Document:

Exhibit 10.1

 

 

CREDIT
AGREEMENT

 

by
and among

 

UTSTARCOM
PERSONAL COMMUNICATIONS LLC

 

as
Borrower,

 

THE
LENDERS THAT ARE SIGNATORIES HERETO

 

as
the Lenders,

 

and

 

WELLS
FARGO FOOTHILL, LLC

 

as
the Arranger and Administrative Agent

 

Dated
as of March 21, 2008

 

 

 

CREDIT AGREEMENT

 

THIS CREDIT
AGREEMENT (this “Agreement”),
is entered into as of March 21, 2008, by and among the lenders identified
on the signature pages hereof (such lenders, together with their
respective successors and permitted assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO FOOTHILL, LLC, a Delaware limited liability
company, as the arranger and administrative agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, “Agent”),
and UTSTARCOM PERSONAL COMMUNICATIONS LLC,
a Delaware limited liability company (“Borrower”).

 

The
parties agree as follows:

 

1.             DEFINITIONS AND CONSTRUCTION.

 

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

 

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

 

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

 

1.4           Construction. 
Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or”
has, except where otherwise indicated, the inclusive meaning represented by the
phrase “and/or.”  The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document, as the case may
be, as a whole and not to any particular provision of this Agreement or such
other Loan Document, as the case may be. 
Section, subsection, clause, schedule, and exhibit references herein are
to this Agreement unless otherwise specified. 
Any reference in this Agreement or in any other Loan Document to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein).  The words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts, and contract rights. 
Any reference herein or in any other Loan Document to the satisfaction
or repayment in full of the Obligations shall mean the repayment in full in
cash (or, in the case of Letters of Credit or Bank Products, providing Letter
of Credit Collateralization) of all Obligations other than unasserted
contingent indemnification Obligations and other than any Bank Product
Obligations that, at such time, are allowed by the applicable Bank Product
Provider to remain outstanding and that are not required by the provisions of
this Agreement to be repaid or cash collateralized.  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein
or in any other Loan Document shall be satisfied by the transmission of a
Record.

 

 

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

 

2.             LOAN AND TERMS OF PAYMENT.

 

2.1           Revolver Advances.

 

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

 

(b)           Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement; provided, that
no amounts may be borrowed pursuant to this Section 2.1 unless the
aggregate amount payable to Parent from Borrower is greater than or equal to
the Minimum Parent Payable Amount.  The
outstanding principal amount of the Advances, together with interest accrued
thereon, shall be due and payable on the Maturity Date or, if earlier, on the
date on which they are declared due and payable pursuant to the terms of this
Agreement.

 

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

 

2.2           Intentionally Omitted.

 

2.3           Borrowing Procedures and
Settlements.

 

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

 

(b)           Making of Swing Loans.  In
the case of a request for an Advance and so long as either (i) the
aggregate amount of Swing Loans made since the last Settlement Date, minus the
amount of Collections or payments applied to Swing Loans since the last
Settlement Date, plus the amount of the requested Advance does not exceed
$7,500,000, or (ii) Swing Lender, in its sole discretion, shall agree to
make 

 

2

 

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

 

(c)           Making of Loans.

 

(i)            In the event that Swing Lender is not
obligated to make a Swing Loan, then promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall notify the
Lenders, not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telecopy,
telephone, or other similar form of transmission, of the requested
Borrowing.  Each Lender shall make the
amount of such Lender’s Pro Rata Share of the requested Borrowing available to
Agent in immediately available funds, to Agent’s Account, not later than 10:00 a.m.
(California time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, Agent shall make the proceeds thereof available to Borrower on the
applicable Funding Date by transferring immediately available funds equal to
such proceeds received by Agent to the Designated Account; provided, however,
that, subject to the provisions of Section 2.3(d)(ii), Agent shall
not request any Lender to make, and no Lender shall have the obligation to
make, any Advance if (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (2) the requested Borrowing would exceed the Availability
on such Funding Date.

