Document:

BankingAgreement

Execution Version

REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER)
WITH
KEY TECHNOLOGY, INC.
(AS BORROWER)
JULY 20, 2015

1

Table of Contents
Page

	
					
	I.
	 
	DEFINITIONS.
	1
	

	 
	1.1
	Accounting Terms
	1
	

	 
	1.2
	General Terms
	1
	

	 
	1.3
	Uniform Commercial Code Terms
	28
	

	 
	1.4
	Certain Matters of Construction
	28
	

	II.
	 
	ADVANCES, PAYMENTS
	29
	

	 
	2.1
	Revolving Advances
	29
	

	 
	2.2
	Procedures for Requesting Revolving Advances; Procedures for Selection of Applicable Interest Rates for All Advances
	30
	

	 
	2.3
	Term Loans
	32
	

	 
	2.4
	Reserved
	33
	

	 
	2.5
	Disbursement of Advance Proceeds
	33
	

	 
	2.6
	Reserved
	33
	

	 
	2.7
	Maximum Advances
	33
	

	 
	2.8
	Manner and Repayment of Advances
	33
	

	 
	2.9
	Repayment of Excess Advances
	34
	

	 
	2.10
	Statement of Account
	34
	

	 
	2.11
	Letters of Credit
	34
	

	 
	2.12
	Issuance of Letters of Credit
	35
	

	 
	2.13
	Requirements For Issuance of Letters of Credit
	36
	

	 
	2.14.
	Disbursements, Reimbursement
	36
	

	 
	2.15
	Reserved
	36
	

	 
	2.16
	Documentation
	36
	

	 
	2.17
	Determination to Honor Drawing Request
	37
	

	 
	2.18
	Nature of Participation and Reimbursement Obligations
	37
	

	 
	2.19
	Liability for Acts and Omissions
	38
	

	 
	2.20
	Mandatory Prepayments
	39
	

	 
	2.21
	Use of Proceeds
	40
	

	 
	2.22
	Reserved
	41
	

	 
	2.23
	Payment of Obligations
	41
	

	III.
	 
	INTEREST AND FEES
	41
	

	 
	3.1
	Interest
	41
	

	 
	3.2
	Letter of Credit Fees
	42
	

	 
	3.3
	Closing Fee and Facility Fee
	43
	

	 
	3.4
	Collateral Monitoring Fee and Collateral Evaluation Fee
	43
	

	 
	3.5
	Computation of Interest and Fees
	44
	

	 
	3.6
	Maximum Charges
	44
	

	 
	3.7
	Increased Costs
	44
	

	 
	3.8
	Basis For Determining Interest Rate Inadequate or Unfair
	45
	

	 
	3.9
	Capital Adequacy
	46
	

	 
	3.10
	Taxes
	46
	

	IV.
	 
	COLLATERAL:  GENERAL TERMS
	47
	

	 
	4.1
	Security Interest in the Collateral
	47
	

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Table of Contents continued
Page

	
					
	 
	4.2
	Perfection of Security Interest
	47
	

	 
	4.3
	Preservation of Collateral
	48
	

	 
	4.4
	Ownership and Location of Collateral
	48
	

	 
	4.5
	Defense of Lender’s Interests
	49
	

	 
	4.6
	Inspection of Premises
	49
	

	 
	4.7
	Appraisals
	50
	

	 
	4.8
	Receivables; Deposit Accounts and Securities Accounts
	50
	

	 
	4.9
	Inventory
	53
	

	 
	4.10
	Maintenance of Equipment
	53
	

	 
	4.11
	Exculpation of Liability
	53
	

	 
	4.12
	Financing Statements
	53
	

	V.
	 
	REPRESENTATIONS AND WARRANTIES
	53
	

	 
	5.1
	Authority
	53
	

	 
	5.2
	Formation and Qualification
	54
	

	 
	5.3
	Survival of Representations and Warranties
	54
	

	 
	5.4
	Tax Returns
	54
	

	 
	5.5
	Financial Statements
	54
	

	 
	5.6
	Entity Names
	55
	

	 
	5.7
	O.S.H.A. Environmental Compliance; Flood Insurance
	55
	

	 
	5.8
	Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance
	56
	

	 
	5.9
	Patents, Trademarks, Copyrights and Licenses
	57
	

	 
	5.10
	Licenses and Permits
	57
	

	 
	5.11
	Default of Indebtedness
	58
	

	 
	5.12
	No Default
	58
	

	 
	5.13
	No Burdensome Restrictions
	58
	

	 
	5.14
	No Labor Disputes
	58
	

	 
	5.15
	Margin Regulations
	58
	

	 
	5.16
	Investment Company Act
	58
	

	 
	5.17
	Disclosure
	58
	

	 
	5.18
	[Reserved]
	59
	

	 
	5.19
	[Reserved]
	59
	

	 
	5.20
	Swaps
	59
	

	 
	5.21
	Business and Property of Borrower
	59
	

	 
	5.22
	Ineligible Securities
	59
	

	 
	5.23
	[Reserved]
	59
	

	 
	5.24
	Equity Interests
	59
	

	 
	5.25
	Commercial Tort Claims
	59
	

	 
	5.26
	Letter of Credit Rights
	59
	

	 
	5.27
	[Reserved]
	59
	

	VI.
	 
	AFFIRMATIVE COVENANTS
	59
	

	 
	6.1
	Compliance with Laws
	59
	

	 
	6.2
	Conduct of Business and Maintenance of Existence and Assets
	60
	

	 
	6.3
	Books and Records
	60
	

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Table of Contents continued
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	6.4
	Payment of Taxes
	60
	

	 
	6.5
	Financial Covenants
	60
	

	 
	6.6
	Insurance
	61
	

	 
	6.7
	Payment of Indebtedness and Leasehold Obligations
	62
	

	 
	6.8
	Environmental Matters
	62
	

	 
	6.9
	Standards of Financial Statements
	63
	

	 
	6.10
	[Reserved]
	63
	

	 
	6.11
	Execution of Supplemental Instruments
	63
	

	 
	6.12
	[Reserved]
	63
	

	 
	6.13
	Government Receivables
	63
	

	 
	6.14
	Keepwell
	63
	

	VII.
	 
	NEGATIVE COVENANTS.
	64
	

	 
	7.1
	Merger, Consolidation, Acquisition and Sale of Assets
	64
	

	 
	7.2
	Creation of Liens
	64
	

	 
	7.3
	Guarantees
	65
	

	 
	7.4
	Investments
	65
	

	 
	7.5
	Loans
	65
	

	 
	7.6
	Capital Expenditures
	65
	

	 
	7.7
	Dividends
	65
	

	 
	7.8
	Indebtedness
	65
	

	 
	7.9
	Nature of Business
	65
	

	 
	7.10
	Transactions with Affiliates
	65
	

	 
	7.11
	Leases
	66
	

	 
	7.12
	Subsidiaries
	66
	

	 
	7.13
	Fiscal Year and Accounting Changes
	66
	

	 
	7.14
	Pledge of Credit
	66
	

	 
	7.15
	Amendment of Organizational Documents
	66
	

	 
	7.16
	Compliance with ERISA
	66
	

	 
	7.17
	Prepayment of Indebtedness
	67
	

	 
	7.18
	[Reserved]
	67
	

	 
	7.19
	[Reserved]
	67
	

	 
	7.20
	[Reserved]
	67
	

	VIII.
	 
	CONDITIONS PRECEDENT
	67
	

	 
	8.1
	Conditions to Initial Advances
	67
	

	 
	8.2
	Conditions to Each Advance
	71
	

	 
	8.3
	Swap Arrangement
	72
	

	IX.
	 
	INFORMATION AS TO BORROWER
	72
	

	 
	9.1
	Disclosure of Material Matters
	72
	

	 
	9.2
	Schedules
	72
	

	 
	9.3
	Environmental Reports
	73
	

	 
	9.4
	Litigation
	73
	

	 
	9.5
	Material Occurrences
	74
	

	 
	9.6
	Government Receivables
	74
	

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Page

	
					
	 
	9.7
	Annual Financial Statements
	74
	

	 
	9.8
	Quarterly Financial Statements
	74
	

	 
	9.9
	Monthly Financial Statements
	74
	

	 
	9.10
	Other Reports
	74
	

	 
	9.11
	Additional Information
	74
	

	 
	9.12
	Projected Operating Budget
	75
	

	 
	9.13
	[Reserved]
	75
	

	 
	9.14
	Notice of Suits, Adverse Events
	75
	

	 
	9.15
	ERISA Notices and Requests
	75
	

	 
	9.16
	Additional Documents
	76
	

	 
	9.17
	Updates to Certain Schedules
	76
	

	 
	9.18
	[Reserved]
	76
	

	X.
	 
	EVENTS OF DEFAULT
	76
	

	 
	10.1
	Nonpayment
	76
	

	 
	10.2
	Breach of Representation
	76
	

	 
	10.3
	Financial Information
	77
	

	 
	10.4
	Judicial Actions
	77
	

	 
	10.5
	Noncompliance
	77
	

	 
	10.6
	Judgments
	77
	

	 
	10.7
	Bankruptcy
	77
	

	 
	10.8
	Material Adverse Effect
	78
	

	 
	10.9
	Lien Priority
	78
	

	 
	10.10
	[Reserved]
	78
	

	 
	10.11
	Cross Default
	78
	

	 
	10.12
	Breach of Guaranty or Pledge Agreement
	78
	

	 
	10.13
	Change of Control
	78
	

	 
	10.14
	Invalidity
	78
	

	 
	10.15
	Seizures
	78
	

	 
	10.16
	Operations
	78
	

	 
	10.17
	Pension Plans
	79
	

	 
	10.18
	Anti-Terrorism Laws
	79
	

	XI.
	 
	LENDER’S RIGHTS AND REMEDIES AFTER DEFAULT
	79
	

	 
	11.1
	Rights and Remedies
	79
	

	 
	11.2
	Lender’s Discretion
	81
	

	 
	11.3
	Setoff
	81
	

	 
	11.4
	Rights and Remedies not Exclusive
	81
	

	 
	11.5
	Allocation of Payments After Event of Default
	81
	

	XII
	 
	WAIVERS AND JUDICIAL PROCEEDINGS.
	81
	

	 
	12.1
	Waiver of Notice
	81
	

	 
	12.1
	Delay
	81
	

	 
	12.3
	Jury Waiver
	81
	

	XIII
	 
	EFFECTIVE DATE AND TERMINATION
	82
	

	 
	13.1
	Term
	82
	

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Page

	
					
	 
	13.2
	Termination
	82
	

	XIV
	 
	[RESERVED].
	83
	

	XV
	 
	[RESERVED].
	83
	

	XVI
	 
	MISCELLANEOUS
	83
	

	 
	16.1
	Governing Law
	83
	

	 
	16.2
	Entire Understanding
	83
	

	 
	16.3
	Successors and Assigns; Participations; New Lenders
	84
	

	 
	16.4
	Application of Payments
	85
	

	 
	16.5
	Indemnity
	85
	

	 
	16.6
	Notice
	86
	

	 
	16.7
	Survival
	88
	

	 
	16.8
	Severability
	88
	

	 
	16.9
	Expenses
	88
	

	 
	16.10
	Injunctive Relief
	89
	

	 
	16.11
	Consequential Damages
	89
	

	 
	16.12
	Captions
	89
	

	 
	16.13
	Counterparts; Facsimile Signatures
	89
	

	 
	16.14
	Construction
	89
	

	 
	16.15
	Confidentiality; Sharing Information
	89
	

	 
	16.16
	Publicity
	90
	

	 
	16.17
	Certifications From Banks and Participants; USA PATRIOT Act
	90
	

	 
	16.18
	Anti-Terrorism Laws
	90
	

    

v

LIST OF EXHIBITS AND SCHEDULES
	
		
	Exhibits
	 

	 
	 

	Exhibit 1.2
	Borrowing Base Certificate

	Exhibit 1.2(a)
	Compliance Certificate

	Exhibit 2.1(a)
	Revolving Credit Note

	Exhibit 2.3
	Term Note

	Exhibit 5.5(b)
	Financial Projections

	Exhibit 8.1(g)
	Financial Condition Certificate

	
		
	Schedules
	 

	 
	 

	Schedule 1.2
	Permitted Encumbrances

	Schedule 4.4
	Equipment and Inventory Locations; Place of Business, Chief Executive Office, Real Property

	Schedule 4.8(j)
	Deposit and Investment Accounts

	Schedule 5.1
	Consents

	Schedule 5.2(a)
	States of Qualification and Good Standing

	Schedule 5.2(b)
	Subsidiaries

	Schedule 5.4
	Federal Tax Identification Number

	Schedule 5.6
	Prior Names

	Schedule 5.8(b)(i)
	Litigation

	Schedule 5.8(b)(ii)
	Indebtedness

	Schedule 5.8(d)
	Plans

	Schedule 5.9
	Intellectual Property, Source Code Escrow Agreements

	Schedule 5.10
	Licenses and Permits

	Schedule 5.14
	Labor Disputes

	Schedule 5.24
	Equity Interests

    
     
     
    
    
    
    
     
    

i

REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated as of July 20, 2015 among KEY TECHNOLOGY, INC., an Oregon corporation, as borrower (“Borrower”), and PNC BANK, NATIONAL ASSOCIATION, as lender (“Lender”).
IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrower and Lender hereby agree as follows:
I.DEFINITIONS.
1.1.    Accounting Terms.  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Borrower for the fiscal year ended September 30, 2014.  If there occurs after the Closing Date any change in GAAP that affects in any respect the calculation of any covenant contained in this Agreement or the definition of any term defined under GAAP used in such calculations, Lender and Borrower shall negotiate in good faith to amend the provisions of this Agreement that relate to the calculation of such covenants with the intent of having the respective positions of Lender and Borrower after such change in GAAP conform as nearly as possible to their respective positions as of the Closing Date, provided, that, until any such amendments have been agreed upon, the covenants in this Agreement shall be calculated as if no such change in GAAP had occurred and Borrower shall provide additional financial statements or supplements thereto, attachments to Compliance Certificates and/or calculations regarding financial covenants as Lender may reasonably require in order to provide the appropriate financial information required hereunder with respect to Borrower both reflecting any applicable changes in GAAP and as necessary to demonstrate compliance with the financial covenants before giving effect to the applicable changes in GAAP.
1.2.    General Terms.  For purposes of this Agreement the following terms shall have the following meanings:
“Accountants” shall have the meaning set forth in Section 9.7 hereof.
“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(ii) hereof.
“Advances” shall mean and include the Revolving Advances, Letters of Credit and the Term Loan.

1

“Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, manager, member, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 25% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.
“Agreement” shall mean this Revolving Credit, Term Loan and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the highest of (a) the Base Rate in effect on such day, (b) the sum of the Federal Funds Open Rate in effect on such day plus one half of one percent (0.5%), and (c) the sum of the Daily LIBOR Rate in effect on such day plus one percent (1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not unlawful.
“Alternate Source” shall have the meaning set forth in the definition of Federal Funds Open Rate.
“Anti-Terrorism Laws” shall mean any Laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering or bribery, and any regulation, order, or directive promulgated, issued or enforced pursuant to such Laws, all as amended, supplemented or replaced from time to time.
“Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles, all provisions of all applicable state, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.
“Applicable Margin” shall mean, on the Closing Date and through, but not including, the Adjustment Date (defined below), the Applicable Margin shall be (x) an amount equal to  1.25% for Advances consisting of Domestic Rate Loans, and (y) an amount equal to 2.75% for Advances consisting of LIBOR Rate Loans.  Effective as of the date on which the quarterly financial statements of Borrower on a Consolidated Basis and related Compliance Certificate required under Section 9.8 for the most recently completed fiscal quarter are due to be delivered (each day on which such delivery is due, an “Adjustment Date”), the Applicable Margin for each type of Advance shall be adjusted, if necessary, to the applicable percent per annum set forth in the pricing table below corresponding to the Fixed Charge Coverage Ratio for the trailing four quarter period ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date:

2

	
					
	FIXED CHARGE COVERAGE RATIO
	APPLICABLE MARGINS FOR DOMESTIC RATE LOANS
	APPLICABLE MARGINS FOR LIBOR RATE LOANS

	 
	Revolving Advances

	Term Loan
	Revolving Advances / Letters of Credit
	Term Loan

	Less than 1.10 to 1.00
	1.25%
	1.75%
	2.75%
	3.25%

	Greater than or equal to 1.10 to 1.00 but less than 1.50 to 1.00
	1.00%
	1.75%
	2.5%
	3.25%

	Greater than or equal to 1.50 to 1.00
	0.75%
	1.75%
	2.25%
	3.25%

If Borrower shall fail to deliver the financial statements, certificates and/or other information required under Sections 9.7 or 9.8 by the dates required pursuant to such sections, each Applicable Margin shall be conclusively presumed to equal the highest Applicable Margin specified in the pricing table set forth above until the date of delivery of such financial statements, certificates and/or other information, at which time the rate will be adjusted based upon the Fixed Charge Coverage Ratio reflected in such statements.  Notwithstanding anything to the contrary contained herein, immediately and automatically upon the occurrence of any Event of Default, each Applicable Margin shall increase to and equal the highest Applicable Margin specified in the pricing table set forth above and shall continue at such highest Applicable Margin until the date (if any) on which such Event of Default shall be waived in accordance with the provisions of this Agreement, at which time the rate will be adjusted based upon the Fixed Charge Coverage Ratio reflected on the most recently delivered financial statements and Compliance Certificate delivered by Borrower to Lender pursuant to Section 9.7 or 9.8 (as applicable).  Any increase in interest rates and/or other fees payable by Borrower under this Agreement and the Other Documents pursuant to the provisions of the foregoing sentence shall be in addition to and independent of any increase in such interest rates and/or other fees resulting from the occurrence of any Event of Default (including, if applicable, any Event of Default arising from a breach of Sections 9.7 or 9.8 hereof) and/or the effectiveness of the Default Rate provisions of Section 3.1 hereof or the default fee rate provisions of Section 3.2 hereof.
If, as a result of any restatement of, or other adjustment to, the financial statements of Borrower on a Consolidated Basis or for any other reason, Lender determines in its Permitted Discretion that (a) the Fixed Charge Coverage Ratio as previously calculated as of any applicable date for any applicable period was inaccurate, and (b) a proper calculation of the Fixed Charge Coverage Ratio for any such period would have resulted in different pricing for such period, then (i) if the proper calculation of the Fixed Charge Coverage Ratio would have resulted in a higher interest rate and/or fees (as applicable) for such period, automatically and immediately without the necessity of any demand or notice by Lender or any other affirmative act of any party, the interest accrued on the applicable outstanding Advances and/or the amount of the fees accruing for such period under the provisions of this Agreement and the Other Documents shall be deemed to be retroactively increased by, and Borrower shall be obligated to immediately pay to Lender an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period; and (ii) if the proper calculation 

3

of the Fixed Charge Coverage Ratio would have resulted in a lower interest rate and/or fees (as applicable) for such period, then the interest accrued on the applicable outstanding Advances and the amount of the fees accruing for such period under the provisions of this Agreement and the Other Documents shall be deemed to remain unchanged, and Lender shall have no obligation to repay interest or fees to Borrower; provided, that, if as a result of any restatement or other event or other determination by Lender a proper calculation of the Fixed Charge Coverage Ratio would have resulted in a higher interest rate and/or fees (as applicable) for one or more periods and a lower interest rate and/or fees (as applicable) for one or more other periods (due to the shifting of income or expenses from one period to another period or any other reason), then the amount payable by Borrower pursuant to clause (i) above shall be based upon the excess, if any, of the amount of interest and fees that should have been paid for all applicable periods over the amounts of interest and fees actually paid for such periods.
“Application Date” shall have the meaning set forth in Section 2.8(b) hereof.
“Approvals” shall have the meaning set forth in Section 5.7(b) hereof.
“Approved Electronic Communication” shall mean each notice, demand, communication, information, document and other material transmitted, posted or otherwise made or communicated by e-mail, E-Fax, the StuckyNet System©, or any other equivalent electronic service agreed to by Lender, whether owned, operated or hosted by Lender, any of its Affiliates or any other Person, that any party is obligated to, or otherwise chooses to, provide to Lender pursuant to this Agreement or any Other Document, including any financial statement, financial and other report, notice, request, certificate and other information material; provided that Approved Electronic Communications shall not include any notice, demand, communication, information, document or other material that Lender specifically instructs a Person to deliver in physical form.
“Average Undrawn Availability” shall mean, for any date of determination, the quotient obtained by dividing (a) the sum of Undrawn Availability for each day during the applicable calendar month ending on the date immediately preceding such date of determination by (b) the actual number of days in such calendar month.
“Base Rate” shall mean the base commercial lending rate of Lender as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.  This rate of interest is determined from time to time by Lender as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by Lender to any particular class or category of customers of Lender.
“Blocked Account Bank” shall have the meaning set forth in Section 4.8(h) hereof.
“Blocked Accounts” shall have the meaning set forth in Section 4.8(h) hereof.
“Borrower” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons.

4

“Borrower on a Consolidated Basis” shall mean the consolidation in accordance with GAAP of the accounts or other items of Borrower and its Subsidiaries.
“Borrower’s Account” shall have the meaning set forth in Section 2.10 hereof.
“Borrowing Base Certificate” shall mean a certificate in substantially the form of Exhibit 1.2 hereto duly executed by the President, Chief Financial Officer or Controller of Borrower and delivered to Lender, appropriately completed, by which such officer shall certify to Lender the Formula Amount and calculation thereof as of the date of such certificate.
“Business Day” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey and, if the applicable Business Day relates to any LIBOR Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.
“Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements (or of any replacements or substitutions thereof or additions thereto) which have a useful life of more than one year and which, in accordance with GAAP, would be classified as capital expenditures.  Capital Expenditures shall include the total principal portion of Capitalized Lease Obligations.
“Capitalized Lease Obligation” shall mean any Indebtedness of Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.
“Cash Management Products and Services” shall mean agreements or other arrangements under which Lender or any Affiliate of Lender provides any of the following products or services to Borrower:  (a) credit cards (including so-called “purchase cards,” “procurement cards,” or “p-cards”; (b) credit card processing services; (c) debit cards and stored value cards; (d) commercial cards; (e) ACH transactions; and (f) cash management and treasury management services and products, including without limitation controlled disbursement accounts or services, lockboxes, automated clearinghouse transactions, overdrafts, interstate depository network services.  The indebtedness, obligations and liabilities of Borrower to Lender with respect to any Cash Management Products and Services (including all obligations and liabilities owing to Lender in respect of any returned items deposited with such provider) (the “Cash Management Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and secured obligations under any Guarantor Security Agreement, as applicable, and otherwise treated as Obligations for purposes of each of the Other Documents.
“Cash Management Liabilities” shall have the meaning provided in the definition of “Cash Management Products and Services.”
“CEA” shall mean the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.
“CFTC” shall mean the Commodity Futures Trading Commission.

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“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.
“Change in Law” shall mean the occurrence, after the Closing Date, of any of the following:  (a) the adoption or taking effect of any Applicable Law; (b) any change in any Applicable Law or in the administration, implementation, interpretation or application thereof by any Governmental Body; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Body; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines, interpretations or directives thereunder or issued in connection therewith (whether or not having the force of Applicable Law) and (y) all requests, rules, regulations, guidelines, interpretations 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 or foreign regulatory authorities (whether or not having the force of law), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued, promulgated or implemented.
“Change of Control” shall mean: (a) any Person or two or more Persons acting in concert (other than Permitted Holders), shall have acquired beneficial ownership, directly or indirectly, of Equity Interests of Borrower (or other securities convertible into such Equity Interests) representing more than 50% of the combined voting power of all Equity Interests of Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Borrower;
(b)    any Person or two or more Persons acting in concert (other than Permitted Holders), shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Borrower or control over the Equity Interests of Borrower entitled to vote for members of the Board of Directors of Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing more than 50% of the combined voting power of such Equity Interests; or
(c)    during any period of twenty four (24) consecutive months, the occurrence of a change in the composition of the Board of Directors of Borrower such that a majority of the members of such Board of Directors are not Continuing Directors.
“Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the PBGC or any environmental agency or superfund), upon the Collateral, Borrower or any of its Affiliates.

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“Claims” shall have the meaning set forth in Section 16.5 hereof.
“Closing Date” shall mean July 20, 2015 or such other date as may be agreed to in writing by the parties hereto.
“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.
“Collateral” shall mean and include all right, title and interest of Borrower in all of the following property and assets of Borrower, in each case whether now existing or hereafter arising or created and whether now owned or hereafter acquired and wherever located:
(a)all Receivables and all supporting obligations relating thereto;
(b)all equipment and fixtures;
(c)all general intangibles (including all payment intangibles and all software) and all supporting obligations related thereto;
(d)all Inventory;
(e)all Subsidiary Stock, securities, investment property, and financial assets;
(f)all Real Property;
(g)[reserved];
(h)all contract rights, rights of payment which have been earned under a contract rights, chattel paper (including electronic chattel paper and tangible chattel paper), commercial tort claims (whether now existing or hereafter arising); documents (including all warehouse receipts and bills of lading), deposit accounts, goods, instruments (including promissory notes), letters of credit (whether or not the respective letter of credit is evidenced by a writing) and letter-of-credit rights, cash, certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), security agreements, eminent domain proceeds, condemnation proceeds, tort claim proceeds and all supporting obligations;
(i)all ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by Borrower or in which it has an interest), computer programs, tapes, disks and documents, including all of such property relating to the property described in clauses (a) through and including (h) of this definition; and
(j)all proceeds and products of the property described in clauses (a) through and including (i) of this definition, in whatever form.  It is the intention of the parties that if Lender shall fail to have a perfected Lien in any particular property or assets of Borrower for any reason whatsoever, but the provisions of this Agreement and/or of the Other Documents, together with all financing statements and other public filings relating to Liens filed or recorded by Lender against 

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Borrower, would be sufficient to create a perfected Lien in any property or assets that Borrower may receive upon the sale, lease, license, exchange, transfer or disposition of such particular property or assets, then all such “proceeds” of such particular property or assets shall be included in the Collateral as original collateral that is the subject of a direct and original grant of a security interest as provided for herein and in the Other Documents (and not merely as proceeds (as defined in Article 9 of the Uniform Commercial Code) in which a security interest is created or arises solely pursuant to Section 9-315 of the Uniform Commercial Code).
“Compliance Certificate” shall mean a compliance certificate substantially in the form of Exhibit 1.2(a) hereto to be signed by the Chief Financial Officer or Controller of Borrower.
“Consents” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement or the Other Documents, including any Consents required under all applicable federal, state or other Applicable Law.
“Consigned Inventory” shall mean Inventory of Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.
“Continuing Director” means (a) any member of the board of directors of Borrower who was a director (or comparable manager) of Borrower on the Closing Date, and (b) any individual who becomes a member of the board of directors of Borrower after the Closing Date if such individual was approved, appointed or nominated for election to the board of directors of Borrower by either the Permitted Holders or a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the board of directors of Borrower in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Borrower and whose initial assumption of office resulted from such contest or the settlement thereof.  
“Contract Rate” shall have the meaning set forth in Section 3.1 hereof.
“Controlled Group” shall mean, at any time, Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with Borrower, are treated as a single employer under Section 414 of the Code.
“Covered Entity” shall mean (a) Borrower, each of Borrower’s Subsidiaries, Guarantor and all pledgors of Collateral and (b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the direct or indirect (x) ownership of, or power to vote, 25% or more of the issued and outstanding equity interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for such Person, or (y) power to direct or cause the direction of the management and policies of such Person whether by ownership of equity interests, contract or otherwise.

