders, Borrower and its officers, employees and agents and Borrower's Books, to the extent that the Agent and/or the Lenders may deem them reasonably necessary to prosecute ,or defend any third-party suit or proceeding instituted by or against the Agent or the Lenders with respect to any Collateral or relating to Borrower. 
6.12     Formation or Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the time that Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective Date, Borrower and such Guarantor shall (a) cause such new Subsidiary to provide to Agent and each Lender a joinder to the Loan Agreement to cause such Subsidiary to become a co-borrower hereunder or secured guarantor (as elected by mutual agreement of the Lenders), together with such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to the Lenders (including being sufficient to grant Agent, for the benefit of each Lender, a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to each Lender appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory to the Lenders, and (c) provide to each Lender all other documentation in form and substance satisfactory to the Agent and the Lenders, including one or more opinions of counsel satisfactory to Agent and the Lenders, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 6.11 shall be a Loan Document. 
6.13     Further Assurances. Execute any further instruments and take further action as the Agent or any Lender reasonably requests to perfect or continue the Agent's Lien in the Collateral or to effect the purposes of this Agreement. Deliver to each Lender, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a 

-  18 -

material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries. 
7     NEGATIVE COVENANTS 
Borrower shall not do, and shall not permit any of its Subsidiaries to do, any of the following without the prior written consent of Agent and the Required Lenders: 
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; 
(b) of worn-out or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; 
(c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrower's use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment of ordinary course business expenses in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents. 
    
7.2     Changes in Business, Management, Ownership, or Business Locations.    (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) fail to provide notice to Agent of any Key Person departing from or ceasing to be employed by Borrower within five (5) days after such Key Person's departure from Borrower; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than 40% of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower's equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Agent the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Agent a description of the material terms of the transaction). 
Borrower shall not, without at least thirty (30) days prior written notice to Agent: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Ten Thousand Dollars ($10,000) in Borrower's assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Ten Thousand Dollars ($10,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Ten Thousand Dollars ($10,000) to a bailee, and Agent and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of the Lenders, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Agent. 

-  19 -

7.3     Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary). A Subsidiary may merge or consolidate into another Subsidiary or into Borrower provided that Borrower is the surviving entity and Agent and Lenders receive written notice of such merger or consolidation within ten (10) days after its occurrence. 
7.4     Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 
7.5     Encumbrance. (a) Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens; (b) permit any Collateral not to be subject to the first priority security interest granted herein, subject to Permitted Liens that may have superior priority to Agent's Lien by operation of law; (c) enter into any agreement, document, instrument or other arrangement (except with or in favor of Agent and Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower's or any Subsidiary's Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of"Permitted Liens" herein. 
7.6     Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof. 
7.7     Distributions; Investments. (a) Pay any dividends or make any distributions or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock; and (iii) Borrower may repurchase the stock of former employees pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase; provided that the aggregate amount of all such repurchases does not exceed $100,000 per fiscal year; or (b) directly or indirectly make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so. 
7.8     Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a non-affiliated Person. 
7.9     Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject (which such subordination, intercreditor or similar agreement shall be in form and substance acceptable to Agent and Lenders), or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, 

-  20 -

provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to the Lenders. 
7.10     Compliance. Become an "investment company" or a company controlled by an "investment company", under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 
7.11    Compliance with Anti-Terrorism Laws. Directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Borrower shall immediately notify Agent if Borrower has knowledge that Borrower or any Subsidiary or Affiliate is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. Borrower will not, nor will Borrower permit any Subsidiary or Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law. Agent hereby notifies Borrower that pursuant to the requirements of Anti-Terrorism Laws, and Agent's policies and practices, Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and its principals, which information includes the name and address of Borrower and its principals and such other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws. 
7.12     First National Bank Account. Maintain more than $100,000 at any time in the Borrower's account at First National Bank. 
8     EVENTS OF DEFAULT
Anyone of the following shall constitute an event of default (an "Event of Default") under this Agreement: 

-  21 -

8.1     Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but Agent and Lenders shall have no obligation to make any Credit Extension during the cure period); 
8.2     Covenant Default. 
(a) Borrower fails or neglects to perform any obligation in Sections 3.5, 6.2, 6.5, 6.7,6.8,6.9, 6.10(c), 6.12, 6.13 or violates any covenant in Section 7; or 

(b) Borrower or any of its Subsidiaries fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default. Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above; 
8.3     Material Adverse Change. A Material Adverse Change occurs; 
8.4     Attachment; Levy; Restraint on Business. 
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed against any of Borrower's assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, Agent and Lenders shall have no obligation to make any Credit Extensions during any ten (10) day cure period; or 
(b) (i) any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business; 

8.5     Insolvency. (a) Borrower and its Subsidiaries on a consolidated basis is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and is not dismissed or stayed within thirty (30) days (but Agent and Lenders shall have no obligation to make any Credit 

-  22 -

Extensions while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed); 
8.6    Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of One Hundred Fifty Thousand Dollars ($150,000); or (b) any breach or default by Borrower or Guarantor, the result of which could have a material adverse effect on Borrower's or any Guarantor's business; 
8.7     Judgments; Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Fifty Thousand Dollars ($150,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that Lenders shall have no obligation to make any Credit Extensions prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree); 
8.8     Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to the Agent or any Lender, or to induce the Agent or any Lender to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made; 
8.9     Subordinated Debt. Any document, instrument, or agreement evidencing or subordinating any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; 
8.10     Guaranties. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7 or 8.8 occurs with respect to any Guarantor; or (d) the liquidation, winding up, or termination of existence of any Guarantor; or € (i) a material impairment in the perfection or priority of Agent's Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general affairs, management, results of operations, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor; or 
8.11     Governmental Approvals. Any Governmental Approval shall have been  (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary 