 

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

 

3

 

(iii)          Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender’s benefit, and, in the absence of such transfer to the Defaulting
Lender, Agent shall transfer any such payments to each other non-Defaulting
Lender member of the Lender Group ratably in accordance with their Commitments
(but only to the extent that such Defaulting Lender’s Advance was funded by the
other members of the Lender Group) or, if so directed by Borrower and if no
Default or Event of Default has occurred and is continuing (and to the extent
such Defaulting Lender’s Advance was not funded by the Lender Group), retain
same to be re-advanced to Borrower as if such Defaulting Lender had made
Advances to Borrower.  Subject to the
foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrower
for the account of such Defaulting Lender the amount of all such payments
received and retained by Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall
be deemed to be zero.  This Section shall
remain effective with respect to such Lender until (x) the Obligations
under this Agreement shall have been declared or shall have become immediately
due and payable, (y) the non-Defaulting Lenders, Agent, and Borrower shall
have waived such Defaulting Lender’s default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays
to Agent all amounts owing by Defaulting Lender in respect thereof.  The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrower of its duties and obligations hereunder to Agent or to
the Lenders other than such Defaulting Lender. 
Any such failure to fund by any Defaulting Lender shall constitute a
material breach by such Defaulting Lender of this Agreement and shall entitle
Borrower at its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be reasonably acceptable to Agent.  In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance in favor of the substitute Lender (and agrees that it
shall be deemed to have executed and delivered such document if it fails to do
so) subject only to being repaid its share of the outstanding Obligations
(other than Bank Product Obligations, but including an assumption of its Pro
Rata Share of the Risk Participation Liability) without any premium or penalty
of any kind whatsoever; provided, however, that any such
assumption of the Commitment of such Defaulting Lender shall not be deemed to
constitute a waiver of any of the Lender Groups’ or Borrower’s rights or
remedies against any such Defaulting Lender arising out of or in relation to
such failure to fund.

 

(d)           Protective Advances and
Optional Overadvances.

 

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

 

(ii)           Any contrary provision of this Agreement
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and either Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrower notwithstanding that an Overadvance exists or thereby
would be created, so long as (A) after giving effect to such Advances, the
outstanding Revolver Usage does not exceed the Borrowing Base by more than
$7,500,000, and (B) after giving effect to such Advances, the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan Account
for interest, fees, or Lender Group Expenses) does not exceed the Maximum
Revolver Amount.  In the event Agent
obtains actual knowledge that the Revolver Usage exceeds the amounts permitted
by the immediately foregoing provisions, regardless of the amount of, or reason
for, such excess, Agent shall notify the Lenders as soon as practicable (and
prior to making any (or any

 

4

 

additional)
intentional Overadvances (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its
value), and the Lenders with Revolver Commitments thereupon shall, together
with Agent, jointly determine the terms of arrangements that shall be
implemented with Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrower to an amount permitted
by the preceding sentence.  In such
circumstances, if any Lender with a Revolver Commitment objects to the proposed
terms of reduction or repayment of any Overadvance, the terms of reduction or
repayment thereof shall be implemented according to the determination of the
Required Lenders.  Each Lender with a
Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(e) for
the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(d)(ii), and any Overadvances resulting from
the charging to the Loan Account of interest, fees, or Lender Group Expenses.

 

(iii)       Each Protective Advance and each Overadvance
shall be deemed to be an Advance hereunder, except that no Protective Advance
or Overadvance shall be eligible to be a LIBOR Rate Loan and, prior to Settlement
therefor, all payments on the Protective Advances shall be payable to Agent
solely for its own account.  The
Protective Advances and Overadvances shall be repayable on demand, secured by
the Agent’s Liens, constitute Obligations hereunder, and bear interest at the
rate applicable from time to time to Advances that are Base Rate Loans.  The provisions of this Section 2.3(d) are
for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrower in any way.

 

(e)           Settlement.  It is agreed that each Lender’s funded portion of the Advances is
intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of
the outstanding Advances.  Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of Borrower) that in order to facilitate
the administration of this Agreement and the other Loan Documents, settlement
among the Lenders as to the Advances, the Swing Loans, and the Protective Advances
shall take place on a periodic basis in accordance with the following
provisions:

 

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

 

5

 

for
its account such amount on demand from such Lender together with interest
thereon at the Defaulting Lender Rate.

 

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

 

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

 

(f)            Notation.  Agent, as a non-fiduciary agent for Borrower, shall maintain a register
showing the principal amount of the Advances, owing to each Lender, including
the Swing Loans owing to Swing Lender, and Protective Advances owing to Agent,
and the interests therein of each Lender, from time to time and such records
shall, absent manifest error, conclusively be presumed to be correct and accurate.

 

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

 

2.4           Payments; Reductions of
Commitments; Prepayments.

 

(a)           Payments by Borrower.