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“Customer” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with Borrower, pursuant to which Borrower is to deliver any personal property or perform any services.
“Customs” shall have the meaning set forth in Section 2.13(b) hereof.
“Daily LIBOR  Rate”  shall  mean,  for  any  day, the rate per annum determined  by  Lender by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the Reserve Percentage.
“Debt Payments” shall mean for any period, in each case, all cash actually expended by Borrower on a Consolidated Basis to make: (a) interest payments on any Advances hereunder, plus (b) scheduled principal payments on the Term Loan, plus (c) payments for all fees, commissions and charges set forth herein, plus (d) payments on Capitalized Lease Obligations, plus (e) payments with respect to any other Indebtedness for borrowed money.
“Default” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.
“Default Rate” shall have the meaning set forth in Section 3.1 hereof.
“Depository Accounts” shall have the meaning set forth in Section 4.8(h) hereof.
“Document” shall have the meaning given to the term “document” in the Uniform Commercial Code.
“Dollar” and the sign “$” shall mean lawful money of the United States of America.
“Domestic Rate Loan” shall mean any Advance that bears interest based upon the Alternate Base Rate.
“Drawing Date” shall have the meaning set forth in Section 2.14 hereof.
“Early Termination Date” shall have the meaning set forth in Section 13.1 hereof.
“EBITDA” shall mean for any period with respect to Borrower on a Consolidated Basis, the sum of (a) net income (or loss) for such period (excluding extraordinary gains and losses), plus (b) all interest expense for such period, plus (c) all charges against income for such period for federal, state and local taxes, plus (d) depreciation expenses for such period, plus (e) amortization expenses for such period, plus (e) any non-cash expenses, including, without limitation, non-cash expenses associated with Borrower’s stock based compensation program or with write-offs or write-downs of goodwill, intangibles or fixed assets.
“Effective Date” means the date indicated in a document or agreement to be the date on which such document or agreement becomes effective, or, if there is no such indication, the date of execution of such document or agreement.

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“Eligible Contract Participant” shall mean an “eligible contract participant” as defined in the CEA and regulations thereunder.
“Eligibility Date” shall mean, with respect to Borrower and Guarantor and each Swap, the date on which this Agreement or any Other Document becomes effective with respect to such Swap (for the avoidance of doubt, the Eligibility Date shall be the Effective Date of such Swap if this Agreement or any Other Document is then in effect with respect to Borrower or Guarantor, and otherwise it shall be the Effective Date of this Agreement and/or such Other Document(s) to which Borrower or Guarantor is a party).
“Eligible Insured Foreign Receivable or Receivables” shall mean Receivables that meet the requirements of Eligible Receivables, except clause (f) of such definition, provided that such Receivables are credit insured (the insurance carrier, amount and terms of such insurance shall be reasonably acceptable to Lender and shall name Lender as beneficiary or loss payee, as applicable).
“Eligible Inventory” shall mean and include Inventory valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Lender’s Permitted Discretion, obsolete, slow moving or unmerchantable and which Lender, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as Lender may from time to time deem appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Lender and no other Lien (other than a Permitted Encumbrance).  In addition, Inventory shall not be Eligible Inventory if it: (a) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof; (b) is Foreign In-Transit Inventory or in-transit within the United States; (c) is located outside the continental United States or at a location that is not otherwise in compliance with this Agreement; (d) constitutes Consigned Inventory; (e) is the subject of an Intellectual Property Claim; (f) is subject to a License Agreement that limits, conditions or restricts Borrower’s or Lender’s right to sell or otherwise dispose of such Inventory, unless Lender is a party to a Licensor Agreement with the Licensor under such License Agreement (or Lender shall agree otherwise in its Permitted Discretion after establishing reserves against the Formula Amount with respect thereto as Lender shall deem appropriate in its Permitted Discretion); (g) is situated at a Customer location unless either (i) such Inventory at such Customer location has a value, in the aggregate, of $250,000 or less, or (ii) if such Inventory at such Customer location has a value, in the aggregate, greater than $250,000, then that Customer has executed in favor of Lender a Lien Waiver Agreement (or Lender shall agree otherwise in its Permitted Discretion after establishing reserves against the Formula Amount with respect thereto, as Lender shall deem appropriate in its Permitted Discretion); (h) is situated at a location that is not owned by Borrower or a Customer location unless the owner or occupier of such location has executed in favor of Lender a Lien Waiver Agreement (or Lender has otherwise in its Permitted Discretion after establishing reserves against the Formal Amount with respect thereto, as Lender shall deem appropriate in its Permitted Discretion); or (i) or if the sale of such Inventory would result in an ineligible Receivable.
“Eligible Receivables” shall mean and include, each Receivable of Borrower arising in the Ordinary Course of Business and which Lender, in its Permitted Discretion, shall deem to be an Eligible Receivable, based on such considerations as Lender may from time to time deem 

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appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Lender’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence satisfactory to Lender in its Permitted Discretion.  In addition, no Receivable shall be an Eligible Receivable if:
(a)it arises out of a sale made by Borrower to an Affiliate of Borrower or to a Person controlled by an Affiliate of Borrower;
(b)it is due or unpaid more than one-hundred twenty (120) days after the original invoice date or sixty (60) days after the original due date;
(c)twenty-five percent (25%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder.  Such percentage may, in Lender’s Permitted Discretion, be increased or decreased from time to time;
(d)any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;
(e)an Insolvency Event shall have occurred with respect to such Customer;
(f)the sale is to a Customer outside the continental United States of America or in a province of Canada that has not adopted the Personal Property Security Act of Canada, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Lender in its Permitted Discretion or such Receivable constitutes an Eligible Insured Foreign Receivable;
(g)the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;
(h)Lender believes, in its Permitted Discretion, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;
(i)the Customer is the United States of America, any state or any department, agency or instrumentality of any of them, unless Borrower assigns its right to payment of such Receivable to Lender pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances;
(j)the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;
(k)the Receivables of the Customer exceed a credit limit determined by Lender, in its Permitted Discretion, to the extent such Receivable exceeds such limit;

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(l)the Receivable is subject to any offset, deduction, defense, dispute, credits or counterclaim, the Customer is also a creditor or supplier of Borrower or the Receivable is contingent in any respect or for any reason;
(m)the Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;
(n)any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed; 
(o)such Receivable is not payable to Borrower; or
(p)such Receivable is not otherwise satisfactory to Lender as determined by Lender in the exercise of its Permitted Discretion. 
“Environmental Complaint” shall have the meaning set forth in Section 9.3(b) hereof.
“Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes as well as common laws, relating to the protection of the environment, human health and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Materials and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state, international and local governmental agencies and authorities with respect thereto.
“Equity Interests” shall mean, with respect to any Person, any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act), including in each case all of the following rights relating to such Equity Interests, whether arising under the Organizational Documents of the Person issuing such Equity Interests (the “issuer”) or under the applicable laws of such issuer’s jurisdiction of organization relating to the formation, existence and governance of corporations, limited liability companies or partnerships or business trusts or other legal entities, as the case may be: (a) all economic rights (including all rights to receive dividends and distributions) relating to such Equity Interests; (b) all voting rights and rights to consent to any particular action(s) by the applicable issuer; (c) all management rights with respect to such issuer; (d) in the case of any Equity Interests consisting of a general partner interest in a partnership, all powers and rights as a general partner with respect to the management, operations and control of the business and affairs of the applicable issuer; (e) in the case of any Equity Interests consisting of the membership/limited liability company interests of a managing member in a limited liability company, all powers and rights as a managing member with respect to the management, operations and control of the business and affairs of the applicable issuer; (f) all rights to designate or appoint or vote for or 

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remove any officers, directors, manager(s), general partner(s) or managing member(s) of such issuer and/or any members of any board of members/managers/partners/directors that may at any time have any rights to manage and direct the business and affairs of the applicable issuer under its Organizational Documents as in effect from time to time or under Applicable Law; (g) all rights to amend the Organizational Documents of such issuer, (h) in the case of any Equity Interests in a partnership or limited liability company, the status of the holder of such Equity Interests as a “partner,” general or limited, or “member” (as applicable) under the applicable Organizational Documents and/or Applicable Law; and (i) all certificates evidencing such Equity Interests.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time and the rules and regulations promulgated thereunder.
“Event of Default” shall have the meaning set forth in Article X hereof.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Excluded Accounts” shall mean any (i) payroll accounts, (ii) withholding tax accounts, (iii) fiduciary accounts, (iv) accounts used to make tax, trust, pension or other similar employee benefit payments, and (v) accounts that contain, at all times, less than $25,000 for all such accounts in the aggregate.
“Excluded Foreign Subsidiary” shall mean (i) any Subsidiary of Borrower that is a “controlled foreign corporation” as defined in Section 957 of the Code (a “CFC Subsidiary”), (ii) any Subsidiary of a CFC Subsidiary, or (iii) any subsidiary of Borrower all of the assets of which are debt or Equity Interests of one or more entities that could reasonably be treated as “controlled foreign corporations” as defined in  Section 957 of the Code.
“Excluded Hedge Liability or Liabilities” shall mean, with respect to Borrower and Guarantor, each of its Swap Obligations if, and only to the extent that, all or any portion of this Agreement or any Other Document that relates to such Swap Obligation is or becomes illegal under the CEA, or any rule, regulation or order of the CFTC, solely by virtue of Borrower’s and/or Guarantor’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap. Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any Other Document, the foregoing is subject to the following provisos: (a) if a Swap Obligation arises under a master agreement governing more than one Swap, this definition shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty or security interest is or becomes illegal under the CEA, or any rule, regulations or order of the CFTC, solely as a result of the failure by Borrower or Guarantor for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap; (b) if a guarantee of a Swap Obligation would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Swap Obligation shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest; and (c) if there is more than one Borrower or Guarantor executing this Agreement or the Other Documents and a Swap Obligation would be an Excluded Hedge Liability with respect to one or more of such Persons, but not all of them, the definition of Excluded 

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Hedge Liability or Liabilities with respect to each such Person shall only be deemed applicable to (i) the particular Swap Obligations that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Swap Obligations constitute Excluded Hedge Liabilities.
“Excluded Taxes” shall mean, with respect to Lender, a Participant or any other recipient of any payment to be made by or on account of any Obligations, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of Lender or a Participant in which its applicable lending office is located or (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located.
“Facility Fee” shall have the meaning set forth in Section 3.3(b) hereof.
“FCCR Period” shall mean a period commencing on any date (the “Commencement Date”) on which (a) an Event of Default has occurred and is continuing, or (b) the sum of the Undrawn Availability of Borrower plus Borrower's aggregate amount of unrestricted cash and cash equivalents (which is subject to Lender’s first priority perfected security interest and is in excess of $1,000,000), which sum is less than $5,000,000, and in each case continuing until the later of (x) the date on which the Event of Default giving rise to such FCCR Period shall have been cured or waived by the Lender, and (y) the month-end after the Commencement Date with respect to which Average Undrawn Availability of Borrower for the month is greater than or equal to $5,000,000.
“Federal Funds Open Rate” shall mean for any day the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by Lender (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by Lender at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day.  If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to Borrower, effective on the date of any such change.
“Fixed Charge Coverage Ratio” shall mean, with respect to any fiscal period, for Borrower on a Consolidated Basis, the ratio of (a) EBITDA, minus Unfunded Capital Expenditures made during such period, minus distributions (including tax distributions) and dividends made during such period, minus cash taxes paid during such period, to (b) all Debt Payments made during such period.

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“Flood Laws” shall mean all Applicable Laws relating to policies and procedures that address requirements placed on federally regulated lenders under the National Flood Insurance Reform Act of 1994 and other Applicable Laws related thereto.
“Foreign Currency Hedge” shall mean any foreign exchange transaction, including spot and forward foreign currency purchases and sales, listed or over-the-counter options on foreign currencies, non-deliverable forwards and options, foreign currency swap agreements, currency exchange rate price hedging arrangements, and any other similar transaction providing for the purchase of one currency in exchange for the sale of another currency entered into by Borrower, Guarantor and/or any of their respective Subsidiaries.
“Foreign Currency Hedge Liabilities” shall have the meaning assigned in the definition of Lender-Provided Foreign Currency Hedge.
“Foreign Subsidiary” shall mean any Subsidiary of any Person that is not organized or incorporated in the United States, any State or territory thereof or the District of Columbia.
“Formula Amount” shall have the meaning set forth in Section 2.1(a) hereof.
“GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.
“Governmental Acts” shall mean any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body.
“Governmental Body” shall mean any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the executive, legislative, judicial, taxing, regulatory or administrative powers or  functions of or pertaining to a government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
“Guarantor” shall mean Key Technology Holdings USA LLC, an Oregon limited liability company and each other direct or indirect Subsidiary of Borrower (other than any Excluded Foreign Subsidiary), and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.
“Guarantor Security Agreement” shall mean any security agreement executed by Guarantor in favor of Lender securing the Obligations or the Guaranty of Guarantor, in form and substance satisfactory to Lender.
“Guaranty” shall mean any guaranty of the Obligations executed by Guarantor in favor of Lender in form and substance satisfactory to Lender.
“Hazardous Discharge” shall have the meaning set forth in Section 9.3(b) hereof.

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“Hazardous Materials” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in or subject to regulation under Environmental Laws.
“Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.
“Hedge Liabilities” shall mean the Interest Rate Hedge Liabilities.
“Indebtedness” shall mean, as to any Person at any time, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of:  (a) borrowed money; (b) amounts received under or liabilities in respect of any note purchase or acceptance credit facility, and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all Capitalized Lease Obligations; (d) reimbursement obligations (contingent or otherwise) under any letter of credit agreement, banker’s acceptance agreement or similar arrangement; (e) obligations under any Interest Rate Hedge, Foreign Currency Hedge, or other interest rate management device, foreign currency exchange agreement, currency swap agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement; (f) any other advances of credit made to or on behalf of such Person or other transaction (including forward sale or purchase agreements, capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements including to finance the purchase price of property or services and all obligations of such Person to pay the deferred purchase price of property or services (but not including trade payables and accrued expenses incurred in the Ordinary Course of Business which are not represented by a promissory note or other evidence of indebtedness and which are not more than thirty (30) days past due); (g) all Equity Interests of such Person subject to repurchase or redemption rights or obligations (excluding repurchases or redemptions at the sole option of such Person); (h) all indebtedness, obligations or liabilities secured by a Lien on any asset of such Person, whether or not such indebtedness, obligations or liabilities are otherwise an obligation of such Person; (i) all obligations of such Person for “earnouts,” purchase price adjustments, profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts; (j) off-balance sheet liabilities and/or pension plan liabilities of such Person; (k) obligations arising under bonus, deferred compensation, incentive compensation or similar arrangements, other than those arising in the Ordinary Course of Business; and (l) any guaranty of any indebtedness, obligations or liabilities of a type described in the foregoing clauses (a) through (k).
“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

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“Ineligible Security” shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
“Insolvency Event” shall mean, with respect to any Person, such Person or such Person’s direct or indirect parent company (a) becomes the subject of a bankruptcy or insolvency proceeding (including any proceeding under Title 11 of the United States Code), or regulatory restrictions, (b) has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it or has called a meeting of its creditors, (c) admits in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, or (d) in the good faith determination of Lender, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment of a type described in clauses (a) or (b), provided that an Insolvency Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person or such Person’s direct or indirect parent company by a Governmental Body or instrumentality thereof if, and only if, such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Body or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Intellectual Property” shall mean property constituting a patent, copyright, trademark (or any application in respect of the foregoing), service mark, copyright, copyright application, trade name, mask work, trade secrets, design right, assumed name or license or other right to use any of the foregoing under Applicable Law.
“Intellectual Property Claim” shall mean the assertion, by any means, by any Person of a claim that Borrower’s ownership, use, marketing, sale or distribution of any Inventory, equipment, Intellectual Property or other property or asset is violative of any ownership of or right to use any Intellectual Property of such Person.
“Interest Period” shall mean the period provided for any LIBOR Rate Loan pursuant to Section 2.2(b) hereof.
“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap, floor, adjustable strike cap, adjustable strike corridor, cross-currency swap or similar agreements entered into by Borrower, Guarantor and/or their respective Subsidiaries in order to provide protection to, or minimize the impact upon, Borrower, Guarantor and/or their respective Subsidiaries of increasing floating rates of interest applicable to Indebtedness.
“Interest Rate Hedge Liabilities” shall have the meaning assigned in the definition of Lender-Provided Interest Rate Hedge.
“Inventory” shall mean and include as to Borrower all of Borrower’s inventory (as defined in Article 9 of the Uniform Commercial Code) and all of Borrower’s goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract 

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of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all Documents.
“Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(ii) hereof.
“Inventory NOLV Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(ii) hereof.
“Law(s)” shall mean any law(s) (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling, order, executive order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award of or any settlement arrangement, by agreement, consent or otherwise, with any Governmental Body, foreign or domestic.
“Lender” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of Lender.  For the purpose of provision of this Agreement or any Other Document which provides for the granting of a security interest or other Lien to Lender as security for the Obligations, "Lender" shall include any Affiliate of Lender to which such Obligation (specifically including any Hedge Liabilities and any Cash Management Liabilities) is owed.
“Lender-Provided Foreign Currency Hedge” shall mean a Foreign Currency Hedge which is provided by Lender.
“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is provided by Lender.
“Letter of Credit Application” shall have the meaning set forth in Section 2.12(a) hereof.
“Letter of Credit Fees” shall have the meaning set forth in Section 3.2 hereof.
“Letter of Credit Sublimit” shall mean $4,000,000.
“Letters of Credit” shall have the meaning set forth in Section 2.11 hereof.
“LIBOR Alternate Source” shall have the meaning set forth in the definition of LIBOR Rate.
“LIBOR Rate” shall mean for any LIBOR Rate Loan for the then current Interest Period relating thereto, the interest rate per annum determined by Lender by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (a) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Lender as an authorized information vendor for the purpose of displaying rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market (a “LIBOR Alternate Source”), at approximately 11:00 a.m., 

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London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars for an amount comparable to such LIBOR Rate Loan and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any LIBOR Alternate Source, a comparable replacement rate determined by Lender at such time (which determination shall be conclusive absent manifest error)), by (b) a number equal to 1.00 minus the Reserve Percentage.
The LIBOR Rate shall be adjusted with respect to any LIBOR Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date.  Lender shall give reasonably prompt notice to the Borrower of the LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
“LIBOR Rate Loan” shall mean any Advance that bears interest based on the LIBOR Rate.
“License Agreement” shall mean any agreement between Borrower and a Licensor pursuant to which Borrower is authorized to use any Intellectual Property in connection with the manufacturing, marketing, sale or other distribution of any Inventory of Borrower or otherwise in connection with Borrower’s business operations.
“Licensor” shall mean any Person from whom Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with Borrower’s business operations.
“Licensor Agreement” shall mean an agreement between Lender and a Licensor, in form and substance satisfactory to Lender, by which Lender is given the unqualified right, vis-à-vis such Licensor, to enforce Lender’s Liens with respect to and to dispose of Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of Borrower’s default under any License Agreement with such Licensor.
“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.
“Lien Waiver Agreement” shall mean an agreement which is executed in favor of Lender by a Person who owns or occupies premises at which any Collateral may be located from time to time in form and substance satisfactory to Lender.
“Liquidity” shall mean, at any time, the sum of (a) the aggregate amount of unrestricted cash and cash equivalents on the balance sheet of Borrower at such time subject to Lender’s first priority perfected security interest, and (b) the Undrawn Availability at such time.

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“Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of Borrower or Guarantor, (b) Borrower’s ability to duly and punctually pay or perform the Obligations in accordance with the terms hereof, (c) the value of the Collateral, Lender’s Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Lender’s rights and remedies under this Agreement and the Other Documents.
“Material Contract” shall mean any contract, agreement, instrument, permit, lease or license, written or oral, of Borrower, which is material to Borrower’s business or which the failure to comply with could reasonably be expected to result in a Material Adverse Effect.
“Maximum Revolving Advance Amount” shall mean $15,000,000.
“Maximum Undrawn Amount” shall mean, with respect to any outstanding Letter of Credit as of any date, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.
“Mortgage” shall mean the mortgage on the Real Property securing the Obligations.
“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37) or 4001(a)(3) of ERISA to which contributions are required or, within the preceding five plan years, were required by Borrower or any member of the Controlled Group.
“Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors (including Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“Negotiable Document” shall mean a Document that is “negotiable” within the meaning of Article 7 of the Uniform Commercial Code.
“Non-Qualifying Party” shall mean Borrower or Guarantor if, on the Eligibility Date, it fails for any reason to qualify as an Eligible Contract Participant.
“Note” shall mean collectively, the Term Note and the Revolving Credit Note.
“Obligations” shall mean and include any and all loans (including without limitation, all Advances), advances, debts, liabilities, obligations (including without limitation all reimbursement obligations and cash collateralization obligations with respect to Letters of Credit issued hereunder), covenants and duties owing by Borrower or Guarantor or any Subsidiary of Borrower or Guarantor to Lender (or to any other direct or indirect subsidiary or affiliate of Lender) of any kind or nature, present or future (including any interest or other amounts accruing thereon, any fees accruing under or in connection therewith, any costs and expenses of any Person payable by Borrower and any indemnification obligations payable by Borrower arising or payable after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to Borrower, whether or not a claim for post-filing or post-petition interest, fees 

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or other amounts is allowable or allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document (including this Agreement, the Other Documents, Lender-Provided Interest Rate Hedges, Lender-Provided Foreign Currency Hedges and any Cash Management Products and Services) whether or not for the payment of money, whether arising by reason of an extension of credit, opening or issuance of a letter of credit, loan, equipment lease, establishment of any commercial card or similar facility or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of Lender’s non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, (i) any and all of Borrower’s or Guarantor’s Indebtedness and/or liabilities (and any and all indebtedness, obligations and/or liabilities of any Subsidiary of Borrower or Guarantor) under this Agreement, the Other Documents or under any other agreement between Lender and Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of Borrower to Lender to perform acts or refrain from taking any action, (ii) all Hedge Liabilities and (iii) all Cash Management Liabilities.  Notwithstanding anything to the contrary contained in the foregoing, the Obligations shall not include any Excluded Hedge Liabilities.
“Ordinary Course of Business” shall mean, with respect to Borrower, the ordinary course of Borrower’s business as conducted on the Closing Date.
“Organizational Documents” shall mean, with respect to any Person, any charter, articles or certificate of incorporation, certificate of organization, registration or formation, certificate of partnership or limited partnership, bylaws, operating agreement, limited liability company agreement, or partnership agreement of such Person and any and all other applicable documents relating to such Person’s formation, organization or entity governance matters (including any shareholders’ or equity holders’ agreement or voting trust agreement) and specifically includes, without limitation, any certificates of designation for preferred stock or other forms of preferred equity.
“Other Documents” shall mean the Mortgage, the Notes, the Perfection Certificates, any Guaranty, Guarantor Security Agreement, any Pledge Agreement, any Lender-Provided Interest Rate Hedge, any Lender-Provided Foreign Currency Hedge, and any and all other agreements, instruments and documents, including, intercreditor agreements, guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by Borrower or Guarantor and/or delivered to Lender in respect of the transactions contemplated by this Agreement, in each case together with all 

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extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.
“Other Taxes” shall mean all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any Other Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any Other Document.
“Parent” of any Person shall mean a corporation or other entity owning, directly or indirectly, 50% or more of the Equity Interests issued by such Person having ordinary voting power to elect a majority of the directors of such Person, or other Persons performing similar functions for any such Person.
“Participant” shall mean each Person who shall be granted the right by Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to Lender.
“Payment Office” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Lender, if any, which it may designate by notice to Borrower to be the Payment Office.
“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.
“Pension Benefit Plan” shall mean at any time any “employee pension benefit plan” as defined in Section 3(2) of ERISA (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Sections 412, 430 or 436 of the Code and either (i) is maintained or to which contributions are required by Borrower or any member of the Controlled Group or (ii) has at any time within the preceding five years been maintained or to which contributions have been required by Borrower or any entity which was at such time a member of the Controlled Group.
“Perfection Certificates” shall mean, collectively, the information questionnaires and the responses thereto provided by Borrower and delivered to Lender.
“Permitted Discretion” shall mean a determination made in good faith and in the exercise (from the perspective of a secured asset-based lender) of commercially reasonable business judgment.
“Permitted Dividends” shall mean so long as: (a) a notice of termination with regard to this Agreement shall not be outstanding; (b) no Event of Default or Default shall have occurred and be continuing or would occur after giving pro forma effect to such dividends; and (c) the purpose for such dividend shall be as set forth in writing to Lender at least ten (10) days prior to the making of such dividend and such dividend shall in fact be used for such purpose, Borrower shall be permitted to pay dividends.