-  23 -

course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) cause, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction. 
9     AGENT'S AND LENDERS' RIGHTS AND REMEDIES
9.1     Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, the Agent and the Lenders may, without notice or demand, and the Agent at the direction of any Lender shall, do any or all of the following: 
(a)     declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by the Agent or any Lender); 
(b)     stop advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and any Lender; 

(c)    [reserved];
    
(d)    [reserved];

(e)    verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that the Lenders considers advisable, and notify any Person owing Borrower money of the Agent's security interest in such funds; 

(f)     make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if the Agent requests and make it available as Agent designates. The Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Agent a license to enter and occupy any of its premises, without charge, to exercise any of the Agent's rights or remedies; 
(g)     apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by the Agent or the Lenders owing to or for the credit or the account of Borrower; 
(h)     ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, Patents, Copyrights, mask works, 

-  24 -

rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Agent's exercise of its and the Lenders' rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Agent's benefit; 

(i)     deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral; 
     (j)    demand and receive possession of Borrower's Books; and 
(k)     exercise all rights and remedies available to the Agent and Lenders under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof). 

9.2     Power of Attorney. Borrower hereby irrevocably appoints Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower's name on any checks or other forms of payment or security; (b) sign Borrower's name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower's insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Agent or a third party as the Code permits. Borrower hereby appoints Agent as its lawful attorney-in-fact to sign Borrower's name on any documents necessary to perfect or continue the perfection of the Agent's security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full. Agent's foregoing appointment as Borrower's attorney in fact, and all of Agent's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed. 
9.3     Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.6 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Agent or any Lender may obtain such insurance or make such payment, and all amounts so paid by Agent or such Lender are Lender Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Agent will make reasonable efforts to provide Borrower with notice of Agent or a Lender obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Agent or any Lender are deemed an agreement to make similar payments in the future or a waiver of any Event of Default. 
9.4     Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, the Agent and each Lender shall have the right to apply in any order any funds in its respective possession, whether from Borrower account balances, payments, proceeds realized 

-  25 -

as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations. Agent and the Lenders shall pay any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to the Lenders for any deficiency. If the Agent or any Lender, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Agent or such Lenders shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Agent or such Lender of cash therefor. 
9.5     Agent's Liability for Collateral. So long as Agent complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of the Agent, the Agent shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral. 
9.6     No Waiver; Remedies Cumulative. Agent's and any Lender's failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Agent or any Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. The Agent's and each Lender's rights and remedies under this Agreement and the other Loan Documents are cumulative. The Agent and each Lender has all rights and remedies provided under the Code, by law, or in equity. The Agent's or any Lender's exercise of one right or remedy is not an election and shall not preclude Agent or any Lender from exercising any other remedy under this Agreement or other remedy available at law or in equity, and the Agent's or any Lender's waiver of any Event of Default is not a continuing waiver. The Agent's or any Lender's delay in exercising any remedy is not a waiver, election, or acquiescence. 
9.7     Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Agent or any Lender on which Borrower is liable. 
10     NOTICES 
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic 

-  26 -

mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Agent, any Lender or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10. 

	
		
	If to Borrower:
	Transgenomic, Inc.

	 
	12325 Emmet Street

	 
	Omaha, Nebraska 68164

	 
	Attn: Craig Tuttle, CEO

	 
	Email: ctuttle@transgenomic.com

	with a copy to:
	 

	 
	Paul Hastings LLP

	 
	1117 South California Avenue

	 
	Palo Alto, California 94304

	 
	Attn: JeffHartlin, Esquire

	 
	Fax: (650) 320-1904

	 
	Email: jeffhartlin@paulhastings.com

	If to Any Agent or any Lenders:
	 

	 
	Third Security Senior Staff 2008 LLC

	 
	The Governor Tyler

	 
	1881 Grove Avenue

	 
	Radford, VA 24141

	 
	Attn: Tad FIsher

	 
	Fax: 540.633.7939

	 
	Email: tad.fisher@thirdsecurity.com

	with a copy to:
	 

	 
	Hunton & Williams LLP

	 
	Riverfront Plaza--East Tower

	 
	951 East Byrd Street

	 
	Attn: Eric J. Nedell, Esquire

	 
	Fax: 804-343-4863

	 
	Email: enedell@hunton.com

11     CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE 
California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Lenders each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Lenders from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Lenders. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and 

-  27 -

Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower's actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. 
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure § 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, 

-  28 -

or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph. 
This Section 11 shall survive the termination of this Agreement. 
12     GENERAL PROVISIONS 
12.1 Termination Prior to Revolving Line Maturity Date; Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied. So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, any other obligations which, by their terms, are to survive the termination of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Agent. Those obligations that are expressly specified in this Agreement as surviving this Agreement's termination shall continue to survive notwithstanding this Agreement's termination. 
12.2     Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Agent's prior written consent (which may be granted or withheld in Agent's discretion). Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender's Term Loan or Revolving Line commitment, together with all related obligations of such Lender hereunder. Borrower and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Agent shall have received and accepted an effective assignment agreement in form and substance acceptable to Agent, executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Agent reasonably shall require. Notwithstanding anything set forth in this Agreement to the contrary, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided. however. that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 
12.3     Indemnification. 
(a)     Borrower agrees to indemnify, defend and hold Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Agent or the Lenders (each, an "Indemnified Person") harmless against: (i) all obligations, demands, claims, and liabilities (collectively, "Claims") asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or Lenders' Expenses incurred, or paid by Indemnified Person from, following, or arising from transactions between Agent, and/or the Lenders and Borrower (including reasonable attorneys' fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person's gross negligence or willful misconduct (collectively, the "Indemnified Liabilities"). 