 

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

 

(ii)           Unless Agent receives notice from Borrower
prior to the date on which any payment is due to the Lenders that Borrower will
not make such payment in full as and when required, Agent

 

6

 

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

 

(b)            Apportionment and
Application.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

(I)            ninth, to pay any other Obligations, and

 

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

 

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

 

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

 

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

 

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

 

(c)           Reduction of Commitments.  The
Revolver Commitments shall terminate on the Maturity Date.  Borrower may reduce the Revolver Commitments
to an amount (which may be zero) not less than the sum of (A) the Revolver
Usage as of such date, plus (B) the principal amount of all Advances not
yet made as to which a request has been given by Borrower under Section 2.3(a),
plus (C) the amount of all Letters of Credit not yet issued as to which a
request has been given by Borrower pursuant to Section 2.11(a).  Each such reduction shall be in an amount
which is an integral multiple of $1,000,000 (unless the Revolver Commitments in
effect immediately prior to such reduction are less than $5,000,000), shall be
made by providing not less than 5 Business Days prior written notice to Agent
and shall be irrevocable.  Once reduced,
the Revolver Commitments may not be increased. 
Each such reduction of the Revolver Commitments shall reduce the
Revolver Commitments of each Lender proportionately in accordance with its Pro
Rata Share thereof.

 

(d)           Optional Prepayments. 
Borrower may prepay the principal of any Advance at any time in whole or
in part.

 

(e)           Mandatory
Prepayments.

 

(i)          Credit Amount.  If,
at any time, the sum of the aggregate amount of the outstanding Advances and
the outstanding Letter of Credit Usage exceeds the lesser of (x) the
Borrowing Base and (y) the Maximum Revolver Amount, Borrower shall prepay
the Obligations in an amount equal to such excess which prepayments shall be applied
in accordance with Section 2.4(f).

 

(ii)         Dispositions. 
Within 3 Business Days of the date of receipt by Borrower or any of its
Subsidiaries of the Net Cash Proceeds of any voluntary or involuntary sale or
disposition by Borrower or any of its Subsidiaries of assets (including
casualty losses or condemnations but excluding sales or dispositions which
qualify as Permitted Dispositions under clauses (a), (b), (c), (d), (e) or
(i) of the

 

8

 

definition
of Permitted Dispositions), Borrower shall prepay the outstanding principal
amount of the Obligations in accordance with Section 2.4(f)(ii) in
an amount equal to 100% of such Net Cash Proceeds (including condemnation
awards and payments in lieu thereof) received by such Person in connection with
such sales or dispositions; provided that, so long as (A) no
Default or Event of Default shall have occurred and is continuing, (B) Borrower
shall have given Agent prior written notice of Borrower’s intention to apply such
monies to the costs of replacement of the properties or assets that are the
subject of such sale or disposition or the cost of purchase or construction of
other assets useful in the business of Borrower or its Subsidiaries, (C) the
monies are held in a Deposit Account in which Agent has a perfected
first-priority security interest, and (D) Borrower or its Subsidiaries, as
applicable, complete such replacement, purchase, or construction within 90 days
after the initial receipt of such monies, Borrower and its Subsidiaries shall
have the option to apply such monies to the costs of replacement of the assets
that are the subject of such sale or disposition unless and to the extent that
such applicable period shall have expired without such replacement, purchase or
construction being made or completed, in which case, any amounts remaining in
the cash collateral account shall be paid to Agent and applied in accordance
with Section 2.4(f).  Nothing
contained in this Section 2.4(e) shall permit Borrower or any
of its Subsidiaries to sell or otherwise dispose of any assets other than in
accordance with Section 6.4.

 

(f)            Application of Payments.  Each prepayment pursuant to Section 2.4(e) shall,
(A) so long as no Application Event shall have occurred and be continuing,
be applied, first, to the outstanding principal
amount of the Advances until paid in full, and second,
to cash collateralize the Letters of Credit in an amount equal to 105% of the
then extant Letter of Credit Usage, and (B) if an Application Event shall
have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii).

 

2.5           Overadvances.  Without duplication of any prepayments
required pursuant to Section 2.4(e)(i), if at any time or for any reason, the amount of Obligations owed by
Borrower to the Lender Group pursuant to Section 2.1 or Section 2.11
is greater than any of the limitations set forth in Section 2.1 or Section 2.11,
as applicable (an “Overadvance”), Borrower shall immediately pay to
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b).  Borrower promises to pay the Obligations
(including principal, interest, fees, costs, and expenses) in Dollars in full on
the Maturity Date or, if earlier, on the date on which the Obligations are
declared due and payable pursuant to the terms of this Agreement.

 

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

 

(a)           Interest Rates.  Except as provided in Section 2.6(c), all Obligations
(except for undrawn Letters of Credit and except for Bank Product Obligations)
that have been charged to the Loan Account pursuant to the terms hereof shall
bear interest on the Daily Balance thereof as follows:

 

(i)            if the relevant Obligation is a LIBOR Rate
Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin,
and

 

(ii)           otherwise, at a per annum rate equal to the
Base Rate plus the Base Rate Margin.