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“Permitted Encumbrances” shall mean: (a) Liens in favor of Lender, including without limitation, Liens securing Hedge Liabilities and Cash Management Products and Services; (b) Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested; (c) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (d) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (e) Liens arising by virtue of the rendition, entry or issuance against Borrower or any Subsidiary, or any property of Borrower or any Subsidiary, of any judgment, writ, order, or decree to the extent the rendition, entry, issuance or continued existence of such judgment, writ, order or decree (or any event or circumstance relating thereto) has not resulted in the occurrence of an Event of Default under Section 10.6 hereof; (f) carriers’, repairmens’, mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested; (g) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (I) any such lien shall not encumber any other property of any Borrower and (II) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount permitted in Section 7.6 hereof; (h)other Liens incidental to the conduct of Borrower’s business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from Lender’s rights in and to the Collateral or the value of Borrower’s property or assets or which do not materially impair the use thereof in the operation of Borrower’s business; (h) easements, rights-of-way, zoning restrictions, minor defects or irregularities in title and other charges or encumbrances, in each case, which do not interfere in any material respect with the Ordinary Course of Business of Borrower and its Subsidiaries; (i) any exceptions listed on Schedule B of the title insurance policies delivered to and accepted by, Lender under Section 8.1(e); and (j) Liens disclosed on Schedule 1.2; provided that such Liens shall secure only those obligations which they secure on the Closing Date (and extensions, renewals and refinancing of such obligations permitted by Section 7.8 hereof) and shall not subsequently apply to any other property or assets of Borrower other than the property and assets to which they apply as of the Closing Date.
“Permitted Indebtedness” shall mean: (a) the Obligations; (b) Indebtedness incurred for Capital Expenditures permitted in Section 7.6 hereof; (c) any guarantees of Indebtedness permitted under Section 7.3 hereof; (d) any Indebtedness listed on Schedule 5.8(b)(ii) hereof; and (e) Interest Rate Hedges that are entered into by Borrower to hedge its risks with respect to outstanding Indebtedness of Borrower and not for speculative or investment purposes.
“Permitted Investments” shall mean investments in: (a) obligations issued or guaranteed by the United States of America or any agency thereof; (b) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency; (d) U.S. money market funds that 

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invest solely in obligations issued or guaranteed by the United States of America or an agency thereof; and (e) Permitted Loans.
“Permitted Holders” shall mean individually and collectively, Leslie J. Schreyer, Royce & Associates, LLC, the board of directors and executive officers of Borrower as at the Closing Date, Columbia Management Investment Advisors, LLC, and Rutabaga Capital Management, LLC.
“Permitted Loans” shall mean the extension of trade credit by Borrower to its Customers, in the Ordinary Course of Business in connection with a sale of Inventory or rendition of services, in each case on open account terms.
“Person” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).
“Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan and a Multiemployer Plan, as defined herein) maintained by Borrower or any member of the Controlled Group or to which Borrower or any member of the Controlled Group is required to contribute.
“Pledge Agreement” shall mean that certain Pledge Agreement executed by Borrower in favor of Lender dated as of the Closing Date and any other pledge agreements executed subsequent to the Closing Date by any other Person to secure the Obligations.
“Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a) hereof.
“Pro Forma Financial Statements” shall have the meaning set forth in Section 5.5(b) hereof.
“Projections” shall have the meaning set forth in Section 5.5(b) hereof.
“Properly Contested” shall mean, in the case of any Indebtedness, Lien or Taxes, as applicable, of any Person that are not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay the same or concerning the amount thereof:  (a) such Indebtedness, Lien or Taxes, as applicable, are being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (b) such Person has established appropriate reserves as shall be required in conformity with GAAP; (c) the non-payment of such Indebtedness or Taxes will not have a Material Adverse Effect or will not result in the forfeiture of any assets of such Person; (d) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness or taxes unless such Lien (x) does not attach to any Receivables or Inventory, (y) is at all times junior and subordinate in priority to the Liens in favor of Lender (except only with respect to property Taxes that have priority as a matter of applicable state law) and, (z) enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; and (e) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, 

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writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review.
“Protective Advances” shall have the meaning set forth in Section 16.2(c) hereof.
“Published  Rate” shall mean the rate of interest published each Business Day in the Wall Street Journal “Money Rates” listing under the  caption  “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the LIBOR Rate for a one month period as published in another publication selected by Lender).
“Qualified ECP Loan Party” shall mean Borrower or each Guarantor that on the Eligibility Date is (a) a corporation, partnership, proprietorship, organization, trust, or other entity other than a “commodity pool” as defined in Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets exceeding $10,000,000 or (b) an Eligible Contract Participant that can cause another person to qualify as an Eligible Contract Participant on the Eligibility Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise providing a “letter of credit or keepwell, support, or other agreement” for purposes of Section 1a(18)(A)(v)(II) of the CEA.
“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.
“Real Property” shall mean all of the owned and leased premises identified on Schedule 4.4 hereto or in and to other premises or real property that are hereafter owned or leased by any Borrower.
“Receivables” shall mean and include, as to Borrower, all of Borrower’s accounts (as defined in Article 9 of the Uniform Commercial Code) and all of Borrower’s contract rights, instruments (including those evidencing indebtedness owed to Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, contract rights, instruments, documents and chattel paper, and drafts and acceptances, credit card receivables and all other forms of obligations owing to Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Lender hereunder.
“Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i) hereof.
“Reimbursement Obligation” shall have the meaning set forth in Section 2.14 hereof.
“Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.
“Reportable Compliance Event” shall mean that any Covered Entity becomes a Sanctioned Person, or is charged by indictment, criminal complaint or similar charging instrument, arraigned, or custodially detained in connection with any Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or has knowledge of facts or circumstances to the effect that it is reasonably likely that any aspect of its operations is in actual or probable violation of any Anti-Terrorism Law.

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“Reportable ERISA Event” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder.
“Reserve Percentage” shall mean as of any day the maximum effective percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).
“Revolving Advances” shall mean Advances other than Letters of Credit and the Term Loan.
“Revolving Credit Note” shall mean, collectively, the promissory notes referred to in Section 2.1(a) hereof.
“Revolving Interest Rate” shall mean (a) with respect to Revolving Advances that are Domestic Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate Base Rate, and (b) with respect to Revolving Advances that are LIBOR Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the greater of (i) the LIBOR Rate and (ii) 0%.
“Sanctioned Country” shall mean a country subject to a sanctions program maintained under any Anti-Terrorism Law.
“Sanctioned Person” shall mean any individual person, group, regime, or entity listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person, group, regime, entity or thing, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any Anti-Terrorism Law.
“SEC” shall mean the Securities and Exchange Commission or any successor thereto.
“Secured Parties” shall mean Lender, together with any Affiliates of Lender to whom any Hedge Liabilities or Cash Management Liabilities are owed and with each other holder of any of the Obligations, and the respective successors and assigns of each of them.
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Subsidiary” shall mean, with respect to any Person a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.
“Subsidiary Stock” shall mean (a) with respect to the Equity Interests issued to Borrower by any Subsidiary (other than a Foreign Subsidiary), 100% of such issued and outstanding Equity Interests, and (b) with respect to any Equity Interests issued to Borrower by any Foreign Subsidiary (i) 100% of such issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956(c)(2)) and (ii) 66% (or such greater percentage that, due to a change 

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in an Applicable Law after the date hereof, (x) could not reasonably be expected to cause the undistributed earnings of such  Foreign Subsidiary as determined for United States federal income tax purposes to be treated as a deemed dividend to Borrower and (y) could not reasonably be expected to cause any material adverse tax consequences) of such issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956‐2(c)(2)).
“Swap” shall mean any “swap” as defined in Section 1a(47) of the CEA and regulations thereunder, other than (a) a swap entered into, on or subject to the rules of, a board of trade designated as a contract market under Section 5 of the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation 32.3(a).
“Swap Obligation” means any obligation to pay or perform under any agreement, contract or transaction that constitutes a Swap which is also a Lender-Provided Interest Rate Hedge, or a Lender-Provided Foreign Currency Hedge.
“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Body, including any interest, additions to tax or penalties applicable thereto.
“Term” shall have the meaning set forth in Section 13.1 hereof.
“Term Loan” shall have the meaning set forth in Section 2.3 hereof.
“Term Loan Rate” shall mean (a) with respect to Term Loans that are Domestic Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate Base Rate and (b) with respect to Term Loans that are LIBOR Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the greater of (i) the LIBOR Rate and (ii) 0%.
“Term Note” shall mean the promissory note described in Section 2.3 hereof.
“Termination Event” shall mean: (a) a Reportable ERISA Event with respect to any Plan; (b) the withdrawal of Borrower or any member of the Controlled Group from a Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (d) the commencement of proceedings by the PBGC to terminate a Plan; (e) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; (f) the partial or complete withdrawal within the meaning of Section 4203 or 4205 of ERISA, of Borrower or any member of the Controlled Group from a Multiemployer Plan; (g) notice that a Multiemployer Plan is subject to Section 4245 of ERISA; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent, upon Borrower or any member of the Controlled Group.

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“Toxic Substance” shall mean and include any material present on the Real Property which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
“Transactions” shall have the meaning set forth in Section 5.5(a) hereof.
“Transferee” shall have the meaning set forth in Section 16.3(c) hereof.
“Undrawn Availability” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of all outstanding Letters of Credit, minus (b) the sum of (i) the outstanding amount of Advances (other than the Term Loan) plus (ii) all amounts due and owing to Borrower’s trade creditors which are outstanding beyond sixty (60) days or more past their due date, plus (iii) fees and expenses incurred in connection with the Transactions for which Borrower is liable but which have not been paid or charged to Borrower’s Account.
“Unfunded Capital Expenditures” shall mean, for Borrower on a Consolidated Basis, without duplication, a Capital Expenditure funded (a) from internally generated cash flow or (b) with the proceeds of a Revolving Advance.
“Uniform Commercial Code” shall have the meaning set forth in Section 1.3 hereof.
“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
1.3.    Uniform Commercial Code Terms.  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of New York from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts,” “chattel paper” (and “electronic chattel paper” and “tangible chattel paper”), “commercial tort claims,” “deposit accounts,” “documents,” “equipment,” “financial asset,” “fixtures,” “general intangibles,” “goods,” “instruments,” “inventory,” “investment property,” “letter-of-credit rights,”  “payment intangibles,” “proceeds,” “promissory note” “securities,” “software” and “supporting obligations” as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision.
1.4.    Certain Matters of Construction.  The terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, 

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except where the context clearly requires otherwise.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Lender is a party, including references to any of the Other Documents, shall include any and all modifications, supplements or amendments thereto, any and all restatements or replacements thereof and any and all extensions or renewals thereof.  Except as otherwise expressly provided for herein, all references herein to the time of day shall mean the time in New York, New York.  Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation.”  A Default or an Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by Lender.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Lender, any agreement entered into by Lender pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Lender pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Lender, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Lender.  Wherever the phrase “to the best of Borrower’s knowledge” or words of similar import relating to the knowledge or the awareness of Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer of Borrower or (ii) the knowledge that a senior officer would have obtained if he/she had engaged in a good faith and diligent performance of his/her duties, including the making of such reasonably specific inquiries as may be necessary of the employees or agents of Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.
II.    ADVANCES, PAYMENTS.
2.1.    Revolving Advances.
(a)    Amount of Revolving Advances.  Subject to the terms and conditions set forth in this Agreement, specifically including Section 2.1(c), Lender will make Revolving Advances to Borrower in aggregate amounts outstanding at any time equal to the lesser of (x) the 

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Maximum Revolving Advance Amount, less the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an amount equal to the sum of:
(i)    up to 85% (the “Receivables Advance Rate”) of Eligible Receivables, plus 
(ii)    the lesser of (A) up to 50% of the cost of the Eligible Inventory (determined on a first-in, first-out basis) (the “Inventory Advance Rate”; together with the Receivables Advance Rate, collectively, the “Advance Rate”), or (B) $10,000,000 in the aggregate at any one time, provided that: (1) the aggregate outstanding Revolving Advances made on the basis of Eligible Inventory consisting of refurbished goods shall not exceed $2,000,000; and (2) the aggregate outstanding Revolving Advances made on the basis of Eligible Inventory consisting of demonstration goods shall not exceed $2,000,000 minus 
(iii)    the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus
(iv)    such reserves as Lender may deem proper and necessary from time to time in its Permitted Discretion.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y) Sections 2.1 (a)(y)(iii) and (iv) at any time and from time to time shall be referred to as the “Formula Amount.”  The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).
(b)    [Reserved].
(c)    Discretionary Rights.  The Advance Rates may be (a) increased by Lender at any time and from time to time in the exercise of its reasonable discretion, or (b) decreased by Lender at any time and from time to time in the exercise of its reasonable discretion upon at least one (1) Business Day’s prior written notice to Borrower. Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrower.
2.2.    Procedures for Requesting Revolving Advances; Procedures for Selection of Applicable Interest Rates for All Advances.
(a)    Borrower may notify Lender prior to 1:00 p.m. on a Business Day of Borrower’s request to incur, on that day, a Revolving Advance hereunder. Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Lender or with respect to any other Obligation under this Agreement, become due, same shall be deemed a request for a Revolving Advance maintained as a Domestic Rate Loan as of the date such payment is due, in the amount required to pay in full such interest, fee, charge or Obligation, and such request shall be irrevocable.

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(b)    Notwithstanding the provisions of subsection (a) above, in the event Borrower desires to obtain a LIBOR Rate Loan for any Advance, Borrower shall give Lender written notice by no later than 1:00 p.m. on the day which is three (3) Business Days prior to the date such LIBOR Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount of such Advance to be borrowed, which amount shall be in a minimum amount of $1,000,000 and in integral multiples of $100,000 thereafter, and (iii) the duration of the first Interest Period therefor.  Interest Periods for LIBOR Rate Loans shall be for one, two, or three months; provided that, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day.  No LIBOR Rate Loan shall be made available to Borrower during the continuance of a Default or an Event of Default.  After giving effect to each requested LIBOR Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(e), there shall not be outstanding more than five (5) LIBOR Rate Loans, in the aggregate.
(c)    Each Interest Period of a LIBOR Rate Loan shall commence on the date such LIBOR Rate Loan is made and shall end on such date as Borrower may elect as set forth in subsection (b)(iii) above, provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term.
(d)    Borrower shall elect the initial Interest Period applicable to a LIBOR Rate Loan by its notice of borrowing given to Lender pursuant to Section 2.2(b) or by its notice of conversion given to Lender pursuant to Section 2.2(e), as the case may be.  Borrower shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Lender of such duration not later than 1:00 p.m. on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such LIBOR Rate Loan.  If Lender does not receive timely notice of the Interest Period elected by Borrower, Borrower shall be deemed to have elected to convert such LIBOR Rate Loan to a Domestic Rate Loan subject to Section 2.2(e) below.
(e)    Provided that no Default or Event of Default shall have occurred and be continuing, Borrower may, on the last Business Day of the then current Interest Period applicable to any outstanding LIBOR Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such loan into a loan of another type in the same aggregate principal amount provided that any conversion of a LIBOR Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such LIBOR Rate Loan.  If Borrower desires to convert a loan, Borrower shall give Lender written notice by no later than 1:00 p.m. (i) on the day which is three (3) Business Days prior to the date on which such conversion is to occur with respect to a conversion from a Domestic Rate Loan to a LIBOR Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur (which date shall be the last Business Day of the Interest Period for the applicable LIBOR Rate Loan) with respect to a conversion from a LIBOR Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion, the loans to be converted and if the conversion is to a LIBOR Rate Loan, the duration of the first Interest Period therefor.

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(f)    At its option and upon written notice given prior to 1:00 p.m. at least three (3) Business Days prior to the date of such prepayment, Borrower may, subject to Section 2.2(g) hereof, prepay the LIBOR Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment.  Borrower shall specify the date of prepayment of Advances which are LIBOR Rate Loans and the amount of such prepayment.  In the event that any prepayment of a LIBOR Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, Borrower shall indemnify Lender therefor in accordance with Section 2.2(g) hereof.
(g)    Borrower shall indemnify Lender and hold Lender harmless from and against any and all losses or expenses that Lender may sustain or incur as a consequence of any prepayment, conversion of or any default by Borrower in the payment of the principal of or interest on any LIBOR Rate Loan or failure by Borrower to complete a borrowing of, a prepayment of or conversion of or to a LIBOR Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive absent manifest error.
(h)    Notwithstanding any other provision hereof, if any Applicable Law, treaty, regulation or directive, or any change therein or in the interpretation or application thereof, including without limitation any Change in Law, shall make it unlawful for Lender (for purposes of this subsection (h), the term “Lender” shall include Lender and the office or branch where Lender or any Person controlling Lender makes or maintains any LIBOR Rate Loans) to make or maintain its LIBOR Rate Loans, the obligation of Lender to make LIBOR Rate Loans hereunder shall forthwith be cancelled and Borrower shall, if any affected LIBOR Rate Loans are then outstanding, promptly upon request from Lender, either pay all such affected LIBOR Rate Loans or convert such affected LIBOR Rate Loans into loans of another type.  If any such payment or conversion of any LIBOR Rate Loan is made on a day that is not the last day of the Interest Period applicable to such LIBOR Rate Loan, Borrower shall pay Lender, upon Lender’s request, such amount or amounts set forth in clause (g) above.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive absent manifest error.
2.3.    Term Loans.  Subject to the terms and conditions of this Agreement, Lender will make a term loan to Borrower in the amount equal to $5,300,000 (the “Term Loan”).  The Term Loan shall be advanced on the Closing Date and shall be, with respect to principal, payable as follows, subject to acceleration upon the occurrence of an Event of Default under this Agreement or termination of this Agreement: one hundred eighty (180) consecutive monthly installments each in the amount of twenty nine thousand four hundred forty-four dollars and forty-four cents ($29,444.44) commencing August 1, 2015 and continuing on the first day of each month thereafter followed by a final payment of all unpaid principal, accrued and unpaid interest and all unpaid fees and expenses.  The Term Loan shall be evidenced by one or more secured promissory notes (collectively, the “Term Note”) in substantially the form attached hereto as Exhibit 2.3. The Term Loan may consist of Domestic Rate Loans or LIBOR Rate Loans, or a combination thereof, as Borrower may request; and in the event that Borrower desires to obtain or extend any portion of 

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the Term Loan as a LIBOR Rate Loan or to convert any portion of the Term Loan from a Domestic Rate Loan to a LIBOR Rate Loan, Borrower shall comply with the notification requirements set forth in Sections 2.2(b) and/or (e) and the provisions of Sections 2.2(b) through (h) shall apply.
2.4.    Reserved.
2.5.    Disbursement of Advance Proceeds.  All Advances shall be disbursed from whichever office or other place Lender may designate from time to time and, together with any and all other Obligations of Borrower to Lender, shall be charged to Borrower’s Account on Lender’s books.  The proceeds of each Revolving Advance requested by Borrower or deemed to have been requested by any Borrower under Sections 2.2(a) or 2.14 hereof shall, (i) with respect to requested Revolving Advances, to the extent Lender makes such Revolving Advances in accordance with Section 2.2(a) or 2.14 hereof, be made available to the Borrower on the day so requested by way of credit to Borrower’s operating account at Lender, or such other bank as Borrower may designate following notification to Lender, in immediately available federal funds or other immediately available funds or, (ii) with respect to Revolving Advances deemed to have been requested by Borrower, be disbursed to Lender to be applied to the outstanding Obligations giving rise to such deemed request.  During the Term, Borrower may use the Revolving Advances by borrowing, prepaying and re-borrowing, all in accordance with the terms and conditions hereof.
2.6.    Reserved.
2.7.    Maximum Advances.  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all issued and outstanding Letters of Credit or (b) the Formula Amount.
2.8.    Manner and Repayment of Advances.
(a)    The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.  The Term Loan shall be due and payable as provided in Section 2.3 hereof and shall be due and payable in full on the last day of the Term, subject to mandatory prepayments as herein provided. Notwithstanding the foregoing, all Advances shall be subject to earlier repayment upon (x) acceleration upon the occurrence of an Event of Default under this Agreement or (y) termination of this Agreement.  Each payment (including each prepayment) by Borrower on account of the principal of and interest on the Advances (other than the Term Loan) shall be applied to the outstanding Revolving Advances.  Each payment (including each prepayment) by Borrower on account of the principal of and interest on the Term Loan shall be applied to the Term Loan in the inverse order of maturities thereof.
(b)    Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Lender on the date received by Lender.  Lender shall conditionally credit Borrower’s Account for each item of payment on the next Business Day after the Business Day on which such item of payment is received by Lender (and the Business Day on which each such item of payment is so credited shall be referred to, with respect to such item, as the “Application Date”). Lender is not, 

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however, required to credit Borrower’s Account for the amount of any item of payment which is unsatisfactory to Lender and Lender may charge Borrower’s Account for the amount of any item of payment which is returned, for any reason whatsoever, to Lender unpaid.  Subject to the foregoing, Borrower agrees that for purposes of computing the interest charges under this Agreement, each item of payment received by Lender shall be deemed applied by Lender on account of the Obligations on its respective Application Date.  Borrower further agrees that there is a monthly float charge payable to Lender for Lender’s sole benefit, in an amount equal to (y) the face amount of all items of payment received during the prior month (including items of payment received by Lender as a wire transfer or electronic depository check) multiplied by (z) the Revolving Interest Rate with respect to Domestic Rate Loans for one (1) Business Day.  All proceeds received by Lender shall be applied to the Obligations in accordance with Section 4.8(h).
(c)    Except as otherwise expressly provided herein, all payments of principal, interest and other amounts payable hereunder (including prepayments), or under any of the Other Documents, shall be made without deduction, setoff or counterclaim and shall be made to Lender at the Payment Office not later than 1:00 p.m. on the due date therefor in Dollars in federal funds or other funds immediately available to Lender. Lender shall have the right to effectuate payment of any and all Obligations due and owing hereunder by charging Borrower's Account or by making Advances as provided in Section 2.2 hereof.
2.9.    Repayment of Excess Advances.  If at any time the aggregate balance of outstanding Revolving Advances, Term Loans and/or Advances taken as a whole exceeds the maximum amount of such type of Advances and/or Advances taken as a whole (as applicable) permitted hereunder, such excess Advances shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or an Event of Default has occurred.
2.10.    Statement of Account.  Lender shall maintain, in accordance with its customary procedures, a loan account (“Borrower’s Account”) in the name of Borrower in which shall be recorded the date and amount of each Advance made by Lender and the date and amount of each payment in respect thereof; provided, however, the failure by Lender to record the date and amount of any Advance shall not adversely affect Lender.  Each month, Lender shall send to Borrower a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Lender and Borrower during such month.  The monthly statements shall be deemed correct and binding upon Borrower in the absence of manifest error and shall constitute an account stated between Lender and Borrower unless Lender receives a written statement of Borrower’s specific exceptions thereto within thirty (30) days after such statement is received by Borrower.  The records of Lender with respect to Borrower’s Account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.
2.11.    Letters of Credit.
(a)    Subject to the terms and conditions hereof, Lender shall issue or cause the issuance of standby and/or trade letters of credit denominated in Dollars (“Letters of Credit”) for the account of Borrower except to the extent that the issuance thereof would then cause the sum of (i) the outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all 

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outstanding Letters of Credit, plus (iii) the Maximum Undrawn Amount of the Letter of Credit to be issued to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount (calculated without giving effect to the deductions provided for in Section 2.1(a)(y)(iii)).  The Maximum Undrawn Amount of all outstanding Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear interest at the Revolving Interest Rate for Domestic Rate Loans.  Letters of Credit that have not been drawn upon shall not bear interest (but fees shall accrue in respect of outstanding Letters of Credit as provided in Section 3.2 hereof).
(b)    Notwithstanding any provision of this Agreement, Lender shall not be under any obligation to issue any Letter of Credit if (i) any order, judgment or decree of any Governmental Body or arbitrator shall by its terms purport to enjoin or restrain  Lender from issuing any Letter of Credit, or any Law applicable to Lender or any request or directive (whether or not having the force of law) from any Governmental Body with jurisdiction over Lender shall prohibit, or request that Lender refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon Lender with respect to the Letter of Credit any restriction, reserve or capital requirement (for which Lender is not otherwise compensated hereunder) not in effect on the date of this Agreement, or shall impose upon Lender any unreimbursed loss, cost or expense which was not applicable on the date of this Agreement, and which Lender in good faith deems material to it, or (ii) the issuance of the Letter of Credit would violate one or more policies of Lender applicable to letters of credit generally.
2.12.    Issuance of Letters of Credit.
(a)    Borrower, may request Lender to issue or cause the issuance of a Letter of Credit by delivering to Lender at the Payment Office, prior to 1:00 p.m., at least five (5) Business Days prior to the proposed date of issuance, Lender’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Lender; and, such other certificates, documents and other papers and information as Lender may reasonably request.  Lender shall not issue any requested Letter of Credit if Lender has received notice from Lender that one or more of the applicable conditions set forth in Section 8.2 of this Agreement have not been satisfied or the commitments of Lender to make Revolving Advances hereunder have been terminated for any reason.
(b)    Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, or other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twelve (12) months after such Letter of Credit’s date of issuance and in no event later than the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce at the time a Letter of Credit is issued (the “UCP”) or the International Standby Practices (International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”), or any subsequent revision thereof at the time a standby Letter of Credit is issued, as determined by Lender, and each trade 

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Letter of Credit shall be subject to the UCP.  In addition, no trade Letter of Credit may permit the presentation of an ocean bill of lading that includes a condition that the original bill of lading is not required to claim the goods shipped thereunder.
2.13.    Requirements For Issuance of Letters of Credit.  In connection with all trade Letters of Credit issued or caused to be issued by Lender under this Agreement, Borrower hereby appoints Lender, or its designee, as its attorney, with full power and authority if an Event of Default shall have occurred and be continuing:  (i) to sign and/or endorse Borrower’s name upon any warehouse or other receipts, and acceptances; (ii) to sign Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“Customs”) in the name of Borrower or Lender or Lender’s designee, and to sign and deliver to Customs officials powers of attorney in the name of Borrower for such purpose; and (iv) to complete in Borrower’s name or Lender’s, or in the name of Lender’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof.  Neither Lender nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Lender’s or its attorney’s willful misconduct.  This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.
2.14.    Disbursements, Reimbursement.  In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Lender will promptly notify Borrower.  Regardless of whether Borrower shall have received such notice, Borrower shall reimburse (such obligation to reimburse Lender shall sometimes be referred to as a “Reimbursement Obligation”) Lender prior to 12:00 Noon, on each date that an amount is paid by Lender under any Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the amount so paid by Lender.  In the event Borrower fails to reimburse Lender for the full amount of any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date, Borrower shall be automatically deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by Lender to be disbursed on the Drawing Date under such Letter of Credit, and Lender shall be unconditionally obligated to fund such Revolving Advance (all whether or not the conditions specified in Section 8.2 are then satisfied or the commitments of Lender to make Revolving Advances hereunder have been terminated for any reason).  Any notice given by Lender pursuant to this Section 2.14 may be oral if promptly confirmed in writing; provided that the lack of such a confirmation shall not affect the conclusiveness or binding effect of such notice.
2.15.    Reserved.
2.16.    Documentation.  Borrower agrees to be bound by the terms of the Letter of Credit Application and by Lender’s interpretations of any Letter of Credit issued on behalf of Borrower and by Lender’s written regulations and customary practices relating to letters of credit, though Lender’s interpretations may be different from Borrower’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  It is understood and agreed that, except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following Borrower’s 

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instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.
2.17.    Determination to Honor Drawing Request.  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.
2.18.    Nature of Participation and Reimbursement Obligations.  The obligation of Lender to make the Revolving Advances as a result of a drawing under a Letter of Credit, and the obligations of Borrower to reimburse Lender upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.18 under all circumstances, including the following circumstances:
(i)    any set-off, counterclaim, recoupment, defense or other right which Lender or Borrower, as the case may be, may have against Borrower or Lender, respectively, as the case may be, or any other Person for any reason whatsoever;
(ii)    the failure of Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance;
(iii)    any lack of validity or enforceability of any Letter of Credit;
(iv)    any claim of breach of warranty that might be made by Borrower or Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense or other right which Borrower, or Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or assignee of the proceeds thereof (or any Persons for whom any such transferee or assignee may be acting), or Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Borrower or any Subsidiaries of Borrower and the beneficiary for which any Letter of Credit was procured);
(v)    the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provision of services relating to a Letter of Credit, in each case even if Lender or any of Lender’s Affiliates has been notified thereof;
(vi)    payment by Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which is forged or does not fully comply with 

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the terms of such Letter of Credit (provided that the foregoing shall not excuse Lender from any obligation under the terms of any applicable Letter of Credit to require the presentation of documents that on their face appear to satisfy any applicable requirements for drawing under such Letter of Credit prior to honoring or paying any such draw);
(vii)    the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;
(viii)    any failure by Lender or any of Lender’s Affiliates to issue any Letter of Credit in the form requested by Borrower, unless Lender has received written notice from Borrower of such failure within three (3) Business Days after Lender shall have furnished Borrower a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;
(ix)    the occurrence of any Material Adverse Effect;
(x)    any breach of this Agreement or any Other Document by any party thereto;
(xi)    the occurrence or continuance of an insolvency proceeding with respect to Borrower or Guarantor;
(xii)    the fact that a Default or an Event of Default shall have occurred and be continuing;
(xiii)    the fact that the Term shall have expired or this Agreement or the obligations of Lender to make Advances have been terminated; and
(xiv)    any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
2.19.    Liability for Acts and Omissions.
(a)    As between Borrower and Lender, Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Lender or any of its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply 

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fully with any conditions required in order to draw upon such Letter of Credit or any other claim of Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Lender, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of Lender’s rights or powers hereunder.  Nothing in the preceding sentence shall relieve Lender from liability for Lender’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence.  In no event shall Lender or Lender’s Affiliates be liable to Borrower for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.
(b)    Without limiting the generality of the foregoing, Lender and each of its Affiliates:  (i) may rely on any oral or other communication believed in good faith by Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit; (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Lender or its Affiliates; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Lender or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a steamship agent or carrier or any document or instrument of like import (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.
(c)    In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Lender under any resulting liability to Borrower or Lender.