-  29 -

(b)     Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds, except for any of such directly caused by such Indemnified Person's gross negligence or willful misconduct. 
(c)     To the extent that the undertaking set forth in this Section 12.3 may be unenforceable, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. 

This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run. 

12.4     Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement. 
12.5     Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 
12.6     Correction of Loan Documents. Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties. 
12.7     Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents. 

-  30 -

12.8     Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement. 
12.9     Confidentiality. In handling any confidential information, Agent and each Lender shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Agent's and each Lender's respective Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Agent and each Lender, collectively, "Creditor Entities"); (b) to prospective transferees or purchasers of any interest in the Term Loans or Revolving Line commitment (provided, however, Agent and each Lender shall obtain any prospective transferee's or purchaser's agreement to the terms of this provision, or if an Event of Default has occurred and is continuing use its commercially reasonable efforts to so provide); (c) as required by law, regulation, subpoena, or other order; (d) to regulators or as otherwise required in connection with Agent's or any Lender's examination or audit; (e) as Agent or any Lender considers necessary in exercising remedies under the Loan Documents; and (f) to third-party service providers of Agent or any Lender so long as such service providers have executed a confidentiality agreement with the Agent or such Lender, as applicable, with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Agent's or any Lender's possession when disclosed to Agent or any such Lender, or becomes part of the public domain (other than as a result of its disclosure by Agent or a Lender in violation of this Agreement) after disclosure to Agent or a Lender; or (ii) disclosed to Agent or any Lender by a third party, if Agent or such Lender does not know that the third party is prohibited from disclosing the information. 
Creditor Entities may use confidential information for the development of databases, reporting purposes, and market analysis so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement. 
12.10     Attorneys' Fees, Costs and Expenses. In any action or proceeding among Borrower, the Agent and any Lender arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled. 
12.11     Electronic Execution of Documents. The words "execution," "signed," "signature" and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act. 
12.12     Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement. 

-  31 -

12.13    Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist. 
12.14     Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm's·length contract. 
12.15     Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement. 
13     AGENT 
13.1     Appointment and Authorization of Agent. Each Lender hereby irrevocably appoints, designates and authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 
13.2     Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Loan Document by or through its, or its Affiliates', agents, employees or attorneys-in-fact and shall be entitled to obtain and rely upon the advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 
13.3     Liability of Agent. Except as otherwise provided herein, no Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for 

-  32 -

any recital, statement, representation or warranty made by Borrower or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any Affiliate thereof.  
13.4     Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of all Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of all Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 
13.5     Notice of Default. Agent shall not be. deemed to have knowledge or notice of the occurrence of any Default and/or Event of Default, unless Agent shall have received written notice from a Lender or Borrower, describing such default or Event of Default. Agent will notify the Lenders of its receipt of any such notice. Agent shall take such action with respect to an Event of Default as may be directed in writing by the Required Lenders; provided however, that while an Event of Default has occurred and is continuing, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as Agent shall deem advisable or in the best interest of the Lenders, including without limitation, satisfaction of other security interests, liens or encumbrances on the Collateral not permitted under the Loan Documents, payment of taxes on behalf of Borrower, payments to landlords, warehouseman, bailees and other Persons in possession of the Collateral and other actions to protect and safeguard the Collateral, and actions with respect to insurance claims for casualty events affecting Borrower and/or the Collateral. 
13.6     Credit Decision; Disclosure of Information by Agent. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to Agent that it has, independently and without reliance upon 

-  33 -

any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by Agent herein, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower or any of its Affiliates which may come into the possession of any Agent-Related Person. 

13.7     Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, each Lender shall, severally and pro rata based on its respective Pro Rata Share, indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities (which shall not include legal expenses of Agent incurred in connection with the closing of the transactions contemplated by this Agreement) incurred by it; provided. however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a judgment by a court of competent jurisdiction to have resulted from such Agent-Related Person's own gross negligence or willful misconduct; provided. however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 13.7. Without limitation of the foregoing, each Lender shall, severally and pro rata based on its respective Pro Rata Share, reimburse Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Lenders' Expenses incurred after the closing of the transactions contemplated by this Agreement) incurred by Agent (in its capacity as Agent, and not as a Lender) in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section 13.7 shall survive the payment in full of the Obligations, the termination of this Agreement and the resignation of Agent. 
13.8     Agent in its Individual Capacity. With respect to its Pro Rata Share of the Term Loan and Revolving Line, Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not Agent, and the terms "Lender" and "Lenders" include Agent in its individual capacity. 
13.9     Successor Agent.  