 

(b)           Letter of Credit Fee.  Borrower shall pay Agent (for the ratable benefit of the Lenders with a
Revolver Commitment, subject to any agreements between Agent and individual
Lenders), a Letter of Credit fee (in addition to the charges, commissions,
fees, and costs set forth in Section 2.11(e)) which shall accrue at
a rate equal to 4.0% per annum times the
Daily Balance of the undrawn amount of all outstanding Letters of Credit.

 

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

 

9

 

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

 

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

 

(d)           Payment.  Except as provided to the contrary in Section 2.10 or Section 2.12(a),
interest, Letter of Credit fees, and all other fees payable hereunder shall be
due and payable, in arrears, on the first day of each month at any time that
Obligations or Commitments are outstanding. 
Borrower hereby authorizes Agent, from time to time without prior notice
to Borrower, to charge all interest and fees (when due and payable), all Lender
Group Expenses (as and when incurred), all charges, commissions, fees, and
costs provided for in Section 2.11(e) (as and when accrued or
incurred), all fees and costs provided for in Section 2.10 (as and
when accrued or incurred), and all other payments as and when due and payable
under any Loan Document (including any amounts due and payable to the Bank
Product Providers in respect of Bank Products up to the amount of the Bank
Product Reserve) to the Loan Account, which amounts thereafter shall constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances that are Base Rate Loans.  Any
interest not paid when due shall be compounded by being charged to the Loan
Account and shall thereafter constitute Advances hereunder and shall accrue
interest at the rate then applicable to Advances that are Base Rate Loans.

 

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

 

(f)            Intent to Limit Charges to
Maximum Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.  Borrower and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto,
as of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.

 

2.7           Crediting Payments.  The receipt of any payment item by Agent
shall not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to the Agent’s Account or
unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent’s Account on a Business Day on or before 11:00 a.m.
(California time).  If any payment item
is received into the Agent’s Account on a non-Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received
by Agent as of the opening of business on the immediately following Business
Day.

 

2.8           Designated Account.  Agent is authorized to make the Advances, and Issuing Lender is
authorized to issue the Letters of Credit, under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to Section 2.6(d).  

 

10

 

Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances
requested by Borrower and made by Agent or the Lenders hereunder.  Unless otherwise agreed by Agent and
Borrower, any Advance, Protective Advance, or Swing Loan requested by Borrower
and made by Agent or the Lenders hereunder shall be made to the Designated Account.

 

2.9           Maintenance of Loan Account;
Statements of Obligations.  Agent shall maintain an account on its books
in the name of Borrower (the “Loan Account”) on which Borrower will be
charged with all Advances (including Protective Advances and Swing Loans) made
by Agent, Swing Lender, or the Lenders to Borrower or for Borrower’s account,
the Letters of Credit issued by Issuing Lender for Borrower’s account, and with
all other payment Obligations hereunder or under the other Loan Documents
(except for Bank Product Obligations), including, accrued interest, fees and
expenses, and Lender Group Expenses.  In
accordance with Section 2.7, the Loan Account will be credited with
all payments received by Agent from Borrower or for Borrower’s account.  Agent shall render statements regarding the
Loan Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and the Lender Group unless, within 30 days after receipt thereof by
Borrower, Borrower shall deliver to Agent written objection thereto describing
the error or errors contained in any such statements.

 

2.10         Fees.  Borrower shall pay to Agent,

 

(a)           for the account of Agent, as and when due and
payable under the terms of the Fee Letter, the fees set forth in the Fee
Letter.

 

(b)           for the ratable account of those Lenders with
Revolver Commitments, on the first day of each month from and after the Closing
Date up to the first day of the month prior to the Payoff Date and on the
Payoff Date, an unused line fee in an amount equal to 0.375% per annum times
the result of (i) the Maximum Revolver Amount, less (ii) the average
Daily Balance of the Revolver Usage during the immediately preceding month (or
portion thereof).