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2.20.    Mandatory Prepayments.
(a)    Subject to Section 7.1 hereof, when Borrower sells or otherwise disposes of any Collateral with proceeds in excess of $100,000, other than Inventory in the Ordinary Course of Business, Borrower shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable direct costs of such sales or other dispositions), such repayments to be made promptly but in no event more than five (5) Business Days following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Lender.  The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof.  Such repayments shall be applied first, to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof and second to the remaining Advances (including cash collateralization of all Obligations relating to any outstanding Letters of Credit in accordance with the provisions of Section 3.2(b); provided however that if no Default or Event of Default has occurred and is continuing, such repayments shall be applied to cash collateralize any Obligations related to outstanding Letters of Credit last) in such order as Lender may determine, subject to Borrower’s ability to re-borrow Revolving Advances in accordance with the terms hereof, (x) first, to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof, (y) second, to the remaining Advances (including cash collateralization of all Obligations relating to any outstanding Letters of Credit in accordance with the provisions of Section 3.2(b), provided however that if no Default or Event of Default has occurred and is continuing, such repayments shall be applied to cash collateralize any Obligations related to outstanding Letters of Credit last) in such order as Lender may determine, subject to Borrower’s ability to re-borrow Revolving Advances in accordance with the terms hereof.
(b)    [Reserved].
(c)    In the event of any issuance or other incurrence of Indebtedness (other than Permitted Indebtedness) by Borrower or the issuance of any Equity Interests by Borrower, Borrower shall, no later than five (5) Business Days after the receipt by Borrower of (i) the cash proceeds from any such issuance or incurrence of Indebtedness (other than Permitted Indebtedness) or (ii) the net cash proceeds of any issuance of Equity Interests, as applicable, repay the Advances in an amount equal to one hundred percent (100%) of such cash proceeds in the case of such incurrence or issuance of Indebtedness and (y) one hundred percent (100%) of such net cash proceeds in the case of an issuance of Equity Interests.  Such repayments will be applied in the same manner as set forth in Section 2.20(a) hereof.
(d)    All proceeds received by Borrower or Lender (i) under any insurance policy on account of damage or destruction of any assets or property of Borrower, or (ii) as a result of any taking or condemnation of any assets or property shall be applied in accordance with Section 6.6 hereof.
2.21.    Use of Proceeds.
(a)    Borrower shall apply the proceeds of Advances to (i) repay existing indebtedness owed to Bank of America, N.A., (ii) partially fund capital expenditures, (iii) pay fees and expenses relating to this transaction, (iv) provide for its working capital needs and reimburse 

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drawings under Letters of Credit, and (v) pay principal, interest, and fees on the Term Loan when and as due hereunder. Subject to Section 2.23, Borrower shall not use the proceeds of any Revolving Advance to prepay the Term Loan.
(b)    Without limiting the generality of Section 2.21(a) above, neither Borrower nor Guarantor nor any other Person which may in the future become party to this Agreement or the Other Documents as Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds of the Advances, directly or indirectly, for any purpose in violation of Applicable Law.
2.22.    Reserved.
2.23.    Payment of Obligations.  Lender may charge to Borrower’s Account as a Revolving Advance, (i) all payments with respect to any of the Obligations required hereunder (including without limitation principal payments, payments of interest, payments of Letter of Credit Fees and all other fees provided for hereunder and payments under Sections 16.5 and 16.9) as and when each such payment shall become due and payable (whether as regularly scheduled, upon or after acceleration, upon maturity or otherwise), (ii) without limiting the generality of the foregoing clause (i), (a) all amounts expended by Lender pursuant to Sections 4.2 or 4.3 hereof and (b) all expenses which Lender incurs in connection with the forwarding of Advance proceeds and the establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in Section 4.8(h), and (iii) any sums expended by Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including Borrower’s obligations under Sections 3.3, 3.4, 4.4, 4.7, 6.4, 6.6, 6.7 and 6.8 hereof, and all amounts so charged shall be added to the Obligations and shall be secured by the Collateral.
III.    INTEREST AND FEES.
3.1.    Interest.  Interest on Advances shall be payable in arrears on the first day of each month with respect to Domestic Rate Loans and, with respect to LIBOR Rate Loans, at the end of each Interest Period; provided that all accrued and unpaid interest shall be due and payable at the end of the Term.  Interest charges shall be computed on the actual principal amount of Advances outstanding during the month at a rate per annum equal to (i) with respect to Revolving Advances, the applicable Revolving Interest Rate and (ii) with respect to the Term Loan, the applicable Term Loan Rate (as applicable, the “Contract Rate”).  Except as expressly provided otherwise in this Agreement, any Obligations other than the Advances that are not paid when due shall accrue interest at the Revolving Interest Rate for Domestic Rate Loans, subject to the provision of the final sentence of this Section 3.1 regarding the Default Rate.  Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is increased or decreased, the applicable Contract Rate shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base Rate during the time such change or changes remain in effect.  The LIBOR Rate shall be adjusted with respect to LIBOR Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Lender (or, in the case of any Event of Default under Section 10.7, immediately and automatically upon the occurrence of any such Event of Default without the requirement of any affirmative action by 

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any party), (i) the Obligations shall bear interest at the applicable Contract Rate plus two percent (2%) per annum (the “Default Rate”).
3.2.    Letter of Credit Fees.
(a)    Borrower shall pay (x) to Lender, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by the Applicable Margin for Revolving Advances consisting of LIBOR Rate Loans, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first day of each calendar quarter and on the last day of the Term, and (y) to Lender, a fronting fee of one quarter of one percent (0.25%) per annum times the average daily face amount of each outstanding Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, to be payable quarterly in arrears on the first day of each calendar quarter and on the last day of the Term (all of the foregoing fees, the “Letter of Credit Fees”).  In addition, Borrower shall pay to Lender any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by Lender and Borrower Representative in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder, all such charges, fees and expenses, if any, to be payable on demand.  All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in Lender’s prevailing charges for that type of transaction.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Lender (or, in the case of any Event of Default under Section 10.7, immediately and automatically upon the occurrence of any such Event of Default without the requirement of any affirmative action by any party), the Letter of Credit Fees described in clause (x) of this Section 3.2(a) shall be increased by an additional two percent (2.0%) per annum.
(b)    At any time following the occurrence of an Event of Default, at the option of Lender (or, in the case of any Event of Default under Section 10.7, immediately and automatically upon the occurrence of such Event of Default, without the requirement of any affirmative action by any party), or upon the expiration of the Term or any other termination of this Agreement (and also, if applicable, in connection with any mandatory prepayment under Section 2.20), Borrower will cause cash to be deposited and maintained in an account with Lender, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all outstanding Letters of Credit, and Borrower hereby irrevocably authorizes Lender, in its discretion, on Borrower’s behalf and in Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by Borrower, in the amounts required to be made by Borrower, out of the proceeds of Receivables or other Collateral or out of any other funds of Borrower coming into Lender’s possession at any time.  Lender may, in its discretion, invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Lender and Borrower mutually agree (or, in the absence of such agreement, as Lender may reasonably 

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select) and the net return on such investments shall be credited to such account and constitute additional cash collateral, or Lender may (notwithstanding the foregoing) establish the account provided for under this Section 3.2(b) as a non-interest bearing account and in such case Lender shall have no obligation (and Borrower hereby waives any claim) under Article 9 of the Uniform Commercial Code or under any other Applicable Law to pay interest on such cash collateral being held by Lender.  No Borrower may withdraw amounts credited to any such account except upon the occurrence of all of the following:  (x) payment and performance in full of all Obligations; (y) expiration of all Letters of Credit; and (z) termination of this Agreement.  Borrower hereby assigns, pledges and grants to, Lender and each other Secured Party, a continuing security interest in and to and Lien on any such cash collateral and any right, title and interest of Borrower in any deposit account, securities account or investment account into which such cash collateral may be deposited from time to time to secure the Obligations, specifically including all Obligations with respect to any Letters of Credit.  Borrower agrees that upon the coming due of any Reimbursement Obligations (or any other Obligations, including Obligations for Letter of Credit Fees) with respect to the Letters of Credit, Lender may use such cash collateral to pay and satisfy such Obligations.
3.3.    Closing Fee and Facility Fee.
(a)    Upon the execution of this Agreement, Borrower shall pay to Lender a closing fee of $203,000 which is fully earned and non-refundable as of the Closing Date less that portion of the deposit of $50,000 heretofore paid by Borrower to Lender, remaining after application of such fees to out of pocket costs and expenses.
(b)    If, for any calendar quarter during the Term, the average daily unpaid balance of the sum of Revolving Advances plus the Maximum Undrawn Amount of all outstanding Letters of Credit for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then Borrower shall pay to Lender, a fee at a rate equal to one-quarter of one percent (0.25%) per annum on the amount by which the Maximum Revolving Advance Amount exceeds such average daily unpaid balance (the “Facility Fee”).  Such Facility Fee shall be payable to Lender in arrears on the first day of each calendar quarter with respect to the previous calendar quarter and on the last day of the Term with respect to the period ending on the last day of the Term.
3.4.    Collateral Monitoring Fee and Collateral Evaluation Fee
(a)    Borrower shall pay Lender a collateral monitoring fee equal to $2,000 per month commencing on the first day of the month following the Closing Date and on the first day of each month thereafter during the Term.  The collateral monitoring fee shall be deemed earned in full on the date when same is due and payable hereunder and shall not be subject to rebate or proration upon termination of this Agreement for any reason.
(b)    Subject to the last sentence of this Section 3.4(b), Borrower shall pay to Lender promptly at the conclusion of any collateral evaluation performed by or for the benefit of Lender – namely any field examination, collateral analysis or other business analysis, the need for which is to be determined by Lender and which evaluation is undertaken by Lender or for Lender’s benefit – a collateral evaluation fee in an amount equal to $850 (or such other amount customarily 

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charged by Lender to its customers per day for each person employed to perform such evaluation), plus a per examination manager review fee (whether such examination is performed by Lender’s employees or by a third party retained by Lender) in the amount of $1,300 (or such other amount customarily charged by Lender to its customers), plus all costs and disbursements incurred by Lender in the performance of such examination or analysis, and further provided that if third parties are retained to perform such collateral evaluations, then such fees charged by such third parties plus all costs and disbursements incurred by such third party, shall be the responsibility of Borrower and shall not be subject to the foregoing limits.  Unless a Default or an Event of Default has occurred and is continuing, Borrower shall have no obligation to pay the fees, costs, expenses, or disbursements described in this Section 3.4(b) with respect to more than four (4) such collateral evaluations in any calendar year.
(c)    All of the fees and out-of-pocket costs and expenses of any appraisals conducted pursuant to Section 4.7 hereof shall be paid for when due, in full and without deduction, off-set or counterclaim by Borrower.
3.5.    Computation of Interest and Fees.  Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed.  If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the applicable Contract Rate during such extension.
3.6.    Maximum Charges.  In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under Applicable Law.  In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under Applicable Law:  (i) the interest rates hereunder will be reduced to the maximum rate permitted under Applicable Law; (ii) such excess amount shall be first applied to any unpaid principal balance owed by Borrower; and (iii) if the then remaining excess amount is greater than the previously unpaid principal balance, Lender shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate.
3.7.    Increased Costs.  In the event that any Applicable Law or any Change in Law or compliance by Lender (for purposes of this Section 3.7, the term “Lender” shall include Lender and any corporation or bank controlling Lender and the office or branch where Lender makes or maintains any LIBOR Rate Loans) with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall:
(a)    subject Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, or any participation in a Letter of Credit or any LIBOR Rate Loan, or change the basis of taxation of payments to Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.10 and the imposition of, or any change in the rate of, any Excluded Tax payable by Lender);
(b)    impose, modify or deem applicable any reserve, special deposit, assessment, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office 

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of Lender including pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or
(c)    impose on Lender or the London interbank LIBOR market any other condition, loss or expense (other than Taxes) affecting this Agreement or any Other Document or any Advance made by Lender, or any Letter of Credit or participation therein;
and the result of any of the foregoing is to increase the cost to Lender of making, converting to, continuing, renewing or maintaining its Advances hereunder by an amount that Lender deems in its Permitted Discretion to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Lender deems in its Permitted Discretion to be material, then, in any case Borrower shall promptly pay Lender, upon its demand, such additional amount as will compensate Lender for such additional cost or such reduction, as the case may be, provided that the foregoing shall not apply to increased costs which are reflected in the LIBOR Rate, as the case may be.  Lender shall certify the amount of such additional cost or reduced amount to Borrower, and such certification shall be conclusive absent manifest error.
3.8.    Basis For Determining Interest Rate Inadequate or Unfair.  In the event that Lender shall have determined that:
(a)    reasonable means do not exist for ascertaining the LIBOR Rate applicable pursuant to Section 2.2 hereof for any Interest Period; or
(b)    Dollar deposits in the relevant amount and for the relevant maturity are not available in the London interbank LIBOR market, with respect to an outstanding LIBOR Rate Loan, a proposed LIBOR Rate Loan, or a proposed conversion of a Domestic Rate Loan into a LIBOR Rate Loan; or
(c)    the making, maintenance or funding of any LIBOR Rate Loan has been made impracticable or unlawful by compliance by Lender in good faith with any Applicable Law or any interpretation or application thereof by any Governmental Body or with any request or directive of any such Governmental Body (whether or not having the force of law), then Lender shall give Borrower prompt written or telephonic notice of such determination.  If such notice is given, (i) any such requested LIBOR Rate Loan shall be made as a Domestic Rate Loan, unless Borrower shall notify Lender no later than 1:00 p.m. two (2) Business Days prior to the date of such proposed borrowing, that its request for such borrowing shall be cancelled or made as an unaffected type of LIBOR Rate Loan, (ii) any Domestic Rate Loan or LIBOR Rate Loan which was to have been converted to an affected type of LIBOR Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrower shall notify Lender, no later than 1:00 p.m. two (2) Business Days prior to the proposed conversion, shall be maintained as an unaffected type of LIBOR Rate Loan, and (iii) any outstanding affected LIBOR Rate Loans shall be converted into a Domestic Rate Loan, or, if Borrower shall notify Lender, no later than 1:00 p.m. two (2) Business Days prior to the last Business Day of the then current Interest Period applicable to such affected LIBOR Rate Loan, shall be converted into an unaffected type of LIBOR Rate Loan, on the last Business Day of the then current Interest Period for such affected LIBOR Rate Loans (or sooner, if Lender cannot 

45

continue to lawfully maintain such affected LIBOR Rate Loan).  Until such notice has been withdrawn, Lender shall have no obligation to make an affected type of LIBOR Rate Loan or maintain outstanding affected LIBOR Rate Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an unaffected type of LIBOR Rate Loan into an affected type of LIBOR Rate Loan.
3.9.    Capital Adequacy.
(a)    In the event that Lender shall have determined that any Applicable Law or guideline regarding capital adequacy, or any Change in Law or any change in the interpretation or administration thereof by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Lender (for purposes of this Section 3.9, the term “Lender” shall include Lender and any corporation or bank controlling Lender and the office or branch where Lender makes or maintains any LIBOR Rate Loans) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender’s policies with respect to capital adequacy) by an amount deemed by Lender to be material, then, from time to time, Borrower shall pay upon demand to Lender such additional amount or amounts as will compensate Lender for such reduction.  In determining such amount or amounts, Lender may use any reasonable averaging or attribution methods.  The protection of this Section 3.9 shall be available to Lender regardless of any possible contention of invalidity or inapplicability with respect to the Applicable Law, rule, regulation, guideline or condition.
(b)    A certificate of Lender setting forth such amount or amounts as shall be necessary to compensate Lender with respect to Section 3.9(a) hereof when delivered to Borrower shall be conclusive absent manifest error.
3.10.    Taxes.
(a)    Any and all payments by or on account of any Obligations hereunder or under any Other Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required by Applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) Lender or Participant, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall timely pay the full amount deducted to the relevant Governmental Body in accordance with Applicable Law.
(b)    Without limiting the provisions of Section 3.10(a) above, Borrower shall timely pay any Other Taxes to the relevant Governmental Body in accordance with Applicable Law.

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(c)    Borrower shall indemnify Lender or any Participant within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by Lender or such Participant, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Body.  A certificate as to the amount of such payment or liability delivered to Borrower by Lender or any Participant shall be conclusive absent manifest error.
(d)    As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Body, Borrower shall deliver to Lender the original or a certified copy of a receipt issued by such Governmental Body evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Lender.
IV.    COLLATERAL:  GENERAL TERMS
4.1.    Security Interest in the Collateral.  To secure the prompt payment and performance to Lender (and each other holder of any Obligations) of the Obligations, Borrower hereby assigns, pledges and grants to Lender and each other Secured Party a continuing security interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter created, acquired or arising and wheresoever located.  Borrower shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Lender’s and any other Secured Party’s security interest and shall cause its financial statements to reflect such security interest.  Borrower shall provide Lender with written notice of all commercial tort claims asserted by Borrower promptly upon the occurrence of any events giving rise to any such claim(s) (regardless of whether legal proceedings have yet been commenced), such notice to contain a brief description of the claim(s), the events out of which such claim(s) arose and the parties against which such claims may be asserted and, if applicable in any case where legal proceedings regarding such claim(s) have been commenced, the case title together with the applicable court and docket number.  Upon delivery of each such notice, Borrower shall be deemed to thereby grant to Lender and each other Secured Party a security interest and lien in and to such commercial tort claims described therein and all proceeds thereof.  Borrower shall provide Lender with written notice promptly upon becoming the beneficiary under any letter of credit or otherwise obtaining any right, title or interest in any letter of credit rights, and at Lender’s request shall take such actions as Lender may reasonably request for the perfection of Lender’s and each other Secured Party’s security interest therein.
4.2.    Perfection of Security Interest.  Borrower shall take all action that may be necessary or desirable, or that Lender may reasonably request, so as at all times to maintain the validity, perfection, enforceability and priority of Lender’s and each other Secured Party’s security interest in and Lien on the Collateral or to enable Lender and each other Secured Party to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements; provided, however, that Borrower shall have no obligation to seek or obtain Lien Waiver Agreements from any Customer in possession of any equipment used for demonstration purposes, (iii) delivering 

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to Lender, endorsed or accompanied by such instruments of assignment as Lender may specify, and stamping or marking, in such manner as Lender may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox, customs and freight agreements and other custodial arrangements satisfactory to Lender, and (v) executing and delivering financing statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each case in form and substance satisfactory to Lender, relating to the creation, validity, perfection, maintenance or continuation of Lender’s and each other Secured Party’s security interest and Lien under the Uniform Commercial Code or other Applicable Law.  By its signature hereto, Borrower hereby authorizes Lender and each other Secured Party to file against Borrower, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code in form and substance satisfactory to Lender (which statements may have a description of collateral which is broader than that set forth herein, including without limitation a description of Collateral as “all assets” and/or “all personal property” of Borrower).  All charges, expenses and fees Lender and each other Secured Party may incur in doing any of the foregoing, and any local taxes relating thereto, shall be charged to Borrower’s Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at Lender’s option, shall be paid by Borrower to Lender and each other Secured Party immediately upon demand.
4.3.    Preservation of Collateral.  Following the occurrence and during the continuation of a Default or Event of Default, in addition to the rights and remedies set forth in Section 11.1 hereof, Lender:  (a) may at any time take such steps as Lender deems necessary to protect Lender’s interest in and to preserve the Collateral, including the hiring of security guards or the placing of other security protection measures as Lender may deem appropriate; (b) may employ and maintain at any of Borrower’s premises a custodian who shall have full authority to do all acts necessary to protect Lender’s interests in the Collateral; (c) may lease warehouse facilities to which Lender may move all or part of the Collateral; (d) may use Borrower’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted (to the extent of Borrower's interest therein), a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Borrower’s owned or leased property.  Borrower shall cooperate fully with all of Lender’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as Lender may direct.  All of Lender’s expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be charged to Borrower’s Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations.
4.4.    Ownership and Location of Collateral.
(a)    With respect to the Collateral, at the time the Collateral becomes subject to Lender’s security interest:  (i) Borrower shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of  its respective Collateral to Lender; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens whatsoever; (ii) each document and agreement executed by Borrower or delivered to Lender in connection with this Agreement shall be true and correct in all material respects; (iii) all signatures and endorsements of Borrower that appear on such documents and 

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agreements shall be genuine and Borrower shall have full capacity to execute same; and (iv) Borrower’s equipment and Inventory shall be located as set forth on Schedule 4.4, as such Schedule may be updated from time to time, and shall not be removed from such location(s) without the prior written consent of Lender except with respect to the sale of Inventory in the Ordinary Course of Business and equipment to the extent permitted in Section 7.1(b) hereof.
(b)    (i) There is no location at which Borrower has any Inventory (except for Inventory in transit) or other Collateral other than those locations listed on Schedule 4.4(b)(i); (ii) Schedule 4.4(b)(ii) hereto contains a correct and complete list, as of the Closing Date, of the legal names and addresses of each warehouse at which Inventory of Borrower is stored;  none of the receipts received by Borrower from any warehouse states that the goods covered thereby are to be delivered to bearer or to the order of a named Person or to a named Person and such named Person’s assigns; (iii) Schedule 4.4(b)(iii) hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business of Borrower and (B) the chief executive office of Borrower; and (iv) Schedule 4.4(b)(iv) hereto sets forth a correct and complete list as of the Closing Date of the location, by state and street address, of all Real Property owned or leased by Borrower, identifying which properties are owned and which are leased, together with the names and addresses of any landlords.
4.5.    Defense of Lender’s Interests.  Until (a) payment and performance in full of all of the Obligations and (b) termination of this Agreement, Lender’s interests in the Collateral shall continue in full force and effect.  During such period no Borrower shall, without Lender’s prior written consent, pledge, sell (except for sales or other dispositions otherwise permitted in Section 7.1(b) hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral.  Borrower shall defend Lender’s interests in the Collateral against any and all Persons whatsoever.  At any time following demand by Lender for payment of all Obligations pursuant to this Agreement or the Other Documents, Lender shall have the right to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including:  labels, stationery, documents, instruments and advertising materials.  If Lender exercises this right to take possession of the Collateral, Borrower shall, upon demand, assemble it in the best manner possible and make it available to Lender at a place reasonably convenient to Lender.  In addition, with respect to all Collateral, Lender shall be entitled to all of the rights and remedies set forth herein and further provided by the Uniform Commercial Code or other Applicable Law.  Borrower shall, and Lender may, at its option, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in which Lender holds a security interest to deliver same to Lender and/or subject to Lender’s order and if they shall come into Borrower’s possession, they, and each of them, shall be held by Borrower in trust as Lender’s, and Borrower will immediately deliver them to Lender in their original form together with any necessary endorsement.
4.6.    Inspection of Premises.  At all reasonable times and from time to time as often as Lender shall elect in its Permitted Discretion, Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from Borrower’s books, records, audits, correspondence and all other papers relating to the Collateral and the operation of Borrower’s 