-  34 -

(a)    Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such assignment of agency rights hereunder) 50% or more of its Loan, in each case without the consent of the Lenders or Borrowers. Following any such assignment, Agent shall give notice to the Lenders and Borrowers. An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by Agent for purposes of subsection (b) below. 
(b)     Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give notice of its resignation to the Lenders and Borrowers. Upon receipt of any such notice of resignation, Required Lenders shall have the right to appoint a successor Agent. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent; provided however, that if Agent shall notify Borrowers and the Lenders that no Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this subsection (b). 
(c)     Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor's appointment as Agent pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Loan Documents (if not already discharged therefrom as provided above in this subsection (c)). The fees payable by Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the retiring Agent's resignation hereunder and under the other Loan Documents, the provisions of this Section 13 shall continue in effect for the benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting or was continuing to act as Agent. 
13.10     Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Borrower, Agent (irrespective of whether the principal of any Loan, shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise: 
(a)     to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Term Loan and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and Agent (including any claim for the reasonable compensation, 

-  35 -

expenses, disbursements and advances of the Lenders and Agent and their respective agents and counsel and all other amounts due the Lenders and Agent allowed in such judicial proceeding); and 
(b)     to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; 
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to the Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent under Section 2 and 3. To the extent that Agent fails timely to do so, each Lender may file a claim relating to such Lender's claim. 
13.11     Collateral and Guaranty Matters. The Lenders irrevocably authorize Agent, at its option and in its discretion, to release any Guarantor and any Lien on any Collateral granted to or held by Agent under any Loan Document (a) upon the date that all Obligations due hereunder have been fully and indefeasibly paid in full and no commitments or other obligations of any Lender to provide funds to Borrower under this Agreement remain outstanding, (b) that is transferred or to be transferred as part of or in connection with any Transfer permitted hereunder or under any other Loan Document, or (c) as approved in accordance with SectionI2.7. Upon request by Agent at any time, all Lenders will confirm in writing Agent's authority to release its interest in particular types or items of  property, pursuant to this Section 13.11. 
13.12     Cooperation of Borrower. If necessary, Borrower agrees to (a) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of any portion of the Term Loan or Revolving Line to an assignee in accordance with Section 12.1, (b) make Borrower's management available to meet with Agent and prospective participants and assignees and (c) assist Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of any portion of the Term Loan or Revolving Line reasonably may request. Subject to the provisions of Section 12.9 Borrower authorizes each Lender to disclose to any prospective participant or assignee of any portion of the Term Loan or Revolving Line, any and all information in such Lender's possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender's credit evaluation of Borrower prior to entering into this Agreement. 
14     DEFINITIONS 
14.1     Definitions. As used in the Loan Documents, the word "shall" is mandatory, the word "may" is permissive, the word "or" is not exclusive, the words "includes" and "including" are not limiting, and the singular includes the plural. As used in this Agreement, the following capitalized terms have the following meanings: 

-  36 -

"Account" is any "account" as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower. 
"Account Debtor" is any "account debtor" as defined in the Code with such additions to such term as may hereafter be made. 
"Advance" or "Advances" means a revolving credit loan (or revolving credit loans) under the Revolving Line, including any Overadvance. 
"Advance Rate" is initially 80%; provided, however, that Agent has the right to decrease such percentage in its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the Collateral or its value. 
"Affiliate" is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and members. 
"Agent" means Third Security Senior Staff 2008 LLC, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders. 
"Agent-Related Person" means the Agent, together with its Affiliates, and the officers, directors, employees, agents, advisors, auditors and attorneys-in-fact of such Persons; provided. however, that no Agent-Related Person shall be an Affiliate of Borrower. 
"Agreement" is defined in the preamble hereof. 
"Amortization Date" means January 1,2014. 
"Annual Financial Projections" is defined in Section 6.2( c). 
"Anti-Terrorism Laws" means any Laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24,2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by OFAC. 
"Applicable Commitment" means the original principal amount of each Term Commitment for each Lender and each Lender's commitment to fund its portion of the Revolving Line. 
"Approved Fund" means any (a) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business, or (b) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) a 

-  37 -

Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender. 
"Authorized Signer" is any individual listed in Borrower's Borrowing Resolution who is authorized to execute the Loan Documents on behalf of Borrower. 
"Availability Amount" is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base, minus (b) the outstanding principal balance of any Advances. 
"Base LIBOR Rate" means, for any Interest Period, the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of such Interest Period or, if such day is not a Business Day, on the preceding Business Day) in the amount of One Million Dollars ($1,000,000) are offered to major banks in the London interbank market on or about 11 :00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period, for a term comparable to such Interest Period, which determination shall be conclusive in the absence of manifest error. 
"Blocked Person" means: (a) any Person listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports "terrorism" as defined in Executive Order No. 13224, or ( e) a Person that is named a "specially designated national" or "blocked person" on the most current list published by OFAC or other similar list. 
"Borrower" is defined in the preamble hereof. 
"Borrower's Books" are all Borrower's books and records including ledgers, federal and state tax returns, records regarding Borrower's assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information. 
"Borrowing Base" is the product of the Advance Rate multiplied by the Eligible Accounts; provided, however, that Agent has the right to adjust the foregoing in its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the Collateral or its value; and provided further, that, the proceeds for any sale of the Borrower's intellectual property shall not be included for purposes of calculating the Borrowing Base. 
"Borrowing Resolutions" are, with respect to any Person, those resolutions adopted by such Person's board of directors (and, if required, under the terms of such Person's Operating Documents, stockholders) and delivered by such Person to the Lenders, approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying ( a) such Person 

-  38 -

has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, on behalf of such Person, together with a sample of the true signature( s) of such Person(s), and (d) that the Agent and the Lenders may conclusively rely on such certificate unless and until such Person shall have delivered to the Agent or any Lender a further certificate canceling or amending· such prior certificate. 
"Business Day" means any day that is not a Saturday, Sunday or a day on which banks are closed for business in California. 
"Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.; (c) certificates of deposit issued maturing no more than one (I) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition. 
"Claims" is defined in Section 12.3. 
"Code" is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Agent's Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term "Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions. 
"Collateral" is any and all properties, rights and assets of Borrower described on Exhibit A. 
"Collateral Account" is any Deposit Account, Securities Account, or Commodity Account. 
"Commitment Percentage" means, as to any Lender, the percentage set forth opposite such Lender's name on Schedule 1, as amended from time to time. 
"Commodity Account" is any "commodity account" as defined in the Code with such additions to such term as may hereafter be made. 