 

2.11         Letters of Credit.

 

(a)           Subject to the terms and conditions of this
Agreement, the Issuing Lender agrees to issue letters of credit for the account
of Borrower (each, an “L/C”) or to purchase participations or execute
indemnities, guarantees, or reimbursement obligations (each such undertaking,
an “L/C Undertaking”) with respect to letters of credit issued by an
Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is
to be Wells Fargo) for the account of Borrower. 
Each request for the issuance of a Letter of Credit, or the amendment,
renewal, or extension of any outstanding Letter of Credit, shall be made in
writing by an Authorized Person and delivered to the Issuing Lender and Agent
via hand delivery, telefacsimile, or other electronic method of transmission
reasonably in advance of the requested date of issuance, amendment, renewal, or
extension.  Each such request shall be in
form and substance reasonably satisfactory to the Issuing Lender in its
Permitted Discretion and shall specify (i) the amount of such Letter of
Credit, (ii) the date of issuance, amendment, renewal, or extension of
such Letter of Credit, (iii) the expiration date of such Letter of Credit,
(iv) the name and address of the beneficiary thereof (or the beneficiary
of the Underlying Letter of Credit, as applicable), and (v) such other
information (including, in the case of an amendment, renewal, or extension,
identification of the outstanding Letter of Credit to be so amended, renewed,
or extended) as shall be necessary to prepare, amend, renew, or extend such
Letter of Credit.  If requested by the
Issuing Lender, Borrower also shall be an applicant under the application with
respect to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking.  The Issuing Lender shall
have no obligation to issue a Letter of Credit if any of the following would result
after giving effect to the issuance of such requested Letter of Credit:

 

11

 

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

 

(ii)        the Letter of Credit Usage would exceed
$5,000,000, or

 

(iii)       the Letter of Credit Usage would exceed the
Maximum Revolver Amount less the
sum of (A) the Bank Product Reserve, and (B) the outstanding amount
of Advances.

 

Borrower and the Lender
Group acknowledge and agree that certain Underlying Letters of Credit may be
issued to support letters of credit that already are outstanding as of the
Closing Date.  Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable
in Dollars.  If Issuing Lender is
obligated to advance funds under a Letter of Credit, Borrower shall reimburse
such L/C Disbursement to Issuing Lender by paying to Agent an amount equal to
such L/C Disbursement not later than 11:00 a.m., California time, on the
date that such L/C Disbursement is made, if Borrower shall have received
written or telephonic notice of such L/C Disbursement prior to 10:00 a.m.,
California time, on such date, or, if such notice has not been received by
Borrower prior to such time on such date, then not later than 11:00 a.m.,
California time, on the Business Day that Borrower receives such notice, if
such notice is received prior to 10:00 a.m., California time, on the date
of receipt, and, in the absence of such reimbursement, the L/C Disbursement
immediately and automatically shall be deemed to be an Advance hereunder and,
initially, shall bear interest at the rate then applicable to Advances that are
Base Rate Loans.  To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower’s obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance.  Promptly following receipt
by Agent of any payment from Borrower pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to Section 2.11(b) to reimburse
the Issuing Lender, then to such Lenders and the Issuing Lender as their
interests may appear.

 

(b)           Promptly following receipt of a notice of L/C
Disbursement pursuant to Section 2.11(a), each Lender with a
Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed
made pursuant to the foregoing subsection on the same terms and conditions as
if Borrower had requested such Advance and Agent shall promptly pay to Issuing
Lender the amounts so received by it from the Lenders.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders with Revolver
Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Revolver Commitment, and each Lender with a Revolver Commitment shall be
deemed to have purchased, a participation in each Letter of Credit, in an
amount equal to its Pro Rata Share of the Risk Participation Liability of such
Letter of Credit, and each such Lender agrees to pay to Agent, for the account
of the Issuing Lender, such Lender’s Pro Rata Share of any payments made by the
Issuing Lender under such Letter of Credit. 
In consideration and in furtherance of the foregoing, each Lender with a
Revolver Commitment hereby absolutely and unconditionally agrees to pay to
Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of
each L/C Disbursement made by the Issuing Lender and not reimbursed by Borrower
on the date due as provided in Section 2.11(a), or of any
reimbursement payment required to be refunded to Borrower for any reason.  Each Lender with a Revolver Commitment
acknowledges and agrees that its obligation to deliver to Agent, for the
account of the Issuing Lender, an amount equal to its respective Pro Rata Share
of each L/C Disbursement made by the Issuing Lender pursuant to this Section 2.11(b) shall
be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 3.  If any such Lender fails to make available to
Agent the amount of such Lender’s Pro Rata Share of each L/C Disbursement made
by the Issuing Lender in respect of such Letter of Credit as provided in this
Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for
the account of the Issuing Lender) shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Defaulting Lender
Rate until paid in full.