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business.  Lender and its agents may enter upon any premises of Borrower at any time during business hours and at any other reasonable time, and from time to time as often as Lender shall elect in its sole discretion, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of Borrower’s business.
4.7.    Appraisals.  Lender may, in its sole discretion, exercised in a commercially reasonable manner, engage the services of an independent appraisal firm or firms of reputable standing, satisfactory to Lender, for the purpose of appraising the then current values of Borrower’s assets.  Absent the occurrence and continuance of an Event of Default at such time, Lender shall consult with Borrower as to the identity of any such firm.  In the event the value of Borrower’s assets, as so determined pursuant to such appraisal, is less than anticipated by Lender, such that the Revolving Advances are in excess of such Advances permitted hereunder, then, promptly upon Lender’s demand for same, Borrower shall make mandatory prepayments of the then outstanding Revolving Advances so as to eliminate the excess Advances.
4.8.    Receivables; Deposit Accounts and Securities Accounts.
(a)    Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of Borrower, or work, labor or services theretofore rendered by Borrower as of the date each Receivable is created.  Same shall be due and owing in accordance with Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrower to Lender.
(b)    Each Customer, to the best of Borrower’s knowledge, as of the date each Receivable is created, is and will be solvent and able to pay all Receivables on which the Customer is obligated in full when due.  With respect to such Customers of Borrower who are not solvent, Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.
(c)    Borrower’s chief executive office is located as set forth on Schedule 4.4(b)(iii).  Until written notice is given to Lender by Borrower of any other office at which Borrower keeps its records pertaining to Receivables, all such records shall be kept at such executive office.
(d)    Borrower shall instruct its Customers to deliver all remittances upon Receivables (whether paid by check or by wire transfer of funds) to such Blocked Account(s) and/or Depository Accounts (and any associated lockboxes) as Lender shall designate from time to time as contemplated by Section 4.8(h) or as otherwise agreed to from time to time by Lender.  Notwithstanding the foregoing, to the extent Borrower directly receives any remittances upon Receivables, Borrower shall, at Borrower’s sole cost and expense, but on Lender’s behalf and for Lender’s account, collect as Lender’s property and in trust for Lender all amounts received on Receivables, and shall not commingle such collections with Borrower’s funds or use the same except to pay Obligations, and shall as soon as possible and in any event no later than one (1) Business Day after the receipt thereof (i) in the case of remittances paid by check, deposit all such 

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remittances in their original form (after supplying any necessary endorsements) and (ii) in the case of remittances paid by wire transfer of funds, transfer all such remittances, in each case, into such Blocked Accounts(s) and/or Depository Account(s).  Borrower shall deposit in the Blocked Account and/or Depository Account or, upon request by Lender, deliver to Lender, in original form and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness.
(e)    At any time following the occurrence of an Event of Default or a Default,  or when Lender reasonably believes that proceeds of Collateral are being diverted, Lender shall have the right to send notice of the assignment of, and Lender’s security interest in and Lien on, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral.  Thereafter, Lender shall have the sole right to collect the Receivables, take possession of the Collateral, or both.  Lender’s actual collection expenses, including, but not limited to, stationery and postage, telephone, facsimile, telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrower’s Account and added to the Obligations.
(f)    Lender shall have the right to receive, endorse, assign and/or deliver in the name of Lender or Borrower any and all checks, drafts and other instruments for the payment of money relating to the Receivables, and Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed.  Borrower hereby constitutes Lender or Lender’s designee as Borrower’s attorney with power to, at any time following the occurrence and during the continuation of a Default or an Event of Default:  (i) endorse Borrower’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) sign Borrower’s name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) send verifications of Receivables to any Customer; (iv) sign Borrower’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by Lender to preserve, protect, or perfect Lender’s interest in the Collateral and to file same; and (v) receive, open and dispose of all mail addressed to Borrower at any post office box/lockbox maintained by Lender for Borrower or at any other business premises of Lender; (vi) demand payment of the Receivables; (vii) enforce payment of the Receivables by legal proceedings or otherwise; (viii) exercise all of Borrower’s rights and remedies with respect to the collection of the Receivables and any other Collateral; (ix) sue upon or otherwise collect, extend the time of payment of, settle, adjust, compromise, extend or renew the Receivables; (x) settle, adjust or compromise any legal proceedings brought to collect Receivables; (xi) prepare, file and sign Borrower’s name on a proof of claim in bankruptcy or similar document against any Customer; (xii) prepare, file and sign Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; (xiii) accept the return of goods represented by any of the Receivables; (xiv) to change the address for delivery of mail addressed to Borrower to such address as Lender may designate; and (xv) do all other acts and things necessary to carry out this Agreement.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction 

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in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid.
(g)    Lender shall not, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom.
(h)    all proceeds of Collateral shall be deposited by Borrower into either (i) a lockbox account, dominion account or such other “blocked account” (“Blocked Accounts”) established at a bank or banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may be acceptable to Lender or (ii) depository accounts (“Depository Accounts”) established at Lender for the deposit of such proceeds.  Within one hundred twenty (120) days after the Closing Date, Borrower, Lender and each Blocked Account Bank shall enter into a deposit account control agreement in form and substance satisfactory to Lender that is sufficient to give Lender “control” (for purposes of Articles 8 and 9 of the Uniform Commercial Code) over such account and which directs such Blocked Account Bank to transfer such funds so deposited on a daily basis to Lender, either to any account maintained by Lender at said Blocked Account Bank or by wire transfer to appropriate account(s) at Lender; provided, however, that Borrower shall not be required to give “control” to Lender with respect to any Excluded Accounts.  All funds deposited in such Blocked Accounts or Depository Accounts shall immediately become subject to the security interest of Lender and all other holders of the Obligations, and Borrower shall obtain the agreement by such Blocked Account Bank to waive any offset rights against the funds so deposited.  Lender shall not assume any responsibility for such blocked account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank thereunder.  During any FCCR Period, Lender may apply all funds received by it from the Blocked Accounts and/or Depository Accounts to the satisfaction of the Obligations (including the cash collateralization of the Letters of Credit) and in such order as Lender shall determine in its sole discretion.
(i)    No Borrower will, without Lender’s consent, compromise or adjust any material amount of the Receivables (or extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the Ordinary Course of Business of Borrower.
(j)    All deposit accounts (including all Blocked Accounts and Depository Accounts), securities accounts and investment accounts of Borrower and its Subsidiaries as of the Closing Date are set forth on Schedule 4.8(j).  No Borrower shall open any new deposit account, securities account or investment account unless (i) Borrower shall have given at least thirty (30) days prior written notice to Lender and (ii) if such account is to be maintained with a bank, depository institution or securities intermediary that is not Lender, such bank, depository institution or securities intermediary, Borrower and Lender shall first have entered into an account control agreement in form and substance satisfactory to Lender sufficient to give Lender “control” (for purposes of Articles 8 and 9 of the Uniform Commercial Code) over such account.

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4.9.    Inventory.  To the extent Inventory held for sale or lease has been produced by Borrower, it has been and will be produced by Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.
4.10.    Maintenance of Equipment.  The equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted).  No Borrower shall use or operate the equipment in violation of any law, statute, ordinance, code, rule or regulation.
4.11.    Exculpation of Liability.  Nothing herein contained shall be construed to constitute Lender as Borrower’s agent for any purpose whatsoever, nor shall Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof.  Lender shall not, whether by anything herein or in any assignment or otherwise, assume any of Borrower’s obligations under any contract or agreement assigned to Lender, and Lender shall not be responsible in any way for the performance by Borrower of any of the terms and conditions thereof.
4.12.    Financing Statements.  Except as respects the financing statements filed by Lender, financing statements described on Schedule 1.2, and financing statements filed in connection with Permitted Encumbrances, no financing statement covering any of the Collateral or any proceeds thereof is or will be on file in any public office.
V.    REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1.    Authority.  Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents to which it is a party and to perform all its respective Obligations hereunder and thereunder.  This Agreement and the Other Documents to which it is a party have been duly executed and delivered by Borrower, and this Agreement and the Other Documents to which it is a party constitute the legal, valid and binding obligation of Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.  The execution, delivery and performance of this Agreement and of the Other Documents to which it is a party (a) are within Borrower’s corporate or company powers, as applicable, have been duly authorized by all necessary corporate or company action, as applicable, are not in contravention of law or the terms of Borrower’s Organizational Documents or to the conduct of Borrower’s business or of any Material Contract or undertaking to which Borrower is a party or by which Borrower is bound, (b) will not conflict with or violate any law or regulation, or any judgment, order or decree of any Governmental Body, (c) will not require the Consent of any Governmental Body, any party to a Material Contract or any other Person, except those Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled prior to the Closing Date and which are in full force and effect and (d) will not conflict with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of Borrower under the provisions of any agreement, instrument, or other document to which Borrower is a party or by which it or its property is a party or by which it may be bound.

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5.2.    Formation and Qualification.
(a)    Borrower is duly incorporated or formed, as applicable, and in good standing under the laws of the state listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the states listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are necessary for Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on Borrower.  Borrower has delivered to Lender true and complete copies of its Organizational Documents and will promptly notify Lender of any amendment or changes thereto.
(b)    The only Subsidiaries of Borrower are listed on Schedule 5.2(b).
5.3.    Survival of Representations and Warranties.  All representations and warranties of Borrower contained in this Agreement and the Other Documents to which it is a party shall be true at the time of Borrower’s execution of this Agreement and the Other Documents to which it is a party, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.
5.4.    Tax Returns.  Borrower’s federal tax identification number is set forth on Schedule 5.4.  Borrower has filed all federal, state and local tax returns and other reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable.  The provision for taxes on the books of Borrower is adequate for all years not closed by applicable statutes, and for its current fiscal year, and no Borrower has any knowledge of any deficiency or additional assessment in connection therewith not provided for on its books.
5.5.    Financial Statements.
(a)    The pro forma balance sheet of Borrower on a Consolidated Basis (the “Pro Forma Balance Sheet”) furnished to Lender on the Closing Date reflects the consummation of the transactions contemplated under this Agreement (collectively, the “Transactions”) and is accurate, complete and correct in all material respects and fairly reflects in all material respects the financial condition of Borrower on a Consolidated Basis as of the Closing Date after giving effect to the Transactions.  The Pro Forma Balance Sheet has been certified as accurate, complete and correct in all material respects by the President and Chief Financial Officer of Borrower.  All financial statements referred to in this subsection 5.5(a), including the related schedules and notes thereto, have been prepared in accordance with GAAP, consistently applied, except as may be disclosed in such financial statements.
(b)    The twelve-month cash flow and balance sheet projections of Borrower on a Consolidated Basis, copies of which are annexed hereto as Exhibit 5.5(b) (the “Projections”) were prepared by the Chief Financial Officer of Borrower, are based on underlying assumptions which provide a reasonable basis for the projections contained therein and reflect Borrower’s judgment based on present circumstances of the most likely set of conditions and course of action for the projected period.  The cash flow Projections together with the Pro Forma Balance Sheet are referred to as the “Pro Forma Financial Statements.”

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(c)    The consolidated and consolidating balance sheets and statements of income of Borrower, and such other Persons described therein, as of September 30, 2014, and the related consolidated changes in stockholder’s equity and changes in cash flow for the period ended on such date, and, with respect to the consolidated statements only, accompanied by reports thereon containing opinions without qualification by independent certified public accountants, copies of which have been delivered to Lender, have been prepared in accordance with GAAP, consistently applied (except for changes in application to which such accountants concur), and present fairly in all material respects the financial position of Borrower at such date and the results of their operations for such period.  Since March 31, 2015, there has been no change in the condition, financial or otherwise, of Borrower as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery, equipment and Real Property owned by Borrower, except changes in the Ordinary Course of Business, none of which individually or in the aggregate has been materially adverse.  For the avoidance of doubt, Lender acknowledges that the consolidating financial statements described in this Section 5.5(c) are internally prepared by Borrower’s management and have not been reviewed by, and are not accompanied by a report of, independent certified public accountants.
(d)    The Pro Forma Financial Statements do not constitute, and Borrower does not make and expressly disclaims any, representations or warranties that the results set forth therein will be met, it being acknowledged and agreed by Lender that uncertainty is inherent in any forecasts, projections and other forward-looking information and projections as to future events or conditions are not to be viewed as facts, and the actual results during the period or periods covered by such forecasts may differ materially from the projected results.
5.6.    Entity Names.  No Borrower has been known by any other company or corporate name, as applicable, in the past five (5) years and does not sell Inventory under any other name except as set forth on Schedule 5.6, nor has Borrower been the surviving corporation or company, as applicable, of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years.
5.7.    O.S.H.A. Environmental Compliance; Flood Insurance.
(a)    Borrower is in compliance in all material respects with, and its facilities, business, assets, property, leaseholds, Real Property and equipment are in compliance in all material respects with the Federal Occupational Safety and Health Act, and Environmental Laws and there are no outstanding citations, notices or orders of non-compliance issued to Borrower or relating to its business, assets, property, leaseholds or equipment under any such laws, rules or regulations.
(b)    Borrower has been issued all required federal, state and local licenses, certificates or permits (collectively, “Approvals”) relating to all applicable Environmental Laws and all such Approvals are current and in full force and effect.
(c)    (i) there have been no releases, spills, discharges, leaks or disposal (collectively referred to as “Releases”) of Hazardous Materials at, upon, under or migrating from or onto any Real Property owned, leased or occupied by Borrower, except for those Releases which are in full compliance with Environmental Laws; (ii) there are no underground storage tanks or 

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polychlorinated biphenyls on any Real Property owned, leased or occupied by Borrower, except for such underground storage tanks or polychlorinated biphenyls that are presently in compliance with Environmental Laws; (iii) the Real Property including any premises owned, leased or occupied by Borrower, has never been used by Borrower to dispose of Hazardous Materials, except as authorized by Environmental Laws; and (iv) no Hazardous Materials are managed by Borrower on any Real Property including any premises owned, leased or occupied by Borrower, excepting such quantities as are managed in accordance with all applicable manufacturer’s instructions and compliance with Environmental Laws  and as are necessary for the operation of the commercial business of Borrower or of its tenants.
(d)    All Real Property owned by Borrower is insured pursuant to policies and other bonds which are valid and in full force and effect and which provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each Borrower in accordance with prudent business practice in the industry of Borrower.  Borrower has taken all actions required under the Flood Laws and/or requested by Lender to assist in ensuring that Lender is in compliance with the Flood Laws applicable to the Collateral, including, but not limited to, providing Lender with the address and/or GPS coordinates of each structure located upon any Real Property that will be subject to a Mortgage in favor of Lender, and, to the extent required, obtaining flood insurance for such property, structures and contents prior to such property, structures and contents becoming Collateral.
5.8.    Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance.
(a)    (i) Borrower is solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which it is about to engage, (ii) as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities, and (iii) subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities.
(b)    Except as disclosed in Schedule 5.8(b)(i), no Borrower has any pending or, to the best of Borrower's knowledge, threatened litigation, arbitration, actions or proceedings that, if determined adversely to Borrower, could reasonably be expected to have a Material Adverse Effect.  No Borrower has any outstanding Indebtedness other than the Obligations, except for (i) Indebtedness disclosed in Schedule 5.8(b)(ii) and (ii) Permitted Indebtedness.  
(c)    No Borrower is in violation of any applicable statute, law, rule, regulation or ordinance in any respect which could reasonably be expected to have a Material Adverse Effect, nor is Borrower in violation of any order of any court, Governmental Body or arbitration board or tribunal applicable to Borrower.  Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state laws.
(d)    No Borrower or any member of the Controlled Group maintains or is required to contribute to any Plan other than those listed on Schedule 5.8(d) hereto.  (i) Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA and Section 412 of the Code in respect of each Plan, and each Plan is in 

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compliance with Sections 412, 430 and 436 of the Code and Sections 206(g), 302 and 303 of ERISA, without regard to waivers and variances; (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code or an application for such a determination is currently being processed by the Internal Revenue Code; (iii) neither Borrower nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan; (v) the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and neither Borrower nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities; (vi) neither Borrower nor any member of the Controlled Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii) neither Borrower nor any member of a Controlled Group has incurred any liability for any excise tax arising under Section 4971, 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability; (viii) neither Borrower nor any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA; (ix) no Termination Event has occurred or is reasonably expected to occur; (x) there exists no event described in Section 4043 of ERISA, for which the thirty (30) day notice period has not been waived; (xi) neither Borrower nor any member of the Controlled Group has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; (xii) neither Borrower nor any member of the Controlled Group maintains or is required to contribute to any Plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither Borrower nor any member of the Controlled Group has withdrawn, completely or partially, within the meaning of Section 4203 or 4205 of ERISA, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which could reasonably be expected to result in any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any failure in connection with the administration or investment of the assets of a Plan.
5.9.    Patents, Trademarks, Copyrights and Licenses.  All Intellectual Property owned or utilized by Borrower:  (i) is set forth on Schedule 5.9; (ii) is valid, if registered or filed, and has been duly registered or filed with all appropriate Governmental Bodies; and (iii) constitutes all of the intellectual property rights which are necessary for the operation of its business as currently conducted.  There is no objection to or pending challenge to the validity of, or proceeding by any Governmental Body to suspend, revoke, terminate or adversely modify, any such Intellectual Property and no Borrower is aware of any grounds for any challenge or proceedings, except as set forth in Schedule 5.9 hereto.  All Intellectual Property owned or held by Borrower consists of original material or property developed by Borrower or was lawfully acquired by Borrower from the proper 

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and lawful owner thereof.  Each of such items has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof.
5.10.    Licenses and Permits.  Except as set forth in Schedule 5.10, Borrower (a) is in compliance in all material respects with and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, provincial or local law, rule or regulation for the operation of its business in each jurisdiction wherein it is now conducting or presently proposes to conduct business and where the failure to procure such licenses or permits could reasonably be expected to have a Material Adverse Effect.
5.11.    Default of Indebtedness.  No Borrower is in default in the payment of the principal of or interest on any Indebtedness or under any instrument or agreement under or subject to which any Indebtedness has been issued, and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an Event of Default.
5.12.    No Default.  No Borrower is in default in the payment or performance of any of its obligations under any Material Contract and no Default or Event of Default has occurred and is continuing.
5.13.    No Burdensome Restrictions.  No Borrower is party to any contract or agreement the performance of which could reasonably be expected to have a Material Adverse Effect.  Borrower has heretofore delivered to Lender true and complete copies of all Material Contracts to which it is a party or to which it or any of its properties is subject.  No Borrower has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.
5.14.    No Labor Disputes.  No Borrower is involved in any labor dispute; there are no strikes or walkouts or union organization of Borrower’s employees threatened or in existence and no labor contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15.    Margin Regulations.  No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.  No part of the proceeds of any Advance will be used for “purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of Governors.
5.16.    Investment Company Act.  No Borrower is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company.
5.17.    Disclosure.  No representation or warranty made by Borrower in this Agreement or in any financial statement, report, certificate or any other document furnished in connection herewith 

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contains any untrue statement of fact or omits to state any fact necessary to make the statements herein or therein not misleading.  There is no fact known to Borrower or which reasonably should be known to Borrower which Borrower has not disclosed to Lender in writing with respect to the Transactions which could reasonably be expected to have a Material Adverse Effect.
5.18.    [Reserved].
5.19.    [Reserved].
5.20.    Swaps.  No Borrower is a party to, nor will it be a party to, any swap agreement whereby Borrower has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited “two-way basis” without regard to fault on the part of either party.
5.21.    Business and Property of Borrower.  As of the Closing Date, Borrower does not propose to engage in any business other than designing, manufacturing and marketing process automation and inspection systems for food, pharmaceutical and other related industries and activities necessary to conduct the foregoing.  On the Closing Date, Borrower will own or have the right to use all the property and possess all of the rights and Consents necessary for the conduct of the business of Borrower as currently conducted.
5.22.    Ineligible Securities.  Borrower does not intend to use and shall not use any portion of the proceeds of the Advances, directly or indirectly, to purchase during the underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a securities Affiliate of Lender or by Lender.
5.23.    [Reserved].
5.24.    Equity Interests.  The authorized and outstanding Equity Interests of Borrower as of the Closing Date, are as set forth on Schedule 5.24(a) hereto.  All of the Equity Interests of Borrower have been duly and validly authorized and issued and are fully paid and non-assessable and have been sold and delivered to the holders hereof in compliance with, or under valid exemption from, all federal and state laws and the rules and regulations of each Governmental Body governing the sale and delivery of securities.
5.25.    Commercial Tort Claims.  Borrower does not have any commercial tort claims.
5.26.    Letter of Credit Rights.  As of the Closing Date, Borrower does not have any letter-of-credit rights (as defined in the Uniform Commercial Code).
5.27.    [Reserved].
VI.    AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination of this Agreement:

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6.1.    Compliance with Laws.  Comply in all material respects with all Applicable Laws with respect to the Collateral or any part thereof or to the operation of Borrower’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect (except to the extent any separate provision of this Agreement shall expressly require compliance with any particular Applicable Law(s) pursuant to another standard).  Borrower may, however, contest or dispute any Applicable Laws in any reasonable manner, provided that any related Lien is inchoate or stayed and sufficient reserves are established to the reasonable satisfaction of Lender to protect Lender’s Lien on or security interest in the Collateral.
6.2.    Conduct of Business and Maintenance of Existence and Assets.  (a) Conduct continuously and operate actively its business according to standard industry practices and maintain all of its properties necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of this Agreement), including all Intellectual Property and take all actions necessary to enforce and protect the validity of any intellectual property right or other right included in the Collateral; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required by it to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof where the failure to do so could reasonably be expected to have a Material Adverse Effect.
6.3.    Books and Records.  Keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs (including without limitation accruals for taxes, assessments, Charges, levies and claims, allowances against doubtful Receivables and accruals for depreciation, obsolescence or amortization of assets), all in accordance with, or as required by, GAAP consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Borrower.
6.4.    Payment of Taxes.  Pay, when due, all taxes, assessments and other Charges lawfully levied or assessed upon Borrower or any of the Collateral, including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes (other than such taxes, assessments and other Charges being Properly Contested.  If any tax by any Governmental Body is or may be imposed on or as a result of any transaction between Borrower and Lender in which Lender may be required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Lender’s opinion, may possibly create a valid Lien on the Collateral, Lender may without notice to Borrower pay the taxes, assessments or other Charges and Borrower hereby indemnifies and holds Lender harmless in respect thereof.  Lender will not pay any taxes, assessments or Charges to the extent that Borrower has Properly Contested those taxes, assessments or Charges.  The amount of any payment by Lender under this Section 6.4 shall be charged to Borrower’s Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations and, until Borrower shall furnish Lender with an indemnity therefor (or supply Lender with evidence satisfactory to Lender that due provision for the payment thereof has 

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been made), Lender may hold without interest any balance standing to Borrower’s credit and Lender shall retain its security interest in and Lien on any and all Collateral held by Lender.
6.5.    Financial Covenants.  
(a)    Fixed Charge Coverage Ratio.  Commencing on the date on which a FCCR Period begins and measured as of the end of the month immediately preceding the date on which a FCCR Period first begins and as of each month-end thereafter during such FCCR Period, cause to be maintained a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00, measured on a trailing twelve (12) month basis. 
(b)    Liquidity.  At all times, cause to be maintained Liquidity of no less than $1,000,000.  Lender shall test Borrower’s compliance with this covenant monthly, as of the last day of each month, or with such greater frequency as Lender may advise Borrower in its Permitted Discretion.
6.6.    Insurance.
(a)    (i) Keep all its insurable properties and properties in which Borrower has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to Borrower’s including business interruption insurance; (ii) maintain a commercial crime policy including employee theft coverage in such amount as is customary in the case of companies engaged in businesses similar to Borrower; (iii) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (iv) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which Borrower is engaged in business; (v) furnish Lender with (A) copies of all policies and evidence of the maintenance of such policies by the renewal thereof within 5 days after any expiration date; provided that for the avoidance of doubt, the aforementioned 5 day period applies only to the delivery of the evidence of such insurance and not to the Borrower’s obligation to maintain such insurance at all times, and (B) appropriate loss payable endorsements in form and substance satisfactory to Lender, naming Lender as an additional insured and mortgagee and/or lender loss payee (as applicable) as its interests may appear with respect to all insurance coverage referred to in clauses (i), and (iii) above, and providing (A) that all proceeds thereunder shall be payable to Lender, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days prior written notice is given to Lender (or in the case of non-payment, at least ten (10) days prior written notice).  In the event of any loss thereunder, the carriers named therein hereby are directed by Lender and Borrower to make payment for such loss to Lender and not to Borrower and Lender jointly.  If any insurance losses are paid by check, draft or other instrument payable to Borrower and Lender jointly, Lender may endorse Borrower’s name thereon and do such other things as Lender may deem advisable to reduce the same to cash.
(b)    Borrower shall take all actions required under the Flood Laws and/or requested by Lender to assist in ensuring that Lender is in compliance with the Flood Laws 

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applicable to the Collateral, including, but not limited to, providing Lender with the address and/or GPS coordinates of each structure on any real property that will be subject to a mortgage in favor of Lender, and, to the extent required, obtaining flood insurance for such property, structures and contents prior to such property, structures and contents becoming Collateral, and thereafter maintaining such flood insurance in full force and effect for so long as required by the Flood Laws.
(c)    If an Event of Default or Default has occurred and is continuing, Lender is authorized to adjust and compromise claims under insurance coverage referred to in Sections 6.6(a)(i), and (iii) and 6.6(b) above.  All loss recoveries received by Lender under any such insurance may be applied to the Obligations, in such order as Lender in its sole discretion shall determine.  Any surplus shall be paid by Lender to Borrower or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by Borrower to Lender, on demand.  If Borrower fails to obtain insurance as hereinabove provided, or to keep the same in force, Lender, if Lender so elects, may obtain such insurance and pay the premium therefor on behalf of Borrower, which payments shall be charged to Borrower’s Account and constitute part of the Obligations.
6.7.    Payment of Indebtedness and Leasehold Obligations.  Pay, discharge or otherwise satisfy (i) at or before maturity (subject, where applicable, to specified grace periods) all its Indebtedness, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being Properly Contested, subject at all times to any applicable subordination arrangement in favor of Lender and (ii) when due its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect.
6.8.    Environmental Matters.
(a)    Ensure that the Real Property and all operations and businesses conducted thereon are and remain in compliance in all material respects with all Environmental Laws and it shall manage any and all Hazardous Materials on any Real Property in compliance in all material respects with Environmental Laws.
(b)    Establish and maintain an environmental management and compliance system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic environmental compliance audits to be conducted by knowledgeable environmental professionals.  All potential violations and violations of Environmental Laws shall be reviewed with legal counsel to determine any required reporting to applicable Governmental Bodies and any required corrective actions to address such potential violations or violations.
(c)    Respond promptly to any Hazardous Discharge or Environmental Complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Lien.  If Borrower shall fail to respond promptly to any Hazardous Discharge or Environmental Complaint or Borrower shall fail to comply with any of the requirements of any Environmental Laws, Lender may, but without the obligation to do so, for the sole purpose of protecting Lender’s interest in the Collateral:  (i) give such notices or (ii) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Lender (or such third parties as directed by Lender) deem reasonably necessary or 

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advisable, to remediate, remove, mitigate or otherwise manage with any such Hazardous Discharge or Environmental Complaint.  All reasonable costs and expenses incurred by Lender (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrower, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Lender and Borrower.
(d)    If Lender has a reasonable basis to believe that a Hazardous Discharge has occurred at the Real Property, then, promptly upon the written request of Lender, Borrower shall provide Lender, at Borrower’s expense, with an environmental site assessment or environmental compliance audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Lender, to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the potential costs in connection with abatement, remediation  and removal of any Hazardous Materials  found on, under, at or within the Real Property.  Any report or investigation of such Hazardous Discharge proposed and acceptable to the responsible Governmental Body shall be acceptable to Lender.  If such estimates, individually or in the aggregate, exceed $100,000, Lender shall have the right to require Borrower to post a bond, letter of credit or other security reasonably satisfactory to Lender to secure payment of these costs and expenses.
6.9.    Standards of Financial Statements.  Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which GAAP is applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as disclosed therein and agreed to by such reporting accountants or officer, as applicable).
6.10.    [Reserved].
6.11.    Execution of Supplemental Instruments.  Execute and deliver to Lender from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Lender may reasonably request, in order that the full intent of this Agreement may be carried into effect.
6.12.    [Reserved].
6.13.    Government Receivables.  Take all steps necessary to protect Lender’s interest in the Collateral under the Federal Assignment of Claims Act, the Uniform Commercial Code and all other applicable state or local statutes or ordinances and deliver to Lender appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of any contract between Borrower and the United States, any state or any department, agency or instrumentality of any of them.