-  39 -

"Compliance Certificate" is that certain certificate in the form attached hereto as Exhibit B. 
"Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement. 
"Control Agreement" is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Agent pursuant to which Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account. 
"Copyrights" are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret. 
"Credit Extension" means any Term Loan, Advance, any Overadvance or any other extension of credit by Agent or the Lenders for Borrower's benefit. 
"Creditor Entities" is defined in Section 12.9. 
"Cross Aged Accounts" are, from the Effective Date through and including June 30, 2013, up to Seven Hundred Fifty Thousand Dollars ($750,000) of Accounts that are otherwise Eligible Accounts, the Account Debtor for which is Blue Cross/Blue Shield, that are re-invoiced, so long as the recent billing and collection history is acceptable to Agent, in its sole discretion. 
"Default Rate" is defined in Section 2.3( c). 
"Deferred Revenue" is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue. 
"Deposit Account" is any "deposit account" as defined in the Code with such additions to such term as may hereafter be made. 

-  40 -

"Dollars," "dollars" or use of the sign "$" means only lawful money of the United States and not any other currency, regardless of whether that currency uses the "$" sign to denote its currency or may be readily converted into lawful money of the United States. 
"Effective Date" is defined in the preamble hereof. 
"Eligible Accounts" means Accounts which arise in the ordinary course of Borrower's business that meet all Borrower's representations and warranties in Section 5.3. Agent reserves the right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Unless Agent otherwise agrees in writing, Eligible Accounts shall not include: 
(a)     Accounts for which the Account Debtor is Borrower's Affiliate, officer, employee, or agent; 
(b)     Accounts that the Account Debtor has not paid within one hundred twenty (120) days of invoice date regardless of invoice payment period terms; 

(c)    Accounts with credit balances over one hundred twenty (120) days from invoice date;
    
(d)    Accounts owing from an Account Debtor if fifty percent (50%) or more of the Accounts owing from such Account Debtor have not been paid within one hundred twenty (120) days of invoice date, excluding Cross Aged Accounts;

(e)     Accounts owing from an Account Debtor which does not have its principal place of business in the United States or Canada; 
(f)     Accounts billed from and/or payable to Borrower outside of the United States unless Agent has a first priority, perfected security interest or other enforceable Lien in such Accounts under all applicable laws, including foreign laws (sometimes called foreign invoiced accounts); 
(g)     Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise sometimes called "contra" accounts, accounts payable, customer deposits or credit accounts); 
(h)     Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof (other than Accounts generated from Medicare and/or Medicaid payment receivables), unless Borrower has assigned its payment rights to Agent and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended; 
(i)     Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a "sale guaranteed", "sale or return", "sale on approval", or other terms if Account Debtor's payment may be conditional; 

-  41 -

(j)     Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings or pre-billings); 
(k)     Accounts subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower's failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress billings, milestone billings, or fulfillment contracts); 
(l)     Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor's satisfaction of Borrower's complete performance (but only to the extent of the amount withheld; sometimes called retainage billings); 
(m)     Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust; 

(n)     Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Agent, Borrower, and the Account Debtor have entered into an agreement acceptable to Agent wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called "bill and hold" accounts); 
(o)     Accounts for which the Account Debtor has not been invoiced; 
(p)     Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower's business; 
(q)     Accounts for which Borrower has permitted Account Debtor's payment to extend beyond one hundred twenty (120) days; 
(r)     Accounts arising from chargebacks, debit memos or other payment deductions taken by an Account Debtor; 

(s)     Accounts arising from product returns and/or exchanges (sometimes called  "warranty" or "RMA" accounts); 
(t)     Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; 
(u)    Accounts owing from an Account Debtor with respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred Revenue); 
(v)     Accounts owing from an Account Debtor, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that exceed that percentage, unless Agent approves in writing; and 

-  42 -

(w)     Accounts for which Agent in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts represented by "refreshed" or "recycled" invoices. 

"Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by Agent; provided, however, that notwithstanding the foregoing, "Eligible Assignee" shall not include Borrower, any Guarantor or any of Borrower's or any Guarantor's Affiliates or Subsidiaries. Notwithstanding the foregoing, in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party becoming an assignee incident to such forced divestiture. 
"Equipment" is all "equipment" as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing. 
"ERISA" is the Employee Retirement Income Security Act of 1974, and its regulations. 
"Event of Default" is defined in Section 8. 
"Exchange Act" is the Securities Exchange Act of 1934, as amended. 
"Excluded Property" means (i) any rights or interests in any license, contract or agreement to which the Borrower is a party, including any Restricted License, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement, result in a breach of the terms of, or constitute a default under, such license, lease, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to 9-406, 9-407, 9-408 or 9-409 of the UCC or other applicable law); (ii) any Equipment or other assets subject to a purchase money Lien permitted hereunder to the extent that the agreements governing the indebtedness secured by such Liens prohibit the granting of a security interest to the Agent hereunder; and (iii) any rights or property, including, without limitation, any intent-to-use trademark applications or any Restricted License to the extent that any valid and enforceable law or regulation applicable to such rights or property prohibits the creation of a security interest in such rights or property or would otherwise result in a material loss of rights from the creation of such security interest therein. 
"Final Payment" means a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, (b) the acceleration of the Term Loan, and (c) the prepayment of the entire outstanding balance of the Term Loan pursuant to Section 2.2( c) or (d), equal to the Term Loan Commitment (or, in the case of any partial prepayment made pursuant to Section 2.2( d), the principal amount of the Term Loan being prepaid) multiplied by the Final Payment Percentage. 
"Final Payment Percentage" means three percent (3.00%). 