 

12

 

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

 

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

 

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

 

(f)            If by reason of (i) any change after the
Closing Date in any applicable law, treaty, rule, or regulation or any change
in the interpretation or application thereof by any Governmental Authority, or (ii) compliance
by the Underlying Issuer or the Lender Group with any direction, request, or
requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor
thereto):

 

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

 

(ii)           there shall be imposed on the Underlying
Issuer or the Lender Group any other condition regarding any Underlying Letter
of Credit or any Letter of Credit issued pursuant hereto,

 

and the result of the
foregoing is to increase, directly or indirectly, the cost to the Lender Group
of issuing, making, guaranteeing, or maintaining any Letter of Credit or to
reduce the amount receivable in respect thereof by the Lender Group, then, and
in any such case, Agent may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay within 30 days after demand therefor, such amounts as
Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such 

 

13

 

demand until payment in full
thereof at the rate then applicable to Base Rate Loans hereunder; provided
that Borrower shall not be required to compensate a Lender pursuant to this Section for
any such amounts incurred more than 180 days prior to the date that such Lender
first demands payment from Borrower of such amounts; provided  further
that if an event or circumstance giving rise to such amounts is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof. 
The determination by Agent of any amount due pursuant to this Section,
as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.

 

2.12         LIBOR Option.

 

(a)           Interest and Interest
Payment Dates.  In lieu of having interest charged at the
rate based upon the Base Rate, Borrower shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged
(whether at the time when made (unless otherwise provided herein), upon
conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of
a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the
LIBOR Rate.  Interest on LIBOR Rate Loans
shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto; (ii) the date on which all or any portion of
the Obligations are accelerated pursuant to the terms hereof, or (iii) the
date on which this Agreement is terminated pursuant to the terms hereof.  On the last day of each applicable Interest
Period, unless Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically
shall convert to the rate of interest then applicable to Base Rate Loans of the
same type hereunder.  At any time that an
Event of Default has occurred and is continuing, Borrower no longer shall have
the option to request that Advances bear interest at a rate based upon the
LIBOR Rate.

 

(b)           LIBOR Election.

 

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

 

(ii)           Each LIBOR Notice shall be irrevocable and
binding on Borrower.  In connection with
each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold Agent and the
Lenders harmless against any loss, cost, or expense actually incurred by Agent
or any Lender as a result of (A) the payment of any principal of any LIBOR
Rate Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (B) the conversion of any
LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (C) the failure to borrow, convert, continue or prepay any
LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant
hereto (such losses, costs, or expenses, “Funding Losses”).  Funding Losses shall, with respect to Agent
or any Lender, be deemed equal to (x) the amount determined by Agent or
such Lender to be the excess, if any, of (1) the amount of interest that
would have accrued on the principal amount of such LIBOR Rate Loan had such
event not occurred, at the LIBOR Rate that would have been applicable thereto,
for the period from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period therefor), minus (2) the amount of interest that would accrue on
such principal amount for such period at the interest rate which Agent or such
Lender would be offered were it to be offered, at the commencement of such
period, Dollar deposits of a comparable amount and period in the London
interbank market plus (y) the amount of reasonable expenses actually
incurred by Agent or any Lender as a result of such events.  A certificate of Agent or a Lender delivered
to 

 

14

 

Borrower setting forth in reasonable detail any amount or amounts that
Agent or such Lender is entitled to receive pursuant to this Section 2.12
shall be conclusive absent manifest error. 
Borrower shall pay such amount to Agent or the Lender, as applicable,
within 30 days of the date of its receipt of such certificate.

 

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

 

(c)           Conversion.  Borrower may convert LIBOR Rate Loans to Base Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are converted or
prepaid on any date that is not the last day of the Interest Period applicable
thereto, including as a result of any automatic prepayment through the required
application by Agent of proceeds of Borrower’s and its Subsidiaries’
Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrower shall indemnify, defend, and hold Agent and the Lenders and
their Participants harmless against any and all Funding Losses in accordance
with Section 2.12 (b)(ii) above.

 

(d)           Special Provisions
Applicable to LIBOR Rate.

 

(i)            The LIBOR Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or obtaining any
eurodollar deposits or increased costs, in each case, due to changes in applicable
law occurring subsequent to the commencement of the then applicable Interest
Period, including changes in tax laws (except (i) changes with respect to
Taxes, which will be governed by Section 16 of this Agreement, and (ii) changes
of general applicability in any laws imposing taxes, levies, imposts, duties,
fees, assessments or other charges that are excluded from the definition of
Taxes) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, which additional or increased costs would increase the cost
of funding or maintaining loans bearing interest at the LIBOR Rate.  In any such event, the affected Lender shall
give Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt
of the notice from the affected Lender, 
Borrower may, by notice to such affected Lender (y) require such
Lender to furnish to Borrower a statement setting forth the basis for adjusting
such LIBOR Rate and the method for determining the amount of such adjustment,
or (z) repay the LIBOR Rate Loans with respect to which such adjustment is
made (together with any amounts due under Section 2.12(b)(ii)).