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6.14.    Keepwell.  If it is a Qualified ECP Loan Party, then jointly and severally, together with each other Qualified ECP Loan Party, hereby absolutely unconditionally and irrevocably (a) guarantees the prompt payment and performance of all Swap Obligations owing by each Non-Qualifying Party (it being understood and agreed that this guarantee is a guaranty of payment and not of collection), and (b) undertakes to provide such funds or other support as may be needed from time to time by any Non-Qualifying Party to honor all of such Non Qualifying Party’s obligations under this Agreement or any Other Document in respect of Swap Obligations (provided, however, that each Qualified ECP Loan Party shall only be liable under this Section 6.14 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 6.14, or otherwise under this Agreement or any Other Document, voidable under applicable law, including applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations of each Qualified ECP Loan Party under this Section 6.14 shall remain in full force and effect until payment in full of the Obligations and termination of this Agreement and the Other Documents.  Each Qualified ECP Loan Party intends that this Section 6.14 constitute, and this Section 6.14 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of Borrower and each Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the CEA.
VII.    NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and termination of this Agreement:
7.1.    Merger, Consolidation, Acquisition and Sale of Assets.
(a)    Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any other Person or permit any other Person to consolidate with or merge with it, except Borrower may merge, consolidate or reorganize with another Borrower or acquire the assets or Equity Interest of another Borrower so long as Borrower provides Lender with at least ten (10) days prior written notice of such merger, consolidation or reorganization and delivers all of the relevant documents evidencing such merger, consolidation or reorganization.
(b)    Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (i) (a) the sale of Inventory in the Ordinary Course of Business and (b) the disposition or transfer of obsolete and worn-out equipment in the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than $250,000 and only to the extent (x) that the proceeds of any such disposition are used to acquire replacement equipment which is subject to Lender’s and the other Secured Party’s first priority security interest or (y) the proceeds of such disposition are, to the extent required by Section 2.20, remitted to Lender to be applied pursuant to Section 2.20 and (ii) any other sales or dispositions not expressly prohibited by this Agreement.
7.2.    Creation of Liens.  Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter created or acquired, except Permitted Encumbrances.

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7.3.    Guarantees.  Become liable upon the obligations or liabilities of any other Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lender) except (a) guarantees made in the Ordinary Course of Business up to an aggregate amount of $100,000 at any one time, (b) guarantees by one or more Borrower(s) of the Indebtedness or obligations of any other Borrower(s) to the extent such Indebtedness or obligations are permitted to be incurred and/or outstanding pursuant to the provisions of this Agreement and (c) the endorsement of checks in the Ordinary Course of Business.
7.4.    Investments.  Purchase or acquire obligations or Equity Interests of, or any other interest in, any other Person, other than Permitted Investments.
7.5.    Loans.  Make advances, loans or extensions of credit to any other Person, including any Parent, Subsidiary or Affiliate other than Permitted Loans.
7.6.    Capital Expenditures.  Contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount in excess of $6,000,000.
7.7.    Dividends.  Declare, pay or make any dividend or distribution on any Equity Interests of Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any Equity Interest, or of any options to purchase or acquire any Equity Interest of Borrower other than (a) Permitted Dividends, and (b) repurchases or redemptions of Equity Interests of Borrower pursuant to a plan approved by the Board of Directors of Borrower.
7.8.    Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness other than Permitted Indebtedness.
7.9.    Nature of Business.  Substantially change the nature of the business in which it is presently engaged, nor except as specifically permitted hereby purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business for assets or property which are useful in, necessary for and are to be used in its business as presently conducted.
7.10.    Transactions with Affiliates.  Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except for (i) transactions among Borrower and its Subsidiaries which are not expressly prohibited by the terms of this Agreement and which are in the Ordinary Course of Business;  (ii) payment by Borrower of dividends and distributions permitted under Section 7.7 hereof, and (iii) transactions disclosed to Lender in writing, which are in the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions which would have been obtainable from a Person other than an Affiliate; provided, however, that neither the extension of credit to, nor the assumption, endorsement or guaranty of any Indebtedness of, any Affiliate shall be deemed to be a transaction in the Ordinary Course of Business for purposes of this Section 7.10.

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7.11.    Leases.  Enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 7.6 hereof) if after giving effect thereto, aggregate annual rental payments for all leased property would exceed $700,000 in any one fiscal year in the aggregate for Borrower.
7.12.    Subsidiaries.
(a)    Form any Subsidiary unless such Subsidiary (i) is not an Excluded Foreign Subsidiary, (ii) at Lender’s discretion, (x) expressly joins in this Agreement as Borrower and becomes jointly and severally liable for the obligations of Borrower hereunder, under the Notes, and under any other agreement between Borrower and Lender, or (y) becomes a Guarantor with respect to the Obligations and executes a Guarantor Security Agreement in favor of Lender, and (iii) Lender shall have received all documents, including without limitation, legal opinions and appraisals it may reasonably require to establish compliance with each of the foregoing conditions in connection therewith; or
(b)    Enter into any partnership, joint venture or similar arrangement.
7.13.    Fiscal Year and Accounting Changes.  Change its fiscal year from September 30th or make any change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law.
7.14.    Pledge of Credit.  Now or hereafter pledge Lender’s credit on any purchases, commitments or contracts or for any purpose whatsoever or use any portion of any Advance in or for any business other than Borrower’s business operations as conducted on the Closing Date, including, without limitation, issuing purchase commitments to Borrower's suppliers in the Ordinary Course of Business..
7.15.    Amendment of Organizational Documents.  (i) Change its legal name, (ii) change its form of legal entity (e.g., converting from a corporation to a limited liability company or vice versa), (iii) change its jurisdiction of organization or become (or attempt or purport to become) organized in more than one jurisdiction, or (iv) otherwise amend, modify or waive any term or material provision of its Organizational Documents unless required by law, in any such case without (x) giving at least thirty (30) days prior written notice of such intended change to Lender, (y) having received from Lender confirmation that Lender has taken all steps necessary for Lender to continue the perfection of and protect the enforceability and priority of its Liens in the Collateral belonging to Borrower and in the Equity Interests of Borrower and (z) in any case under clause (iv), having received the prior written consent of Lender to such amendment, modification or waiver.
7.16.    Compliance with ERISA.  (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction,” as that term is defined in Section 406 of ERISA or Section 4975 of the Code, (iii) terminate, or permit any member of the Controlled Group to terminate, any Plan where such event could result in any liability of Borrower or any member of the Controlled Group or the 

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imposition of a lien on the property of Borrower or any member of the Controlled Group pursuant to Section 4068 of ERISA, (iv) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (v) fail promptly to notify Lender of the occurrence of any Termination Event, (vi) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Plan, (vii) fail to meet, permit any member of the Controlled Group to fail to meet, or permit any Plan to fail to meet all minimum funding requirements under ERISA and the Code, without regard to any waivers or variances, or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Plan, or (viii) cause, or permit any member of the Controlled Group to cause, a representation or warranty in Section 5.8(d) to cease to be true and correct.
7.17.    Prepayment of Indebtedness.  At any time, directly or indirectly, prepay any Indebtedness (other than to Lender), or repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower.
7.18.    [Reserved].
7.19.    [Reserved].
7.20.    [Reserved].
VIII.    CONDITIONS PRECEDENT.
8.1.    Conditions to Initial Advances.  The agreement of Lender to make the initial Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by Lender, immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:
(a)    Note.  Lender shall have received the Note duly executed and delivered by an authorized officer of Borrower;
(b)    Other Documents.  Lender shall have received each of the executed Other Documents, as applicable;
(c)    [Reserved];
(d)    Mortgage.  Lender shall have received in form and substance satisfactory to Lender an executed Mortgage;
(e)    Title Insurance.  Lender shall have received fully paid mortgagee title insurance policies (or binding commitments to issue title insurance policies, marked to Lender’s satisfaction to evidence the form of such policies to be delivered with respect to the Mortgage), in standard ALTA form, issued by a title insurance company satisfactory to Lender, each in an amount equal to not less than the fair market value of the Real Property subject to the Mortgage, insuring the Mortgage to create a valid Lien on the Real Property with no exceptions which Lender shall not have approved in writing and no survey exceptions;

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(f)    Environmental Reports.  Lender shall have received all environmental studies and reports prepared by independent environmental engineering firms with respect to all Real Property owned or leased by Borrower;
(g)    Financial Condition Certificates.  Lender shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(g);
(h)    Closing Certificate.  Lender shall have received a closing certificate signed by the Chief Financial Officer of Borrower dated as of the date hereof, stating that (i) all representations and warranties set forth in this Agreement and the Other Documents are true and correct on and as of such date, and (ii) on such date no Default or Event of Default has occurred or is continuing;
(i)    Borrowing Base.  Lender shall have received evidence from Borrower that the aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in value and amount to support the Revolving Advances in the amount requested by Borrower on the Closing Date;
(j)    Unused Availability. Borrower shall have Liquidity of at least $9,000,000 after giving effect to the initial Advances under this Agreement and the payment of all fees and expenses required to be paid by Borrower on the Closing Date under this Agreement or the other Loan Documents;
(k)    Blocked Accounts.  Borrower shall have opened the Depository Accounts with Lender;
(l)    [Reserved];
(m)    Filings, Registrations and Recordings.  Each document (including any Uniform Commercial Code financing statement) required by this Agreement, any related agreement or under law or reasonably requested by Lender to be filed, registered or recorded in order to create, in favor of Lender, a perfected security interest in or lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required  or requested, and Lender shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;
(n)    Lien Waiver Agreements.  Lender shall have received Lien Waiver Agreements with respect to all locations or places at which Inventory, equipment and books and records are located, other than Customer locations with respect to equipment used for demonstration purposes that is located at such Customer location;
(o)    Secretary’s Certificates, Authorizing Resolutions and Good Standings of Borrower.  Lender shall have received a certificate of the Secretary or Assistant Secretary (or other equivalent officer, partner or manager) of Borrower in form and substance reasonably satisfactory to Lender dated as of the Closing Date which shall certify (i) copies of resolutions in form and 

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substance reasonably satisfactory to Lender, of the board of directors (or other equivalent governing body, member or partner) of Borrower authorizing (x) the execution, delivery and performance of this Agreement, the Notes and each Other Document to which Borrower is a party (including authorization of the incurrence of indebtedness, borrowing of Revolving Advances and Term Loan and requesting of Letters of Credit as provided for herein), and (y) the granting by Borrower of the security interests in and liens upon the Collateral to secure all of the Obligations (and such certificate shall state that such resolutions have not been amended, modified, revoked or rescinded as of the date of such certificate), (ii) the incumbency and signature of the officers of Borrower authorized to execute this Agreement and the Other Documents, (iii) copies of the Organizational Documents of Borrower as in effect on such date, complete with all amendments thereto, and (iv) the good standing (or equivalent status) of Borrower in its jurisdiction of organization and each applicable jurisdiction where the conduct of Borrower’s business activities or the ownership of its properties necessitates qualification, as evidenced by good standing certificate(s) (or the equivalent thereof issued by any applicable jurisdiction) dated not more than thirty (30) days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each such jurisdiction;
(p)    Secretary’s Certificates, Authorizing Resolutions and Good Standings of Guarantor.  Lender shall have received a certificate of the Secretary or Assistant Secretary (or other equivalent officer, partner or manager) of Guarantor in form and substance reasonably satisfactory to Lender dated as of the Closing Date which shall certify (i) copies of resolutions in form and substance reasonably satisfactory to Lender, of the board of directors (or other equivalent governing body, member or partner) of Guarantor authorizing (x) the execution, delivery and performance of Guarantor’s Guaranty and each Other Loan Document to which Guarantor is a party and (y) the granting by Guarantor of the security interests in and liens upon the Collateral to secure its obligations under its Guaranty (and such certificate shall state that such resolutions have not been amended, modified, revoked or rescinded as of the date of such certificate), (ii) the incumbency and signature of the officers of Guarantor authorized to execute this Agreement and the Other Documents, (iii) copies of the Organizational Documents of Guarantor as in effect on such date, complete with all amendments thereto, and (iv) the good standing (or equivalent status) of Guarantor in its jurisdiction of organization and each applicable jurisdiction where the conduct of Guarantor’s business activities or the ownership of its properties necessitates qualification, as evidenced by good standing certificate(s) (or the equivalent thereof issued by any applicable jurisdiction) dated not more than thirty (30) days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each such jurisdiction;
(q)    Legal Opinion.  Lender shall have received the executed legal opinion of Tonkon Torp LLP in form and substance reasonably satisfactory to Lender which shall cover such matters incident to the transactions contemplated by this Agreement, the Notes, the Other Documents, and related agreements as Lender may reasonably require and Borrower hereby authorizes and directs such counsel to deliver such opinions to Lender;
(r)    No Litigation.  (i) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened in writing against Borrower or against the officers or directors of Borrower (A) in connection with this Agreement, the Other Documents, or any of the transactions contemplated thereby and which, in the reasonable opinion 

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of Lender, is deemed material or (B) which could, in the reasonable opinion of Lender, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse to Borrower or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body;
(s)    Collateral Examination.  Lender shall have completed Collateral examinations and received appraisals, the results of which shall be satisfactory in form and substance to Lender, of the Receivables, Inventory, General Intangibles, Real Property, and equipment of Borrower and all books and records in connection therewith;
(t)    Fees.  Lender shall have received all fees payable to Lender on or prior to the Closing Date hereunder, including for survey fees, pre-fund fees and other fees pursuant to Article III hereof;
(u)    Pro Forma Financial Statements.  Lender shall have received a copy of the Pro Forma Financial Statements which shall be satisfactory in all respects to Lender;
(v)    Insurance.  Lender shall have received in form and substance reasonably satisfactory to Lender, (i) evidence that adequate insurance, including without limitation, casualty and liability insurance, required to be maintained under this Agreement is in full force and effect, (ii) insurance certificates issued by Borrower’s insurance broker containing such information regarding Borrower’s casualty and liability insurance policies as Lender shall reasonably request and naming Lender as an additional insured, lenders loss payee and/or mortgagee, as applicable, and (iii) loss payable endorsements issued by Borrower’s insurer naming Lender as lenders loss payee and mortgagee, as applicable;
(w)    Flood Insurance.  Evidence that adequate flood insurance required to be maintained under this Agreement is in full force and effect, with additional insured, mortgagee and lender loss payable special endorsements attached thereto in form and substance satisfactory to Lender and its counsel naming Lender as additional insured, mortgagee and lender loss payee, as applicable, and evidence that Borrower has taken all actions required under the Flood Laws and/or requested by Lender to assist in ensuring that Lender is in compliance with the Flood Laws applicable to the Collateral, including, but not limited to, providing Lender with the address and/or GPS coordinates of each structure on any Real Property that will be subject to a Mortgage in favor of Lender, and, to the extent required, obtaining flood insurance for such property, structures and contents prior to such property, structures and contents becoming Collateral.
(x)    Payment Instructions.  Lender shall have received written instructions from Borrower directing the application of proceeds of the initial Advances made pursuant to this Agreement;
(y)    Consents.  Lender shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Lender shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral, as Lender and its counsel shall deem necessary;

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(z)    No Adverse Material Change.  (i) Since March 31, 2015, there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Lender shall have been proven to be inaccurate or misleading in any material respect;
(aa)    [Reserved];
(bb)    Compliance with Laws.  Lender shall be reasonably satisfied that Borrower is in compliance with all pertinent federal, state, local or territorial regulations, including those with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act, ERISA and the Anti-Terrorism Laws; and
(cc)    Other.  All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be satisfactory in form and substance to Lender and its counsel.
8.2.    Conditions to Each Advance.  The agreement of Lender to make any Advance requested to be made on any date (including the initial Advance), is subject to the satisfaction of the following conditions precedent as of the date such Advance is made:
(a)    Representations and Warranties.  Each of the representations and warranties made by Borrower in or pursuant to this Agreement, the Other Documents and any related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement, the Other Documents or any related agreement shall be true and correct in all respects on and as of such date as if made on and as of such date (except to the extent any such representation or warranty expressly relates only to any earlier and/or specified date);
(b)    No Default.  No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Lender, in its sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; 
(c)    Maximum Advances.  In the case of any type of Advance requested to be made, after giving effect thereto, the aggregate amount of such type of Advance shall not exceed the maximum amount of such type of Advance permitted under this Agreement; and
(d)    Borrowing Base.  With respect to the initial Revolving Advance, Lender shall have received an updated Borrowing Base Certificate dated as of a date not earlier than June 30, 2015 or such later date as is required pursuant to the terms of this Agreement.
Each request for an Advance by Borrower hereunder shall constitute a representation and warranty by Borrower as of the date of such Advance that the conditions contained in this subsection shall have been satisfied.

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8.3.    Swap Arrangement. On or before the Closing Date, Borrower and Lender shall enter into a swap arrangement with respect to the Term Loan in a form mutually acceptable to Borrower and Lender, including provisions pertaining to payment of the breakage fee under Borrower's existing swap agreement with Bank of America, N.A.
IX.    INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the termination of this Agreement:
9.1.    Disclosure of Material Matters.  Immediately upon learning thereof, report to Lender all matters materially affecting the value, enforceability or collectability of any portion of the Collateral, including Borrower’s reclamation or repossession of, or the return to Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.
9.2.    Schedules.  Deliver to Lender on or before the thirtieth (30th) day of each month as and for the prior month (a) accounts receivable agings inclusive of reconciliations to the general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger, (c) Inventory reports, (d) a Borrowing Base Certificate in form and substance satisfactory to Lender (which shall be calculated as of the last day of the prior month and which shall not be binding upon Lender or restrictive of Lender’s rights under this Agreement); provided that Borrower shall deliver Borrowing Base Certificates to Lender weekly (no later than the third Business Day of each week) during any FCCR Period or during the continuance of an Event of Default.  In addition, Borrower will deliver to Lender (i) at such intervals as Lender may reasonably require:  (A) confirmatory assignment schedules; (B) copies of Customer’s invoices; (C) evidence of shipment or delivery; and (D) such further schedules, documents and/or information regarding the Collateral as Lender may require including trial balances and test verifications, and (ii) during any FCCR Period, a sales report/roll forward on or before Tuesday of each week for the prior week.  Lender shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder.  The items to be provided under this Section are to be in form reasonably satisfactory to Lender and executed by Borrower and delivered to Lender from time to time solely for Lender’s convenience in maintaining records of the Collateral, and Borrower’s failure to deliver any of such items to Lender shall not affect, terminate, modify or otherwise limit Lender’s Lien with respect to the Collateral.  Unless otherwise agreed to by Lender, the items to be provided under this Section 9.2 shall be delivered to Lender by the specific method of Approved Electronic Communication designated by Lender.
9.3.    Environmental Reports.
(a)    Furnish Lender, concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.8, with a certificate signed by the Chief Financial Officer of Borrower stating, to the best of his knowledge, that Borrower is in compliance in all material respects with all applicable Environmental Laws and that no Hazardous Discharge has occurred at the Real Property.  To the extent Borrower is not in compliance with the foregoing laws, the certificate shall set forth with specificity all areas of non-compliance and the proposed action Borrower will implement in order to achieve full compliance.

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(b)    In the event Borrower obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Materials  at the Real Property (any such event being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at the Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting the Real Property or Borrower’s interest therein or the operations or the business (any of the foregoing is referred to herein as an “Environmental Complaint”) from any Person, including any Governmental Body, then Borrower shall, within five (5) Business Days, give written notice of same to Lender detailing facts and circumstances of which Borrower is aware giving rise to the Hazardous Discharge or Environmental Complaint.  Such information is to be provided to allow Lender to protect its security interest in and Lien on the Collateral and is not intended to create nor shall it create any obligation upon Lender with respect thereto.
(c)    Borrower shall promptly forward to Lender copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Materials at any other site owned, operated or used by Borrower to manage of Hazardous Materials and shall continue to forward copies of correspondence between Borrower and the Governmental Body regarding such claims to Lender until the claim is settled.  Borrower shall promptly forward to Lender copies of all documents and reports concerning a Hazardous Discharge or Environmental Complaint at the Real Property, operations or business that Borrower is required to file under any Environmental Laws.  Such information is to be provided solely to allow Lender to protect Lender’s security interest in and Lien on the Collateral.
9.4.    Litigation.  Promptly notify Lender in writing of any claim, litigation, suit or administrative proceeding affecting Borrower or Guarantor, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which could reasonably be expected to have a Material Adverse Effect.
9.5.    Material Occurrences.  Immediately notify Lender in writing upon the occurrence of:  (a) any Event of Default or Default; (b) any event, development or circumstance whereby any financial statements or other reports furnished to Lender fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of Borrower as of the date of such statements; (c) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject Borrower to a tax imposed by Section 4971 of the Code; (d) each and every default by Borrower which might result in the acceleration of the maturity of any Indebtedness, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (e) any other development in the business or affairs of Borrower or Guarantor, which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrower proposes to take with respect thereto.