-  43 -

"Funded Indebtedness" means, on any date of determination, (i) the aggregate amount of outstanding Advances made under the Revolving Line, and (ii) the aggregate obligations and liabilities of Borrower under the Term Loan. 
"Funding Date" is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day. 
"GAAP" is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. 
"General Intangibles" is all "general intangibles" as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind. 
"Governmental Approval" is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority. 
"Governmental Authority" is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization. 
"Guarantor" is any Person providing a Guaranty in favor of the Agent, the Security Trustee and the Lenders. As of the Effective Date there are no Guarantors. 
"Guaranty" is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented. 
"Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, ( c) capital lease obligations, and (d) Contingent Obligations. 
"Indemnified Person" is defined in Section 12.3. 
"Insolvency Proceeding" is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for 

-  44 -

the benefit of any of its creditors, or proceedings seeking reorganization, arrangement, or other relief. 
"Intellectual Property" means, with respect to any Person, means all of such Person's right, title, and interest in and to the following: 
(a)     its Copyrights, Trademarks and Patents; 
(b)     any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how and operating manuals; 
(c)    any and all source code;
(d)    any and all design rights which may be available to such Person;
(e)    any and all claims for damage by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and 
(f)     all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents. 
"Interest Period" means (a) the period commencing on the Effective Date and ending one (1) month thereafter; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period and ending one (1) month thereafter; provided that if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; and any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. 
"Interest Rate Determination Date" means the second (2nd) Business Day prior to the first (1st) day of the related Interest Period. 
"Inventory" is all "inventory" as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returned goods and any documents of title representing any of the above. 
"Investment" is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person. 

-  45 -

"IP Agreement" is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Agent dated as of the date hereof. 
"Lender" means any one of the Lenders. 
"Lender Expenses" are all audit fees and expenses, costs, and expenses (including reasonable attorneys' fees and expenses) of Agent and Lenders for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower, any Subsidiary of Borrower or any Guarantor. 
"Lenders" means the Persons identified on Schedule 1 hereto, and each assignee that becomes a party to this Agreement pursuant to Section 12.2. 
"LIBOR Rate" means, for each Interest Period, the Base LIBOR Rate for such Interest Period. 
"LIBOR Rate Margin" means six and one-tenth percent (6.10%) per annum. 
"Lien" is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property. 
"Loan Documents" are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the IP Agreement, each Guaranty, each Security Agreement, each Guaranty, the Pledge Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of the Agent or any Lender in connection with this Agreement, all as amended, restated, or otherwise modified. 
"Loan Party" means Borrower and each Guarantor. 
"Material Adverse Change" is (a) a material impairment in the perfection or priority of Agent's Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Agent determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period. 
"Maturity Date" means September 1, 2016. 
"Minimum Liquidity Ratio" is defined in Section 6.9(a). 
"Monthly Financial Statements" is defined in Section 6.2(a). 

-  46 -

"Obligations" are Borrower's obligations to pay when due any debts, principal, interest, fees, Lender Expenses, and other amounts Borrower owes Agent or any Lender now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Agent or any Lender, and to perform Borrower's duties under the Loan Documents. 
"OFAC" means the U.S. Department of Treasury Office of Foreign Assets Control. 
"OFAC Lists" means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224,66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders. 
"Operating Documents" are, for any Person, such Person's formation documents, as certified by the Secretary of State (or equivalent agency) of such Person's jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and ( c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto. 
"Overadvance" is defined in Section 2.7. 
"Patents" means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. 
"Payment Date" is the first day of each month. 
"Perfection Certificate" is defined in Section 5.1. 
"Permitted Indebtedness" is: 
(a)     Borrower's Indebtedness to Agent and the Lenders under this Agreement and the other Loan Documents; 
(b)     [reserved]; 
(c)     Indebtedness existing on the Effective Date and shown on the Perfection Certificate; 

(d)     Subordinated Debt; 
(e)    unsecured Indebtedness to trade creditors incurred in the ordinary course of business:
(f)    Indebtedness incurred as a result of endorsing negotiable instruments received or issuing performance bonds, each in the ordinary course of business;

-  47 -

(g)     Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of"Permitted Liens" hereunder; and 
(h)     extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (g) above; provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. 

"Permitted Investments" are: 
(a)     Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate; 
(b)     Investments consisting of Cash Equivalents; 
(c)     Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; 

(d)     Investments consisting of deposit accounts in which Agent has a perfected security interest; 
(e)    Investments accepted in connection with Transfers permitted by Section 7.1; 
(f)     Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower's board of directors; 
(g)     Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and 
(h)    Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary. 