 

(ii)           In the event that any change in market
conditions or any law, regulation, treaty, or directive, or any change therein
or in the interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of any Lender, make it unlawful or
impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue
such funding or maintaining, or to determine or charge interest rates at the
LIBOR Rate, such Lender shall give notice of such changed circumstances to
Agent and Borrower and Agent promptly shall transmit the notice to each other
Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are
outstanding, the date specified in such Lender’s notice shall be deemed to be
the last day of the Interest Period of such LIBOR Rate Loans, and interest upon
the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the
rate then applicable to Base Rate Loans, and (z) Borrower shall not be
entitled to elect the LIBOR Option until such Lender determines that it would
no longer be unlawful or impractical to do so.

 

(e)           No Requirement of Matched
Funding.  Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.

 

15

 

2.13         Capital Requirements.

 

(a)           If, after the date hereof, any Lender determines
that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies,
or any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by
such Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrower and Agent thereof. 
Following receipt of such notice, Borrower agrees to pay such Lender on
demand the amount of such reduction of return of capital as and when such
reduction is determined, payable within 30 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable detail such
Lender’s calculation thereof and the assumptions upon which such calculation
was based (which statement shall be deemed true and correct absent manifest
error).  In determining such amount, such
Lender may use any reasonable averaging and attribution methods.  Failure or delay on the part of any Lender to
demand compensation pursuant to this Section shall not constitute a waiver
of such Lender’s right to demand such compensation; provided that
Borrower shall not be required to compensate a Lender pursuant to this Section for
any reductions in return incurred more than 180 days prior to the date that
such Lender notifies Borrower of such law, rule, regulation or guideline giving
rise to such reductions and of such Lender’s intention to claim compensation
therefor; provided  further that if such claim arises by reason of
the adoption of or change in any law, rule, regulation or guideline that is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.

 

(b)           If any Lender requests additional or
increased costs referred to in Section 2.12(d)(i) or amounts
under Section 2.13(a) (any such Lender, a “Affected Lender”),
then such Affected Lender shall use reasonable efforts to promptly designate a
different one of its lending offices or to assign its rights and obligations
hereunder to another of its offices or branches, if (i) in the reasonable
judgment of such Affected Lender, such designation or assignment would
eliminate or reduce amounts payable pursuant to Section 2.12(d)(i) or
Section 2.13(a), as applicable, and (ii) in the reasonable
judgment of such Affected Lender, such designation or assignment would not
subject it to any material unreimbursed cost or expense and would not otherwise
be materially disadvantageous to it. 
Borrower agrees to pay all reasonable out-of-pocket costs and expenses
incurred by such Affected Lender in connection with any such designation or
assignment.  If, after such reasonable
efforts, such Affected Lender does not so designate a different one of its
lending offices or assign its rights to another of its offices or branches so
as to eliminate Borrower’s obligation to pay any future amounts to such Affected
Lender pursuant to Section 2.12(d)(i) or Section 2.13(a),
as applicable, then Borrower (without prejudice to any amounts then due to such
Affected Lender under Section 2.12(d)(i) or Section 2.13(a),
as applicable) may, unless prior to the effective date of any such assignment
the Affected Lender withdraws its request for such additional amounts under Section 2.12(d)(i) or
Section 2.13(a), as applicable, designate another Lender reasonably
acceptable to Agent to purchase the Obligations owed to such Affected Lender
and such Affected Lender’s Commitments hereunder (a “Replacement Lender”),
such Affected Lender shall assign to the Replacement Lender its Obligations and
Commitments, pursuant to an Assignment and Acceptance Agreement, and upon such
purchase by the Replacement Lender, such Replacement Lender shall be deemed to
be a “Lender” for purposes of this Agreement and such Affected Lender shall
cease to be a “Lender” for purposes of this Agreement.

 

3.             CONDITIONS; TERM OF
AGREEMENT.

 

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

 

16

 

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

 

(a)           the representations and warranties of
Borrower or its Subsidiaries contained in this Agreement or in the other Loan
Documents shall be true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date); and

 

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

 

3.3           Term.  This Agreement shall continue in full force and effect for a term
ending on September 19, 2008 (the “Maturity Date”).  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.