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9.6.    Government Receivables.  Notify Lender immediately if any of its Receivables arise out of contracts between Borrower and the United States, any state, or any department, agency or instrumentality of any of them.
9.7.    Annual Financial Statements.  Furnish Lender within ninety (90) days after the end of each fiscal year of Borrower, financial statements of Borrower including, but not limited to, consolidated and consolidating statements of income and consolidated stockholders’ equity and cash flow in each case from the beginning of the current fiscal year to the end of such fiscal year and the consolidated and consolidating balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and, with respect to the consolidated financial statements only, reported upon without qualification by an independent certified public accounting firm selected by Borrower and satisfactory to Lender (the “Accountants”).  For the avoidance of doubt, Lender acknowledges that the consolidating financial statements described in this Section 9.7 will be internally prepared by Borrower’s management and will not be reported upon by the Accountants.  
9.8.    Quarterly Financial Statements.  Furnish Lender within forty five (45) days after the end of each fiscal quarter, an unaudited balance sheet of Borrower on a consolidated basis and unaudited statements of income and stockholders’ equity and cash flow of Borrower on a consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such quarter and for such quarter, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year-end adjustments that individually and in the aggregate are not material to Borrower’s business operations and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year.  The reports shall be accompanied by a Compliance Certificate.
9.9.    Monthly Financial Statements.  Furnish Lender within thirty (30) days after the end of each month, an unaudited balance sheet and unaudited statement of income of Borrower on a consolidated and consolidating basis and an unaudited Statement of cash flow of Borrower on a consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year-end adjustments that individually and in the aggregate are not material to Borrower’s business operations and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year.  The reports shall be accompanied by a Compliance Certificate.
9.10.    Other Reports.  Furnish Lender as soon as available, but in any event within ten (10) days after the issuance thereof, with copies of such financial statements, reports and returns as Borrower shall send to the holders of its Equity Interests.
9.11.    Additional Information.  Furnish Lender with such additional information as Lender shall reasonably request in order to enable Lender to determine whether the terms, covenants, provisions and conditions of this Agreement and the Note have been complied with by Borrower including, without the necessity of any request by Lender, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of Borrower’s opening of any new office or place of business or Borrower’s closing of any existing office or place of business, and 

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(c) promptly upon Borrower’s learning thereof, notice of any labor dispute to which Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which Borrower is a party or by which Borrower is bound.
9.12.    Projected Operating Budget.  Furnish Lender, no later than thirty (30) days after the beginning of Borrower’s fiscal years commencing with fiscal year 2016, a month by month projected operating budget and cash flow of Borrower on a consolidated basis for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by the President or Chief Financial Officer of Borrower to the effect that such projections have been prepared on the basis of sound financial planning practice consistent with past budgets and financial statements and that such officer has no reason to question the reasonableness of any material assumptions on which such projections were prepared.  The projected operating budget and cash flows do not constitute, and Borrower does not make and expressly disclaims any, representations or warranties that the results set forth therein will be met, it being acknowledged and agreed by Lender that uncertainty is inherent in any projections and other forward-looking information and projections as to future events or conditions are not to be viewed as facts, and the actual results during the period or periods covered by such projections may differ materially from the projected results.
9.13.    [Reserved].
9.14.    Notice of Suits, Adverse Events.  Furnish Lender with prompt written notice of (i) any lapse or other termination of any Consent issued to Borrower by any Governmental Body or any other Person that is material to the operation of Borrower’s business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by Borrower or Guarantor with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of Borrower or Guarantor, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from any Governmental Body or Person which specifically relate to Borrower or Guarantor.
9.15.    ERISA Notices and Requests.  Furnish Lender with immediate written notice in the event that (i) Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which Borrower or any member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any  Borrower or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a written statement describing such transaction and the action which Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which Borrower or any member of the Controlled Group was not 

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previously contributing shall occur, (v) Borrower or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) Borrower or any member of the Controlled Group shall receive any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) Borrower or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) Borrower or any member of the Controlled Group shall fail to make a required installment or any other required payment under the Code or ERISA on or before the due date for such installment or payment; or (ix) Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan or (d) a Multiemployer Plan is subject to Section 432 of the Code or Section 305 of ERISA.
9.16.    Additional Documents.  Execute and deliver to Lender, upon request, such documents and agreements as Lender may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.
9.17.    Updates to Certain Schedules.  Deliver to Lender promptly as shall be required to maintain the related representations and warranties as true and correct, updates to Schedules 4.4 (Locations of equipment and Inventory), 5.9 (Intellectual Property, Source Code Escrow Agreements), and 5.24 (Equity Interests); provided, that absent the occurrence and continuance of any Event of Default, Borrower shall only be required to provide such updates on a monthly basis in connection with delivery of a Compliance Certificate with respect to the applicable month.  Any such updated Schedules delivered by Borrower to Lender in accordance with this Section 9.17 shall automatically and immediately be deemed to amend and restate the prior version of such Schedule previously delivered to Lender and attached to and made part of this Agreement.
X.    EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute an “Event of Default”:
10.1.    Nonpayment.  Failure by Borrower to pay when due (a) any principal or interest on the Obligations (including without limitation pursuant to Section 2.9), or (b) any other fee, charge, amount or liability provided for herein or in any Other Document, in each case whether at maturity, by reason of acceleration pursuant to the terms of this Agreement, by notice of intention to prepay or by required prepayment;
10.2.    Breach of Representation.  Except as provided in Section 10.18, any representation or warranty made or deemed made by Borrower or Guarantor in this Agreement, any Other Document or any related agreement or in any certificate, document or financial or other statement furnished at any time in connection herewith or therewith shall prove to have been incorrect or misleading in any material respect (or could reasonably be likely to result in an Material Adverse 

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Effect in the case of representations and warranties related to Receivables that are not Eligible Receivables) on the date when made or deemed to have been made;   
10.3.    Financial Information.  Failure by Borrower to (i) furnish financial information when due hereunder or, if no due date is specified herein, within ten (10) days following a request therefor, or (ii) permit the inspection of its books or records or access to its premises for audits and appraisals in accordance with the terms hereof;
10.4.    Judicial Actions.  Issuance of a notice of Lien, levy, assessment, injunction or attachment (a) against Borrower’s Inventory or Receivables or (b) against a material portion of Borrower’s other property which, in either case, is not stayed or lifted within thirty (30) days;
10.5.    Noncompliance.  Except as otherwise provided for in Sections 10.1, 10.3, 10.5(ii), and 10.18, (i) failure or neglect of Borrower or Guarantor to perform, keep or observe any term, provision, condition, covenant herein contained, or contained in any Other Document or any other agreement or arrangement, now or hereafter entered into between Borrower, Guarantor, and Lender, which is not cured within five (5) Business Days from the occurrence of such failure or neglect, or (ii) failure or neglect of Borrower to perform, keep or observe any term, provision, condition or covenant, contained in Sections 4.5, 6.1, 6.3, 6.11, 6.13, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure or neglect;
10.6.    Judgments.  Any (a) judgment or judgments, writ(s), order(s) or decree(s) for the payment of money are rendered against Borrower or Guarantor for an aggregate amount in excess of $100,000 or against Borrower and Guarantor for an aggregate amount in excess of $250,000 and (b) (i) action shall be legally taken by any judgment creditor to levy upon assets or properties of Borrower or Guarantor to enforce any such judgment, (ii) such judgment shall remain undischarged for a period of thirty (30) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, shall not be in effect, or (iii) any Liens arising by virtue of the rendition, entry or issuance of such judgment upon assets or properties of Borrower or Guarantor shall be senior to any Liens in favor of Lender on such assets or properties;
10.7.    Bankruptcy.  Borrower, Guarantor, or any Subsidiary or Affiliate of Borrower shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property,  (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy or receivership laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent (including by entry of any order for relief in any involuntary bankruptcy or insolvency proceeding commenced against it), (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;
10.8.    Material Adverse Effect.  The occurrence of any event or development which could reasonably be expected to have a Material Adverse Effect;

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10.9.    Lien Priority.  Any Lien created hereunder or provided for hereby or under any related agreement for any reason, other than as a result of any act or failure to act on the part of Lender, ceases to be or is not a valid and perfected Lien having a first priority interest (subject only to Permitted Encumbrances that have priority as a matter of Applicable Law to the extent such Liens only attach to Collateral other than Receivables or Inventory) which is not cured within five (5) Business Days from the date of such occurrence;
10.10.    [Reserved].
10.11.    Cross Default.  Either (x) any specified “event of default” under any Indebtedness  (other than the Obligations) of Borrower with a then-outstanding principal balance (or, in the case of any Indebtedness not so denominated, with a then-outstanding total obligation amount) of $100,000 or more, or any other event or circumstance which would permit the holder of any such Indebtedness of Borrower to accelerate such Indebtedness (and/or the obligations of Borrower thereunder) prior to the scheduled maturity or termination thereof, shall occur (regardless of whether the holder of such Indebtedness shall actually accelerate, terminate or otherwise exercise any rights or remedies with respect to such Indebtedness) (subject to any cure periods thereunder) or (y) a default of the obligations of Borrower under any other agreement to which it is a party shall occur (subject to any cure periods thereunder) which has or is reasonably likely to have a Material Adverse Effect;
10.12.    Breach of Guaranty or Pledge Agreement.  Termination or breach of any Guaranty, Guarantor Security Agreement, Pledge Agreement or similar agreement executed and delivered to Lender in connection with the Obligations of Borrower, or if Guarantor or pledgor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty, Guarantor Security Agreement, Pledge Agreement or similar agreement;
10.13.    Change of Control.  Any Change of Control shall occur;
10.14.    Invalidity.  Any material provision of this Agreement or any Other Document shall, for any reason, cease to be valid and binding on Borrower or Guarantor, or Borrower or Guarantor shall so claim in writing to Lender or Borrower challenges the validity of or its liability under this Agreement or any Other Document;
10.15.    Seizures.  Any (a) portion of the Collateral shall be seized, subject to garnishment or taken by a Governmental Body, or Borrower or Guarantor, or (b) the title and rights of Borrower, Guarantor or any Original Owner which is the owner of any material portion of the Collateral shall have become the subject matter of claim, litigation, suit, garnishment or other proceeding which might, in the opinion of Lender, upon final determination, result in impairment or loss of the security provided by this Agreement or the Other Documents, in each case which is not cured within ten (10) days from the date of such occurrence;   
10.16.    Operations.  The operations of any of Borrower’s or Guarantor’s manufacturing facility are interrupted (other than in connection with any regularly scheduled shutdown for employee vacations and/or maintenance in the Ordinary Course of Business) at any time for more than thirty (30) consecutive days, unless Borrower or Guarantor shall (i) be entitled to receive for 

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such period of interruption, proceeds of business interruption insurance sufficient to assure that its per diem cash needs during such period is at least equal to its average per diem cash needs for the consecutive three month period immediately preceding the initial date of interruption and (ii) receive such proceeds in the amount described in clause (i) preceding not later than thirty (30) days following the initial date of any such interruption; provided, however, that notwithstanding the provisions of clauses (i) and (ii) of this section, an Event of Default shall be deemed to have occurred if Borrower or Guarantor shall be receiving the proceeds of business interruption insurance for a period of thirty (30) consecutive days;
10.17.    Pension Plans.  An event or condition specified in Sections 7.16 or 9.15 hereof shall occur or exist with respect to any Plan and, as a result of such event or condition, together with all other such events or conditions, Borrower or any member of the Controlled Group shall incur, or in the opinion of Lender be reasonably likely to incur, a liability to a Plan or the PBGC (or both) which, in the reasonable judgment of Lender, would have a Material Adverse Effect; or the occurrence of any Termination Event, or Borrower’s failure to immediately report a Termination Event in accordance with Section 9.15 hereof; or
10.18.    Anti-Terrorism Laws.  If (i) any representation or warranty contained in (x) Section 16.18 hereof or (y) any corresponding section of any Guaranty is or becomes false or misleading at any time, (ii) Borrower shall fail to comply with its obligations under Section 16.18 hereof, or (iii) Guarantor shall fail to comply with its obligations under any section of any Guaranty containing provisions comparable to those set forth in Section 16.18 hereof.
XI.    LENDER’S RIGHTS AND REMEDIES AFTER DEFAULT.
11.1.    Rights and Remedies.
(a)    Upon the occurrence of: (i) an Event of Default pursuant to Section 10.7 (other than Section 10.7(vii)), all Obligations shall be immediately due and payable and this Agreement and the obligation of Lender to make Advances shall be deemed terminated, (ii) any of the other Events of Default and at any time thereafter, at the option of Lender all Obligations shall be immediately due and payable and Lender shall have the right to terminate this Agreement and to terminate its obligation to make Advances; and (iii) without limiting Section 8.2 hereof, any Default under Sections 10.7(vii) hereof, the obligation of Lender to make Advances hereunder shall be suspended until such time as such involuntary petition shall be dismissed.  Upon the occurrence of any Event of Default, Lender shall have the right to exercise any and all rights and remedies provided for herein, under the Other Documents, under the Uniform Commercial Code and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process.  Lender may enter any of Borrower’s premises or other premises without legal process and without incurring liability to Borrower therefor, and Lender may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Lender may deem advisable and Lender may require Borrower to make the Collateral available to Lender at a convenient place.  With or without having the Collateral at the time or place of sale, Lender may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more 

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sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Lender may elect.  Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give Borrower reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Borrower at least ten (10) days prior to such sale or sales is reasonable notification.  At any public sale Lender may bid (including credit bid) for and become the purchaser, and Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of redemption and all such claims, rights and equities are hereby expressly waived and released by Borrower.  In connection with the exercise of the foregoing remedies, including the sale of Inventory, Lender is granted a perpetual nonrevocable, royalty free, nonexclusive license and Lender is granted permission to use all of Borrower’s (a) Intellectual Property which is used or useful in connection with Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such Inventory and (b) equipment for the purpose of completing the manufacture of unfinished goods.  The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 11.5 hereof.  Noncash proceeds will only be applied to the Obligations as they are converted into cash.  If any deficiency shall arise, Borrower shall remain liable to Lender therefor.
(b)    To the extent that Applicable Law imposes duties on Lender to exercise remedies in a commercially reasonable manner, Borrower acknowledges and agrees that it is not commercially unreasonable for Lender:  (i) to fail to incur expenses reasonably deemed significant by Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition; (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of; (iii) to fail to exercise collection remedies against Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral; (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists; (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature; (vi) to contact other Persons, whether or not in the same business as Borrower, for expressions of interest in acquiring all or any portion of such Collateral; (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature; (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets; (ix) to dispose of assets in wholesale rather than retail markets; (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure Lender against risks of loss, collection or disposition of Collateral or to provide to Lender a guaranteed return from the collection or disposition of Collateral; or (xii) to the extent deemed appropriate by Lender, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Lender in the collection or disposition of any of the Collateral.  Borrower acknowledges that the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or omissions by Lender would not be commercially 

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unreasonable in Lender’s exercise of remedies against the Collateral and that other actions or omissions by Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b).  Without limitation upon the foregoing, nothing contained in this Section 11.1(b) shall be construed to grant any rights to Borrower or to impose any duties on Lender that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).
11.2.    Lender’s Discretion.  Lender shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Lender may at any time pursue, relinquish, subordinate, or modify, which procedures, timing and methodologies to employ, and what any other action to take with respect to any or all of the Collateral and in what order, thereto and such determination will not in any way modify or affect any of Lender’s rights hereunder as against Borrower.
11.3.    Setoff.  In addition to any other rights which Lender may have under Applicable Law, upon the occurrence of an Event of Default hereunder, Lender shall have a right, immediately and without notice of any kind, to apply Borrower’s property held by Lender or any of its Affiliates to reduce the Obligations and to exercise any and all rights of setoff which may be available to Lender with respect to any deposits held by Lender.
11.4.    Rights and Remedies not Exclusive.  The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.
11.5.    Allocation of Payments After Event of Default.  Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by Lender on account of the Obligations (including without limitation any amounts on account of any of Cash Management Liabilities or Hedge Liabilities), or in respect of the Collateral, shall be applied to reduce the outstanding Obligations in such manner as Lender shall determine in its sole discretion.
XII.    WAIVERS AND JUDICIAL PROCEEDINGS.
12.1.    Waiver of Notice.  Borrower hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.
12.2.    Delay.  No delay or omission on Lender’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.
12.3.    Jury Waiver.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, COUNTERCLAIM, DEMAND, 

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ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII.    EFFECTIVE DATE AND TERMINATION.
13.1.    Term.  This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of Borrower, and Lender, shall become effective on the date hereof and shall continue in full force and effect until July 20, 2018 (the “Term”) unless sooner terminated as herein provided.  Borrower may terminate this Agreement at any time upon ninety (90) days prior written notice to Lender upon payment in full of the Obligations.  In the event the Obligations are prepaid in full (whether voluntary or involuntary, including after acceleration thereof) and this Agreement is terminated prior to the last day of the Term (the date of such prepayment hereinafter referred to as the “Early Termination Date”), Borrower shall concurrently pay to Lender an early termination fee in an amount equal to (x) two percent (2.00%) times the sum of the Maximum Revolving Advance Amount plus the amount of the Term Loan then outstanding if the Early Termination Date occurs on or after the Closing Date to and including the date immediately preceding the first anniversary of the Closing Date, (y) one percent (1.00%) times the sum of the Maximum Revolving Advance Amount plus the amount of the Term Loan then outstanding if the Early Termination Date occurs on or after the first anniversary of the Closing Date to and including the date immediately preceding the second anniversary of the Closing Date, and (z) one-half of one percent (0.50%) times the sum of the Maximum Revolving Advance Amount plus the amount of the Term Loan then outstanding if the Early Termination Date occurs on or after the second anniversary of the Closing Date to and including the date that is ten (10) days preceding the third anniversary of the Closing Date.
13.2.    Termination.  The termination of the Agreement shall not affect Lender’s rights, or any of the Obligations having their inception prior to the effective date of such termination or any Obligations which pursuant to the terms hereof continue to accrue after such date, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created and Obligations have been fully and indefeasibly paid, disposed of, concluded or liquidated.  The security interests, Liens and rights granted to Lender and the other Secured Parties hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrower’s Account may from time to time be 

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temporarily in a zero or credit position, until all of the Obligations of Borrower have been indefeasibly paid and performed in full after the termination of this Agreement or Borrower has furnished Lender with an indemnification satisfactory to Lender with respect thereto.  Accordingly, Borrower waives any rights which it may have under the Uniform Commercial Code to demand the filing of termination statements with respect to the Collateral, and Lender shall not be required to send such termination statements to Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations have been indefeasibly paid in full in immediately available funds.  All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations are indefeasibly paid and performed in full.
XIV.    [RESERVED].
XV.    [RESERVED].
XVI.    MISCELLANEOUS.
16.1.    Governing Law.  This Agreement and each Other Document (unless and except to the extent expressly provided otherwise in any such Other Document), and all matters relating hereto or thereto or arising herefrom or therefrom (whether arising under contract law, tort law or otherwise) shall, in accordance with Section 5-1401 of the General Obligations Law of the State of New York, be governed by and construed in accordance with the laws of the State of New York.  Any judicial proceeding brought by or against Borrower with respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New York, United States of America, and, by execution and delivery of this Agreement, Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.  Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified or registered mail (return receipt requested) directed to Borrower at its address set forth in Section 16.6 and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America, or, at Lender’s option, by service upon Borrower which Borrower irrevocably appoints as Borrower’s agent for the purpose of accepting service within the State of New York.  Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction.  Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  Borrower waives the right to remove any judicial proceeding brought against Borrower in any state court to any federal court.  Any judicial proceeding by Borrower against Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York.

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16.2.    Entire Understanding.
(a)    This Agreement and the documents executed concurrently herewith contain the entire understanding between Borrower and Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof.  Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by Borrower’s, and Lender’s respective officers.  Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.  Notwithstanding the foregoing, Lender may modify this Agreement or any of the Other Documents for the purposes of completing missing content or correcting erroneous content of an administrative nature, without the need for a written amendment, provided that the Lender shall send a copy of any such modification to Borrower (which copy may be provided by electronic mail).  Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.
(b)    Any such supplemental agreement shall be binding upon Borrower and Lender and all future holders of the Obligations.  In the case of any waiver, Borrower and Lender shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon.
(c)    Lender is hereby authorized by Borrower, at any time in Lender’s sole discretion, regardless of (i) the existence of a Default or an Event of Default, (ii) whether any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or the commitment of Lender to make Revolving Advances hereunder has been terminated for any reason, or (iii) any other contrary provision of this Agreement, to make Revolving Advances to Borrower which Lender, in its reasonable business judgment, deems necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to enhance the likelihood of, or maximize the amount of, repayment of the Advances and other Obligations, or (c) to pay any other amount chargeable to Borrower pursuant to the terms of this Agreement (the “Protective Advances”).
16.3.    Successors and Assigns; Participations; New Lenders.
(a)    This Agreement shall be binding upon and inure to the benefit of Borrower and Lender, all future holders of the Obligations and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Lender.
(b)    Borrower acknowledges that in the regular course of commercial banking business Lender may at any time and from time to time sell participating interests in the Advances to other Persons (each such transferee or purchaser of a participating interest, a “Participant”).  Each 

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Participant may exercise all rights of payment (including rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant were the direct holder thereof provided that (i) Borrower shall not be required to pay to any Participant more than the amount which it would have been required to pay to Lender hereunder had Lender retained such interest in the Advances hereunder or other Obligations payable hereunder unless the sale of the participation to such Participant is made with Borrower’s prior written consent, and (ii) in no event shall Borrower be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both Lender and such Participant.  Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys or other property actually or constructively held by such Participant as security for the Participant’s interest in the Advances.
(c)    Lender may, without notice to or the consent of Borrower, sell, assign or transfer all or any part of its rights and obligations under or relating to Revolving Advances or Term Loans under this Agreement and the Other Documents to one or more additional Persons and one or more additional Persons may commit to make Advances hereunder (each a “Purchasing Lender” and together with the each Participant, collectively, the “Transferees” and each a “Transferee”).  Borrower shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.
(d)    Notwithstanding anything to the contrary contained in this Agreement, Lender may at any time and from time to time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release Lender from any of its obligations hereunder or substitute any such pledgee or assignee for Lender as a party hereto.
(e)    Borrower authorizes Lender to disclose to any Transferee and any prospective Transferee any and all financial information in Lender’s possession concerning Borrower which has been delivered to Lender by or on behalf of Borrower pursuant to this Agreement or in connection with Lender’s credit evaluation of Borrower.
16.4.    Application of Payments.  Subject to Article II hereof, Lender shall have the continuing and exclusive right to apply any payment and any and all proceeds of Collateral to any portion of the Obligations.  To the extent that Borrower makes a payment or Lender receives any payment or proceeds of the Collateral for Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Lender.
16.5.    Indemnity.  Borrower shall defend, protect, indemnify, pay and save harmless Lender and each of its officers, directors, Affiliates, attorneys, employees and agents (each an “Indemnified Party”) for and from and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, fines, actions, judgments, suits, costs, charges, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel (including allocated 

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costs of internal counsel)) (collectively, “Claims”) which may be imposed on, incurred by, or asserted against any Indemnified Party in arising out of or in any way relating to or as a consequence, direct or indirect, of:  (i) this Agreement, the Other Documents, the Advances and other Obligations and/or the transactions contemplated hereby including the Transactions, (ii) any action or failure to act or action taken only after delay or the satisfaction of any conditions by any Indemnified Party in connection with and/or relating to the negotiation, execution, delivery or administration of the Agreement and the Other Documents, the credit facilities established hereunder and thereunder and/or the transactions contemplated hereby including the Transactions, (iii) Borrower’s or Guarantor’s failure to observe, perform or discharge any of its covenants, obligations, agreements or duties under or breach of any of the representations or warranties made in this Agreement and the Other Documents, (iv) the enforcement of any of the rights and remedies of Lender under the Agreement and the Other Documents, (v) any threatened or actual imposition of fines or penalties, or disgorgement of benefits, for violation of any Anti-Terrorism Law by Borrower, any Affiliate or Subsidiary of Borrower, or Guarantor, and (vi) any claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Lender is a party thereto.  Without limiting the generality of any of the foregoing, Borrower shall defend, protect, indemnify, pay and save harmless each Indemnified Party from (x) any Claims which may be imposed on, incurred by, or asserted against any Indemnified Party arising out of or in any way relating to or as a consequence, direct or indirect, of the issuance of any Letter of Credit hereunder and (y) any Claims which may be imposed on, incurred by, or asserted against any Indemnified Party under any Environmental Laws with respect to or in connection with the Real Property, any Hazardous Discharge, the presence of any Hazardous Materials affecting the Real Property (whether or not the same originates or emerges from the Real Property or any contiguous real estate), including any Claims consisting of or relating to the imposition or assertion of any Lien on any of the Real Property under any Environmental Laws and any loss of value of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Lender.  Borrower’s obligations under this Section 16.5 shall arise upon the discovery of the presence of any Hazardous Materials at the Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Materials , in each such case except to the extent that any of the foregoing arises out of the gross negligence or willful misconduct of the Indemnified Party (as determined by a court of competent jurisdiction in a final and non-appealable judgment).  Without limiting the generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) asserted against or incurred by any of the Indemnified Parties by any Person under any Environmental Laws or similar laws by reason of Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Materials and Hazardous Waste, or other Toxic Substances.  Additionally, if any taxes (excluding taxes imposed upon or measured solely by the net income of Lender, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by Lender or Borrower on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now 

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or hereafter in effect, Borrower will pay (or will promptly reimburse Lender for payment of) all such taxes, including interest and penalties thereon, and will indemnify and hold the Indemnified Parties harmless from and against all liability in connection therewith.
16.6.    Notice.  Any notice or request hereunder may be given to Borrower or to Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section.  Any notice, request, demand, direction or other communication (for purposes of this Section 16.6 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a website to which Borrower is directed (an “Internet Posting”) if Notice of such Internet Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 16.6) in accordance with this Section 16.6.  Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Section 16.6 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 16.6.  Any Notice shall be effective:
(a)    In the case of hand-delivery, when delivered;
(b)    If given by mail, four (4) days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;
(c)    In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, an Internet Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);
(d)    In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;
(e)    In the case of electronic transmission, when actually received;
(f)    In the case of an Internet Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 16.6; and
(g)    If given by any other means (including by overnight courier), when actually received.
If to Lender at:
PNC Bank, National Association
2 North Lake Ave., Suite 440
Pasadena, California  91101

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Attention:  Mark A. Tito
Telephone:  (626) 432-7542
Facsimile:  (626) 432-4589
with a copy to (which shall not constitute notice):
Buchalter Nemer, PC
1000 Wilshire Boulevard, Suite 1500
Los Angeles, California  90017
Attention:  Anthony R. Callobre, Esq.
Telephone:  (213) 891-5024
Facsimile:  (213) 630-5773
If to Borrower:
c/o Key Technology, Inc.
150 Avery Street
Walla Walla, Washington  99362
Attention:  Jeffrey T. Siegal, Chief Financial Officer
Telephone:  (509) 394-3300
Facsimile:  (509) 552-3378
with a copy to:
Tonkon Torp, LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Attention:  Ronald L. Greenman, Esq.
Telephone:  (503) 802-2006
Facsimile:  (503) 972-3706
16.7.    Survival.  The obligations of Borrower under Sections 2.2(f), 2.2(g), 2.2(h), 3.7, 3.8, 3.9, 3.10, 16.5 and 16.9 and the obligations of Lender under Sections 2.2, 2.15(b), 2.16, 2.18, 2.19, and 16.5, shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations.
16.8.    Severability.  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
16.9.    Expenses.  Borrower shall pay (i) all out-of-pocket expenses incurred by Lender and its Affiliates (including the reasonable fees, charges and disbursements of counsel for Lender), and shall pay all fees and time charges and disbursements for attorneys who may be employees of Lender in the preparation, negotiation, execution, delivery and administration of this Agreement and the Other Documents or any amendments, modifications or waivers of the provisions hereof or thereof 

88

(whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by Lender (including the fees, charges and disbursements of any counsel for Lender), and shall pay all fees and time charges for attorneys who may be employees of Lender, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the Other Documents, including its rights under this Section, or (B) in connection with the Advances made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, and (iv) all reasonable out-of-pocket expenses of Lender’s regular employees and agents engaged periodically to perform audits of Borrower’s or Borrower’s Affiliate’s or Subsidiary’s books, records and business properties.
16.10.    Injunctive Relief.  Borrower recognizes that, in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to Lender; therefore, Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy.
16.11.    Consequential Damages.  No party hereto, nor any agent or attorney for any party hereto, shall be liable to any other party (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any Other Document.
16.12.    Captions.  The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement.
16.13.    Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement.  Any signature delivered by a party by facsimile or electronic transmission (including email transmission of a PDF image) shall be deemed to be an original signature hereto.
16.14.    Construction.  The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.
16.15.    Confidentiality; Sharing Information.  Lender and each Transferee shall hold all non-public information obtained by Lender and such Transferee pursuant to the requirements of this Agreement in accordance with Lender’s and such Transferee’s customary procedures for handling confidential information of this nature; provided, however, Lender and each Transferee may disclose such confidential information (a) to its examiners, Affiliates, outside auditors, counsel and other professional advisors, (b) to any prospective Transferee, (c) as required or requested by any 

89

Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by Applicable Law, Lender and each Transferee shall use its reasonable best efforts prior to disclosure thereof, to notify Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Lender or any Transferee be obligated to return any materials furnished by Borrower other than those documents and instruments in possession of Lender or any Transferee in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated.  Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by Lender or by one or more Subsidiaries or Affiliates of Lender and Borrower hereby authorizes Lender to share any information delivered to Lender by Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of Lender to enter into this Agreement, to any such Subsidiary or Affiliate of Lender, it being understood that any such Subsidiary or Affiliate of Lender receiving such information shall be bound by the provisions of this Section 16.15 as if it were a Lender hereunder.  Such authorization shall survive the repayment of the other Obligations and the termination of this Agreement.  Notwithstanding any non-disclosure agreement or similar document executed by Lender in favor of Borrower or any of Borrower’s affiliates, the provisions of this Agreement shall supersede such agreements.
16.16.    Publicity.  Borrower hereby authorizes Lender to make appropriate announcements of the financial arrangement entered into among Borrower and Lender, including announcements which are commonly known as tombstones, in such publications and to such selected parties as Lender shall in its sole and absolute discretion deem appropriate.
16.17.    Certifications From Banks and Participants; USA PATRIOT Act.
(a)    Any assignee or participant of Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to Lender the certification, or, if applicable, recertification, certifying that such assignee or participant is not a “shell” and certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within ten (10) days after the Closing Date, and (2) as such other times as are required under the USA PATRIOT Act.
(b)    The USA PATRIOT Act requires all financial institutions to obtain, verify and record certain information that identifies individuals or business entities which open an "account" with such financial institution. Consequently, Lender may from time to time request, and Borrower shall provide to Lender, Borrower's name, address, tax identification number and/or such other identifying information as shall be necessary for Lender to comply with the USA PATRIOT Act and any other Anti-Terrorism Law.