"Permitted Liens" are: 
(a)     Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents; 
(b)     Liens for taxes, fees, assessments or other government charges or levies, either 
(i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder; 
(c)     (x) capital leases and (y) purchase money Liens securing no more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate amount outstanding which Liens are (i) established upon the leasing or acquisition of the Equipment, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; 
(d)     Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Fifty Thousand Dollars ($50,000) and which are not 

-  48 -

delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; 
(e)     Liens to secure payment of workers' compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA); 
(f)     Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase; 
(g)     leases or subleases of real property granted in the ordinary course of Borrower's business (or, if referring to another Person, in the ordinary course of such Person's business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower's business (or, if referring to another Person, in the ordinary course of such Person's business), if the leases, subleases, licenses and sublicenses do not prohibit granting Agent a security interest therein; 
(h)     non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business; 
(j)    Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and 
(k)     Liens in favor of other financial institutions arising in connection with Borrower's deposit and/or securities accounts held at such institutions, provided that Agent has a perfected security interest in the amounts held in such deposit and/or securities accounts. 
"Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 
"Pledge Agreement" is a certain Stock Pledge Agreement dated as of the Effective Date from Borrower to Agent, as the same may from time to time be amended, restated, modified or otherwise supplemented. 
"Prepayment Fee" means with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment,acceleration or otherwise, an additional fee payable to the Lenders in amount equal to: 
(a)     for a prepayment made on or after the Effective Date through and including the date which is twelve (12) months after the Effective Date, five percent (5.00%) multiplied by the outstanding principal amount of the Term Loan being prepaid; 
(b)     for a prepayment made after the date which is twelve (12) months after the Effective Date through and including the date which is twenty-four (24) months after the Effective Date, two and one-half percent (2.50%) multiplied by the outstanding principal amount of the Term Loan being prepaid; and 

-  49 -

(c)     for a prepayment made after the date which is twenty-four (24) months after the Effective Date and prior to the Maturity Date, one percent (1.00%) multiplied by the outstanding principal amount of the Term Loan being prepaid. 

"Prime Rate" is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the "prime rate" then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Agent, the "Prime Rate" shall mean the rate of interest per annum announced by Silicon Valley Bank as its prime rate in effect at its principal office in the State of California (such announced Prime Rate not being intended to be the lowest rate of interest charged by Lenders in connection with extensions of credit to debtors). 
"Pro Rata Share" means, as determined by Agent, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the amount of the Term Loan or Revolving Line, as applicable, held by such Lender by the outstanding aggregate amount of the Term Loan or Revolving Line, as applicable. 
"Regulatory Change" means, with respect to Lenders, any change on or after the date of this Agreement in United States federal, state, or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations, directives, or requests applying to a class of lenders including Lenders, of or under any United States federal or state, or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. 
"Required Lenders" means, unless all of the Lenders and Agent agree otherwise in writing, Lenders having (a) more than seventy-six percent (76%) of the Applicable Commitments of all Lenders, or (b) if such Applicable Commitments have expired or been terminated, more than seventy-six percent (76%) of the aggregate outstanding principal amount of the Credit Extensions. 
"Requirement of Law" is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 
"Reserves" means, as of any date of determination, such amounts as Agent may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Agent in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Agent's reasonable belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Agent is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Agent determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default. 

-  50 -

"Responsible Officer" is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower. 
"Restricted License" is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower's interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Agent's right to sell any Collateral. 
"Revolving Line" is an aggregate principal amount not to exceed Four Million Dollars ($4,000,000) outstanding at any time. 
"Revolving Line Maturity Date" is September 1, 2016. 
"SEC" shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority. 
"Secured Promissory Note" has the meaning given it in Section 2.13. 
"Secured Promissory Note Record" means a record maintained by each Lender with respect to the outstanding Obligations and credits made thereto. 
"Securities Account" is any "securities account" as defined in the Code with such additions to such term as may hereafter be made. 
"Security Agreement" is any agreement executed by any Loan Party other than Borrower pursuant to which such Loan Party creates a Lien in respect of its property to Agent, Security Trustee or any Lender as security for the Obligations. 
"Subordinated Debt" is indebtedness incurred by Borrower subordinated to all of Borrower's now or hereafter indebtedness owed to any Lender (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to the Lenders entered into between such Lenders and the other creditor), on terms acceptable to such Lenders. 
"Subsidiary" is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor. 
"Term Loan" has the meaning given it in Section 2.2(a). 
"Term Loan Commitment" means, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1. "Term Loan Commitments" means the aggregate amount of such commitments of all Lenders. 

-  51 -

"Trademarks" means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks. 
"Transfer" is defined in Section 7.1. 
"Unused Revolving Line Facility Fee" is defined in Section 3.5(c). 
[Signature page follows.] 

-  52 -

IN WITNESS WHEREOF, the parties hereto have caused this. Agreement to be executed as of the Effective Date. 

-  53 -

AGENT: 
THIRD SECURITY SENIOR STAFF 2008 LLC 
As Agent for Lenders 

-  54 -

LENDERS: 
THIRD SECURITY SENIOR STAFF 2008 LLC 

THIRD SECURITY STAFF 2010 LLC 

THIRD SECURITY INCENTIVE 2010 LLC 

[Signature Page -Loan and Security Agreement] 

-  55 -

	
		
	EXHIBITS AND SCHEDULES

	EXHIBITS
	 

	 
	 

	Exhibit A
	Collateral Description

	ExhibitB
	Compliance Certificate

	Exhibit C
	Form of Secured Promissory Note

	 
	 

	SCHEDULES
	 

	 
	 

	Schedule I
	Lenders and Commitments

-  56 -

EXHIBIT A 
COLLATERAL 
The Collateral consists of all assets of Borrower, including all of Borrower's right, title and interest in and to the following personal property: 
(a)     all goods, Accounts (including health-care insurance receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, investment accounts, commodity accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and 
(b)     all Borrower's Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. 
Notwithstanding any of the other provisions set forth in herein, this Agreement shall not constitute a grant of a security interest in in any Excluded Property; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, the Collateral shall include, and the Borrower shall be deemed to have granted a security interest in, all such rights and interests or Equipment or other assets, as the case may be, as if such provision had never been in effect; and provided, further, that notwithstanding any such restriction, Collateral shall, to the extent such restriction does not by its terms apply thereto, include all rights incident or appurtenant to any such rights or interests and the right to receive all proceeds derived from or in connection with the sale, assignment or transfer of such rights and interests. 