90

16.18.    Anti-Terrorism Laws.
(a)    Borrower represents and warrants that (i) no Covered Entity is a Sanctioned Person and (ii) no Covered Entity, either in its own right or through any third party, (A) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Law; (B) does business in or with, or derives any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law; or (C) engages in any dealings or transactions prohibited by any Anti-Terrorism Law.
(b)    Borrower covenants and agrees that (i) no Covered Entity will become a Sanctioned Person, (ii) no Covered Entity, either in its own right or through any third party, will (A) have any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Law; (B) do business in or with, or derive any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law; (C) engage in any dealings or transactions prohibited by any Anti-Terrorism Law or (D) use the Advances to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law, (iii) the funds used to repay the Obligations will not be derived from any unlawful activity, (iv) each Covered Entity shall comply with all Anti-Terrorism Laws and (v) Borrower shall promptly notify Lender in writing upon the occurrence of a Reportable Compliance Event.
[signature page follows]

91

Each of the parties has signed this Agreement as of the day and year first above written.
	
		
	 
	

KEY TECHNOLOGY, INC.,
an Oregon corporation, as Borrower

	 
	By:     /s/ Jeffrey T. Siegal
Name:     Jeffrey T. Siegal
Title:     Vice President & Chief Financial Officer

92

	
		
	 
	PNC BANK, NATIONAL ASSOCIATION,
as Lender

	 
	By:  /s/ Mark A. Tito
Name:  Mark A. Tito
Title:  Vice President

	 
	 

	 
	 

93USG_EX10.3_6.30.2015 Q2 10-Q

EXHIBIT 10.3

USG CORPORATION
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is effective as of [DATE] (the “Effective Date”) between USG Corporation, a Delaware corporation (the “Company”), and [NAME] (the “Executive”).
RECITALS:
WHEREAS, the Company desires to continue to employ the Executive and the Executive desires to accept such continued employment with the Company;
WHEREAS, as of the Effective Date, the Company shall employ the Executive on the terms and conditions set forth in this Agreement, and the Executive shall be retained and employed by the Company to perform services under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
		
	1.
	Certain Definitions.  Certain words or phrases with initial capital letters not otherwise defined herein shall have the meanings set forth in Section 9 hereof.

		
	2.
	Employment.  The Company shall employ the Executive, and the Executive accepts employment with the Company, as of the Effective Date, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 5 hereof (the “Employment Period”).

		
	3.
	Position and Duties.  During the Employment Period, the Executive shall serve as the [TITLE] of the Company effective [DATE] and shall have the normal duties, responsibilities and authority of an executive serving in such position, subject to the power of the Chief Executive Officer to expand or limit such duties, responsibilities and authority, either generally or in specific instances.  The Executive shall perform the Executive’s duties and responsibilities to the best of the Executive’s abilities in a diligent, trustworthy, businesslike and efficient manner.

		
	4.
	Compensation and Benefits.

		
	(a)
	Salary.  The Company agrees to pay the Executive a salary (“Base Salary”) during the Employment Period in installments based on the Company’s practices as may be in effect 

from time to time.  The Executive’s initial Base Salary shall be at the rate of [$   ] per year.  The Executive’s Base Salary shall be reviewed annually and may be increased from time to time.

		
	(b)
	Incentive Plans.  The Executive shall be eligible to participate in the Company’s annual and long-term incentive plans, on a basis comparable to other similarly situated executives of the Company.

		
	(c)
	Expense Reimbursement.  The Company shall reimburse the Executive for all reasonable expenses incurred by the Executive during the Employment Period in the course of performing the Executive’s duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements applicable generally with respect to reporting and documentation of such expenses.  To the extent that the right to receive such reimbursement would constitute a “deferral of compensation” under Section 409A of the Code, any such reimbursement shall be made not later than the last day of the Executive’s tax year following the year in which the Executive incurs the expense.  In no event will the amount of expenses so reimbursed by the Company in one year affect the amount of expenses eligible for reimbursement to be provided in any other taxable year.

		
	(d)
	Standard Executive Benefits.  The Executive shall be entitled during the Employment Period to participate (on the same basis as other similarly situated executives of the Company) in the Company’s benefit plans (including health and life insurance, retirement and investment plans (including supplements thereto), vacation, perquisites and other benefits, but excluding, except as hereinafter provided in Section 6, any severance pay program or policy of the Company) for which substantially all other similarly situated executives of the Company are from time to time generally eligible, as determined from time to time by the Board or a committee of the Board.

		
	(e)
	Indemnification.  The Executive shall be eligible to enter into the Company’s standard Indemnification Agreement that is entered into with other similarly situated senior executives of the Company.

		
	5.
	Employment Period.

		
	(a)
	Except as hereinafter provided, the Employment Period shall begin on the Effective Date and shall extend until [DATE], with automatic one-year renewals thereafter unless either party notifies the other at least 120 days before the scheduled expiration date that the Employment Period is not to renew.

		
	(b)
	Notwithstanding (a) above, the Employment Period shall end early upon the first to occur of any of the following events:

		
	(i)
	the Executive’s death;

		
	(ii)
	the Company’s termination of the Executive’s employment on account of Disability;

		
	(iii)
	a Termination for Cause;

		
	(iv)
	a Termination without Cause; or

		
	(v)
	a Voluntary Termination.

		
	6.
	Post-Employment Period Payments.

		
	(a)
	At the end of the Employment Period for any reason, the Executive shall cease to have any rights to salary, bonus, expense reimbursements or other benefits, except that the Executive shall be entitled to receive: (i) on the sixty-first (61st) day after the Termination Date, any Base Salary which has accrued but is unpaid, any reimbursable expenses which have been incurred but are unpaid, and payment for any unexpired vacation days which have accrued under the Company’s or a Subsidiary’s vacation policy but are unused, as of the end of the Employment Period, (ii) any plan benefits which by their terms extend beyond termination of the Executive’s employment (but only to the extent provided in any such benefit plan in which the Executive has participated as an employee of the Company or a Subsidiary and excluding, except as hereinafter provided in Section 6, any severance pay program or policy of the Company or a Subsidiary), (iii) payments or benefits payable pursuant to the terms of any annual and/or long-term incentive plan of the Company or a Subsidiary in accordance with the terms thereof, and (iv) any benefits to which the Executive is entitled under Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (“COBRA”).  In addition, the Executive shall be entitled to the additional benefits and amounts described in the succeeding subsections of this Section 6, in the circumstances described in such subsections.

		
	(b)
	If the Employment Period ends pursuant to Section 5 hereof on account of death, a Voluntary Termination, a Termination for Cause or a termination on account of the Executive’s Disability, the Company shall make no further payments to the Executive except as contemplated in Section 6(a) above.

		
	(c)
	If the Employment Period ends early pursuant to Section 5 on account of a Termination without Cause, the Executive shall be entitled to the payments contemplated in Section 6(a) above and as set forth below:

		
	(i)
	On the sixty-first (61st) day after the Termination Date, the Executive shall be entitled to a lump sum payment in an amount equal to [one (1)/two (2)]1 times the sum of (A) Base Salary (at the highest rate in effect for any period within two years prior to the Termination Date), plus (B) annual bonus (in an amount equal to target annual bonus for the year in which the Termination Date occurs).

		
	(ii)
	On the sixty-first (61st) day after the Termination Date, the Executive shall be entitled to a lump sum payment equal to the total cost (including both the Executive’s and the Company’s portion of such costs as paid while the Executive was employed) of continuing the medical, dental, vision, long-term disability and life insurance benefits (excluding benefits under the executive death benefit plan) substantially similar to those that the Executive was receiving or entitled to receive immediately prior to the Termination Date for a period of eighteen (18) months; provided, however, if any benefit described in this Section 6(c)(ii) is subject to tax, the Company will pay to the Executive, at the same time the lump sum cash payment is made, an additional amount such that after payment by the Executive or the Executive’s dependents or beneficiaries, as the case may be, of all taxes so imposed, the recipient retains an amount equal to such taxes.

		
	(iii)
	The Executive shall be entitled to outplacement services for a time period (not less than six (6) months) established by the Company, by a firm selected by the Company in its sole discretion, and at the expense of the Company; provided, however, that all such outplacement services must be completed by December 31 of the second calendar year following the calendar year in which the Termination Date occurs and the Company will be required to make all payments to the Executive for such outplacement services by December 31 of the third calendar year following the calendar year in which the Termination Date occurs.

		
	(iv)
	Notwithstanding anything to the contrary contained in this Agreement, if any payment or reimbursement, or the provision of any benefit under this Agreement that is paid or provided upon the Executive's "separation from service" with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code would constitute a “deferral of compensation” under Section 409A of the Code and the Executive is a “specified employee” (as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code) on the date of the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, the 

1 Two (2) times for any Vice President or above who serves on the Executive Committee of the Company; one (1) times for all others.

Executive (or the Executive’s beneficiary) will receive payment or reimbursement of such amounts or the provision of such benefits upon the earlier of (i) the first day of the seventh month following the date of the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code or (ii) the Executive’s death.  In addition, if payment to the Executive of any amount pursuant to Section 6(a) or this Section 6(c) would constitute a “deferral of compensation” under Section 409A of the Code and if the Executive’s termination does not constitute a “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, then payment of such amount shall be made, to the extent necessary to comply with Section 409A of the Code and subject to the preceding sentence, to the Executive on the later of (i) the payment date identified in the applicable paragraph of this Section 6 or (ii) on the earlier of (A) the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, (B) the Executive's disability (within the meaning of Section 409A of the Code), (C) a change in control of the Company within the meaning of Section 409A of the Code or (D) the Executive’s death.

		
	(d)
	It is expressly understood that the Company’s payment obligations under Section 6(c) shall cease in the event the Executive breaches any of his or her agreements in Section 7 hereof and, in the event of any such breach, the Executive shall repay in cash immediately to the Company any amounts previously paid to the Executive under Section 6(c) of this Agreement.

		
	(e)
	The Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise.

		
	7.
	Competitive Activity; Confidentiality; Nonsolicitation.

		
	(a)
	Acknowledgements and Agreements.  The Executive hereby acknowledges and agrees that in the performance of the Executive’s duties for the Company during the Employment Period, the Executive will be brought into frequent contact, either in person, by telephone or through the mails, with existing and potential customers of the Company throughout the United States.  The Executive also agrees that trade secrets and confidential information of the Company, more fully described in Section 7(i) of this Agreement, gained by the Executive during the Executive’s association with the Company, have been developed by the Company through substantial expenditures of time, effort and money and constitute valuable and unique property of the Company.  The Executive further understands and agrees that the foregoing makes it necessary for the protection of the business of the Company that the Executive not compete with the Company during the Employment 

Period and not compete with the Company for a reasonable period thereafter, as further provided in the following subsections.

		
	(b)
	Covenants During the Employment Period.  During the Employment Period, the Executive will not compete with the Company anywhere that the Company conducts its business.  In accordance with this restriction, but without limiting its terms, during the Employment Period, the Executive will not:

		
	(v)
	enter into or engage in any business which competes with the business of the Company;

		
	(vi)
	solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business that competes with, the business of the Company;

		
	(vii)
	divert, entice or otherwise take away any customers, business, patronage or orders of the Company or attempt to do so; or

		
	(viii)
	promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the business of the Company.

		
	(c)
	Covenants Following Termination.  For a period of two (2) years following the termination of the Executive’s employment for any reason, unless the Executive is entitled to severance benefits under a severance agreement between the Executive and the Company providing for payment of benefits upon a termination of employment following a change in control of the Company and containing covenants made by the Executive with respect to the subject matter of this Section 7(c) (a “Severance Agreement”), in which case those covenants contained in such Severance Agreement shall apply to the Executive in lieu of the application of this Section 7, the Executive will not:

		
	(i)
	enter into or engage in any business which competes with the Company’s business within the United States;

		
	(ii)
	solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business, wherever located, that competes with, the Company’s business within the United States;

		
	(iii)
	divert, entice or otherwise take away any customers, business, patronage or orders of the Company within the United States, or attempt to do so; or

		
	(iv)
	promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the Company’s business within the United States.

		
	(d)
	Indirect Competition.  For the purposes of Sections 7(b) and 7(c), but without limitation thereof, the Executive will be in violation thereof if the Executive engages in any or all of the activities set forth therein directly as an individual on the Executive’s own account, or indirectly as a general partner, joint venturer, employee, agent, salesperson, consultant, officer and/or director of any firm, association, partnership, corporation or other entity, or as a limited partner, member or stockholder of any limited partnership, limited liability company, or corporation in which the Executive or the Executive’s spouse, child or parent owns, directly or indirectly, individually or in the aggregate, more than five percent (5%) of the limited partnership interests, limited liability company interests or outstanding stock, as the case may be.

		
	(e)
	The Company.  For purposes of this Section 7, the Company shall include any and all Subsidiaries of the Company.

		
	(f)
	The Company’s Business.  For the purposes of Sections 7(b), 7(c), 7(j) and 7(k), the Company’s business is defined to be the manufacture and distribution of gypsum wallboard, joint compound and related gypsum products, cement board, gypsum fiber panels, ceiling panels and grid, the distribution of building products and any future businesses the Company may enter, as further described in any and all manufacturing, marketing and sales manuals and materials of the Company as the same may be altered, amended, supplemented or otherwise changed from time to time, or of any other products or services substantially similar to or readily substitutable for any such described products and services.

		
	(g)
	Extension.  If it shall be judicially determined that the Executive has violated any of the Executive’s obligations under Section 7(c), then the period applicable to each obligation that the Executive shall have been determined to have violated shall automatically be extended by a period of time equal in length to the period during which such violation(s) occurred.

		
	(h)
	Non-Solicitation.  Until the expiration of three (3) years following the Termination Date, the Executive will not directly or indirectly at any time solicit or induce or attempt to solicit or induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Company and/or of its Subsidiaries to terminate their employment, representation or other association with the Company and/or its Subsidiaries.

		
	(i)
	Further Covenants.

		
	(i)
	The Executive will keep in strict confidence, and will not, without the prior written consent of the Company or as may otherwise be required by law or legal process, directly or indirectly, at any time during or after the Executive’s employment with the Company, disclose, furnish, disseminate, make available or, except in the course of performing the Executive’s duties of employment, use any trade secrets or non-public confidential business and technical information of the Company or its customers or vendors, including without limitation as to when or how the Executive may have acquired such information before or during employment.  Such confidential information shall include, without limitation, the Company’s unique non-public confidential selling, manufacturing and servicing methods and business techniques, training, service and business manuals, promotional materials, training courses and other training and instructional materials, vendor and product information, customer and prospective customer lists, other customer and prospective customer information and other business information.  The Executive specifically acknowledges that all such non-public confidential information, whether reduced to writing, maintained on any form of electronic media, or maintained in the Executive’s mind or memory and whether compiled by the Company and/or the Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the Company to maintain the secrecy of such information, that such information is the sole property of the Company and that any retention and use of such information by the Executive during the Executive’s employment with the Company (except in the course of performing the Executive’s duties and obligations to the Company) or after the termination of the Executive’s employment shall constitute a misappropriation of the Company’s trade secrets.

		
	(ii)
	The Executive agrees that upon termination of the Executive’s employment with the Company, for any reason, the Executive shall return to the Company, in good condition, all property of the Company, including without limitation, the originals and all copies of any materials which contain, reflect, summarize, describe, analyze or refer or relate to any items of information listed in Section 7(i)(i) of this Agreement.  In the event that such items are not so returned, the Company will have the right to charge the Executive for all reasonable damages, costs, attorneys’ fees and other expenses incurred in searching for, taking, removing and/or recovering such property.

		
	(j)
	Discoveries and Inventions; Work Made for Hire.

		
	(i)
	The Executive hereby assigns and agrees to assign to the Company, its successors, assigns or nominees, all of the Executive’s rights to any discoveries, inventions and improvements, whether patentable or not, made, conceived or suggested, either solely or jointly with others, by the Executive while in the Company’s employ with the use of the Company’s time, material or facilities or in any way within or related to the existing or contemplated scope of the Company’s business.  Any discovery, invention or improvement relating to any subject matter with which the Company was concerned during the Executive’s employment and made, conceived or suggested by the Executive, either solely or jointly with others, within one (1) year following termination of the Executive’s employment under this Agreement or any successor agreements shall be irrebuttably presumed to have been so made, conceived or suggested in the course of such employment with the use of the Company’s time, materials or facilities.  Upon request by the Company with respect to any such discoveries, inventions or improvements, the Executive will execute and deliver to the Company, at any time during or after the Executive’s employment, all appropriate documents for use in applying for, obtaining and maintaining such domestic and foreign patents as the Company may desire, and all proper assignments therefor, when so requested, at the expense of the Company, but without further or additional consideration.

		
	(ii)
	The Executive acknowledges that, to the extent permitted by law, all work papers, reports, documentation, drawings, photographs, negatives, tapes and masters therefor, prototypes and other materials (hereinafter, “items”), including without limitation, any and all such items generated and maintained on any form of electronic media, generated by the Executive during the Executive’s employment with the Company shall be considered a “work made for hire” and that ownership of any and all copyrights in any and all such items shall belong to the Company.  The item will recognize the Company as the copyright owner, will contain all proper copyright notices, e.g., “(creation date) USG Corporation, All Rights Reserved,” and will be in condition to be registered or otherwise placed in compliance with registration or other statutory requirements throughout the world.

		
	(k)
	Communication of Contents of Agreement.  During the Executive’s employment and for two (2) years thereafter, the Executive will communicate the contents of this Agreement to any person, firm, association, partnership, corporation or other entity which the Executive intends to be employed by, associated with, or represent and which is engaged in a business that is competitive to the business of the Company.

		
	(l)
	Non-Disparagement.  The Executive and his immediate family agree to refrain from criticizing or making disparaging or derogatory comments about the Company or any 

Subsidiary and any of their respective officers, directors, employees and agents or any products or services of the Company or any Subsidiary.

		
	(m)
	Relief.  The Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of the Executive’s obligations under this Agreement would be inadequate.  The Executive therefore agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding which may be brought to enforce any provision contained in Sections 7(b), 7(c), 7(h), 7(i), 7(j) 7(k) and 7(l) of this Agreement, without the necessity of proof of actual damage.

		
	(n)
	Reasonableness.  The Executive acknowledges that the Executive’s obligations under this Section 7 are reasonable in the context of the nature of the Company’s business and the competitive injuries likely to be sustained by the Company if the Executive was to violate such obligations.  The Executive further acknowledges that this Agreement is made in consideration of, and is adequately supported by, the agreement of the Company to perform its obligations under this Agreement and by other consideration, which the Executive acknowledges constitutes good, valuable and sufficient consideration.

		
	8.
	Section 280G.  The amounts payable to the Executive under Section 6 may be adjusted as set forth in this Section 8 if the sum (the “combined amount”) of the amounts payable under Section 6 and all other payments or benefits which the Executive has received or has the right to receive from the Company which are defined in Section 280G(b)(2)(A)(i) of the Code, would, but for the application of this Section 8, constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code).  In such event, the combined amount shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a parachute payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payments and benefits to be provided to the Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes).  To the extent the reduction referred to in the second sentence of this Section 8 applies, such reduction shall be made to the combined amount by reduction of the aggregate amount of the lump sum payments described in Sections 6(c)(i) and 6(c)(ii) of this Agreement and, to the extent further reductions are required, in such payments due to the Executive as the Company may determine.  Any determinations required to be made under this Section 8 shall be made by the Company’s independent accountants, which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the date of termination or such earlier time as is requested by the Company, and shall be made at the expense of the Company.  The fact that the Executive’s right to payments or benefits may be 

reduced by reason of the limitations contained in this Section 8 shall not of itself limit or otherwise affect any other rights of the Executive under this Agreement.

		
	9.
	Definitions.

		
	(a)
	“Board” means the Board of Directors of the Company.

		
	(b)
	“Cause” means that, prior to the termination of the Employment Period, the Executive shall have:

		
	(i)
	committed a felony or a fraud;

		
	(ii)
	engaged in conduct that brings the Company or any of its Subsidiaries into substantial public disgrace or disrepute;

		
	(iii)
	committed gross negligence or gross misconduct with respect to the Company or any of its Subsidiaries;

		
	(iv)
	repudiated this Agreement or abandoned employment with the Company;

		
	(v)
	failed to follow the directives of the Board or the Chief Executive Officer and such failure is not cured within five (5) business days after written notice thereof to the Executive from the Company;

		
	(vi)
	breached any of the agreements in Section 7 hereof; 

		
	(vii)
	breached a material employment policy of the Company which is not cured within five (5) business days after written notice thereof to the Executive from the Company; or

		
	(viii)
	committed any other breach of this Agreement which is material and which is not cured within thirty (30) days after written notice thereof to the Executive from the Company.

		
	(c)
	“Code” means the Internal Revenue Code of 1986, as amended.

		
	(d)
	“Disability” means the Executive’s having become unable (as determined in good faith by the Chief Executive Officer), with reasonable accommodations, to regularly perform the Executive’s duties hereunder by reason of illness or incapacity.

		
	(e)
	“Release Agreement” means an agreement, in substantially the form customarily used by the Company for similarly situated executives of the Company in similar instances, pursuant to which the Executive releases, to the extent permitted by law, all current or future claims, known or unknown, arising on or before the date of the release against the Company, its subsidiaries and its officers.

		
	(f)
	“Subsidiary” means a corporation, company or other entity (i) at least 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but at least 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.

		
	(g)
	“Termination Date” means the date on which the Executive’s employment is terminated by the Company or any Subsidiary.

		
	(h)
	“Termination for Cause” means the Company’s termination of the Executive’s employment for Cause.

		
	(i)
	“Termination without Cause” means the Company’s termination of the Executive’s employment other than a Termination for Cause.

		
	(j)
	“Voluntary Termination” means Executive’s termination of the Executive’s employment for any reason, including retirement.

		
	10.
	Representations.

		
	(a)
	Executive Representations.  The Executive represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which the Executive is bound, (ii) the Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms.

		
	(b)
	Company Representation.  The Company represents and warrants to the Executive that upon the execution and delivery of this Agreement by the Executive, this Agreement shall 

be the valid and binding obligation of the Company, enforceable in accordance with its terms.

		
	11.
	Release Agreement.  No payments shall be made under Section 6(c) hereof unless the Executive, on or before the sixtieth (60th) day following the Executive’s Termination Date, (i) signs and returns the Release Agreement within the number of days that the Company determines is required under applicable law, but in no event more than forty-five (45) days after the Company delivers the Release Agreement to the Executive and (ii) does not revoke the Release Agreement within the time period provided therein, such time period not to exceed seven (7) days.  If the Executive becomes entitled to payments under Section 6(c) hereof, the Company shall deliver to the Executive a copy of the Company’s standard form of Release Agreement within seven (7) days of the Executive’s Termination Date.

		
	12.
	Survival.  Subject to any limits on applicability contained therein, Section 7 hereof shall survive and continue in full force in accordance with its terms notwithstanding any termination of the Employment Period.

		
	13.
	Withholding of Taxes.  The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling.

		
	14.
	Notices.  For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as FedEx or UPS, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at the Executive’s principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt.

		
	15.
	Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid or unenforceable provision had never been contained herein.

		
	16.
	Complete Agreement.  This Agreement embodies the complete agreement and understanding between the parties with respect to the employment of the Executive and the subject matter hereof 

and effective as of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way, including any prior Employment Agreements between the Company and the Executive.  The severance benefits provided in Section 6(c) hereof shall be in lieu of any severance benefits under any plans, programs, policies or practices of the Company; provided, however, that if the Executive is entitled to benefits under this Agreement and a Severance Agreement, the Executive will be entitled to severance benefits under either this Agreement or such Severance Agreement, whichever agreement provides for greater benefits, but will not be entitled to benefits under both agreements.

		
	17.
	Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

		
	18.
	Successors and Assigns.  This Agreement shall bind and inure to the benefit of and be enforceable by the Executive, the Company and their respective heirs, executors, personal representatives, successors and assigns, except that neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party.  The Executive hereby consents to the assignment by the Company of all of its rights and obligations hereunder to any successor to the Company by merger or consolidation or purchase of all or substantially all of the Company’s assets, provided such transferee or successor assumes the liabilities of the Company hereunder.

		
	19.
	Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware and federal law, without giving effect to the principles of conflict of laws of such State, except as expressly provided herein.

		
	20.
	Amendment and Waiver.  The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

		
	21.
	Section 409A of the Code.  Each payment or reimbursement and the provision of each benefit under this Agreement shall be considered to be a separate payment and not one of a series of payments for purposes of Section 409A of the Code.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Executive.  This Agreement shall be administered in a manner consistent with this intent.  Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
	
		
	 
	USG CORPORATION

	 
	 

	 
	By:

	 
	Name:

	 
	Title:

	 
	 

	 
	 

	 
	Executive

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