-  57 -

EXHIBIT B 
COMPLIANCE CERTIFICATE 
TO: Third Security 
FROM: Transgenomic, Inc. 
DATE: _______________, 201__

The undersigned authorized officer of Transgenomic, Inc. ("Borrower") certifies that under the terms and conditions of the Loan and Security Agreement between Borrower, Agent and the Lenders (the "Agreement"): 
(1)     Borrower is in complete compliance with all required covenants for the month ending _________, 201__, except as noted below; 
(2)     there are no Events of Default, except as noted below; 
(3)     all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further, that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; 
(4)     Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and material local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of the Agreement; and 
(5)     no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Agent. 

Attached are the required documents supporting the certifications set forth in this Compliance Certificate. The undersigned certifies, in his/her capacity as an officer of the Borrower, that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges, in his/her capacity as an officer of Borrower, that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. 
Please indicate compliance status by circling Yes/No under "Complies" column.	
				
	Reporting Covenant
	Required
	Complies

	Monthly Financial Statements
	Monthly within 30 days
	Yes
	No

	Audited Financial Statements
	Annually within 120 days after FYE
	Yes
	No

	Board Approved Projections
	NLT 30 days after completion no later than 90 days after FYE
	Yes
	No

	Compliance Certificate
	Monthly within 30 days
	Yes
	No

	Minimum Liquidity Ratio
	Per Section 6.9(a) of the Loan Agreement
	Yes
	No

	Minimum Net Revenue
	Per Section 6.9(b) of the Loan Agreement
	Yes
	No

The following are the exceptions with respect to the certification above: (If no exceptions exist, state "No exceptions to note.") 
	
	
	 

	 

	 

	
						
	TRANSGENOMIC, INC.
	 
	AGENT USE ONLY
	 

	By:
	 
	 
	Received by:
	 
	 

	Name:
	 
	 
	AUTHORIZED SIGNER 
	 

	Title:
	 
	 
	Date:
	 
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	Verified:
	 
	 

	 
	 
	 
	AUTHORIZED SIGNER
	 

	 
	 
	 
	Date:
	 
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	Compliance Status
	Yes
	No

	 
	 
	 
	 
	 
	 

-  58 -

EXHIBIT C 
Form of Secured Promissory Note 
(See attached.) 

-  59 -

SECURED PROMISSORY NOTE 
$______    Dated: March ____, 2013
FOR VALUE RECEIVED, the undersigned, TRANSGENOMIC, INC., a Delaware corporation ("Borrower") HEREBY PROMISES TO PAY to the order of___---- ("Lender") the principal amount of _______ DOLLARS ($______) or such lesser amount as shall equal the outstanding principal balance of the Term Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of the Term Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated as of March _--, 2013 by and among Borrower and Third Security Senior Staff 2008 LLC, as Agent, and the Lenders as defined therein (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. If not sooner paid, the entire principal amount and all accrued interest hereunder and under the Loan Agreement shall be due and payable on Maturity Date as set forth in the Loan Agreement. 
Borrower agrees to pay any initial partial month interest payment from the date of this Secured Promissory Note (this "Note") to the first Payment Date ("Interim Interest") on the first Payment Date. 
Principal, interest and all other amounts due with respect to the Term Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Note. The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note. 
The Loan Agreement, among other things, (a) provides for the making of a secured Term Loan to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. 
This Note may not be prepaid except as set forth in Section 2.2(c) and Section 2.2(d) of the Loan Agreement. 
This Note and the obligation of Borrower to repay the unpaid principal amount of the Term Loan, interest on the Term Loan and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement. 
Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived. 
Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys' fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower's obligations hereunder not performed when due. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California. 
Note Register: Ownership of Note. The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity. 

-  60 -

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof. 
	
					
	 
	 
	 
	BORROWER:

	 
	 
	 
	TRANSGENOMIC, INC

	 
	 
	 
	 
	 

	 
	 
	 
	By:
	 

	 
	 
	 
	Name:
	 

	 
	 
	 
	Title
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

-  61 -

SCHEDULE 1
 LENDERS AND COMMITMENTS
	
			
	Lender
	Term Loan Commitment
	Commitment Percentage

	Third Security Incentive 2010 LLC
	$800,000
	20%

	Third Security Staff 2010 LLC
	$1,600,000
	40%

	Third Security Senior Staff 2008 LLC
	$1,600,000
	40%

	 
	 
	 

	TOTAL
	$4,000,000
	100%

	 
	 
	 

	Lender
	Revolving Loan Commitment
	Commitment Percentage

	Third Security Incentive 2010 LLC
	$800,000
	20%

	Third Security Staff 2010 LLC
	$1,600,000
	40%

	Senior Staff 2008 LLC
	$1,600,000
	40%

	 
	 
	 

	TOTAL
	$4,000,000
	100%

-  62 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00214-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00214-of-00352.parquet"}]]