 

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

 

3.5           Early Termination by
Borrower.  Borrower has the option, at any time upon 5
Business Days prior written notice to Agent, to terminate this Agreement and
terminate the Commitments hereunder by paying to Agent the Obligations
(including (a) providing Letter of Credit Collateralization with respect
to the then existing Letter of Credit Usage, and (b) providing Bank
Product Collateralization with respect to the then existing Bank Products), in
full.

 

4.             REPRESENTATIONS AND
WARRANTIES.

 

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

 

17

 

4.1           Due Organization and
Qualification; Subsidiaries.

 

(a)           Each Loan Party (i) is duly organized
and existing and in good standing under the laws of the jurisdiction of its
organization, (ii) qualified to do business in any state where the failure
to be so qualified reasonably could be expected to result in a Material Adverse
Change, and (iii) has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents to which it is a party and to carry
out the transactions contemplated thereby.

 

(b)           Set forth on Schedule 4.1(b) is a
complete and accurate description of the ownership of Borrower as of the
Closing Date.  Other than as described on
Schedule 4.1(b), there are no subscriptions, options, warrants, or calls
relating to any shares of Borrower’s capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.  Borrower is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable
for any of its capital Stock.

 

(c)           Set forth on Schedule 4.1(c) (as
such Schedule may be updated from time to time to reflect changes permitted to
be made under Section 5.11), is a complete and accurate list of the
Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of
shares of each class of common and preferred Stock authorized for each of such
Subsidiaries, and (ii) the number and the percentage of the outstanding
shares of each such class owned directly or indirectly by Borrower.  All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.

 

(d)           Except as set forth on Schedule 4.1(c),
there are no subscriptions, options, warrants, or calls relating to any shares
of Borrower’s Subsidiaries’ capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument.  Neither Borrower nor any of its Subsidiaries
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of Borrower’s Subsidiaries’ capital
Stock or any security convertible into or exchangeable for any such capital
Stock.

 

4.2           Due Authorization; No
Conflict.

 

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

 

(b)           As to each Loan Party,
the execution, delivery, and performance by such Loan Party of the Loan
Documents to which it is a party do not and will not (i) violate any
material provision of federal, state, or local law or regulation applicable to
any Loan Party or its Subsidiaries, the Governing Documents of any Loan Party
or its Subsidiaries, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Loan Party or its Subsidiaries, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any Material Contract of any Loan Party or its
Subsidiaries except to the extent that any such conflict, breach or default
could not individually or in the aggregate reasonably be expected to have a
Material Adverse Change, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any assets of any Loan
Party, other than Permitted Liens, or (iv) require any approval of any
Loan Party’s interestholders or any approval or consent of any Person under any
Material Contract of any Loan Party, other than consents or approvals that have
been obtained and that are still in force and effect and except, in the case of
Material Contracts, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.

 

4.3           Governmental Consents.  The execution, delivery, and performance by each Loan Party of the Loan
Documents to which such Loan Party is a party and the consummation of the
transactions contemplated by the Loan Documents do not and will not require any
registration with, consent, or approval

 

18

 

of, or notice to, or other action with or by, any Governmental
Authority, other than consents or approvals that have been obtained and that
are still in force and effect and except for filings and recordings with respect
to the Collateral to be made, or otherwise delivered to the Agent for filing or
recordation, as of the Closing Date.

 

4.4           Binding Obligations; Perfected Liens.

 

(a)           Each Loan Document has been duly executed and
delivered by each Loan Party that is a party thereto and is the legally valid
and binding obligation of such Loan Party, enforceable against such Loan Party
in accordance with its respective terms, except as enforcement may be limited
by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors’ rights
generally.

 

(b)           The Agent’s Liens are validly created,
perfected (other than (i) in respect of motor vehicles and (ii) any
Deposit Accounts and Securities Accounts not subject to a Control Agreement as
permitted by Section 6.11, and subject only to the filing of
financing statements and the recordation of the Mortgages), and first priority
Liens, subject only to Permitted Liens.

 

4.5           Title to Assets; No
Encumbrances.  Each of the Loan Parties and its Subsidiaries
has (i) good, sufficient and legal title to (in the case of fee interests
in Real Property), (ii) valid leasehold interests in (in the case of
leasehold interests in real or personal property), and (iii) good and
marketable title to (in the case of all other personal property), all of their
respective assets reflected in their most recent financial statements delivered
pursuant to Section 5.1, in each case except for assets disposed of
since the date of such financial statements to the extent permitted
hereby.  All of such assets are free and
clear of Liens except for Permitted Liens.

 

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

 

(a)           The name of (within the meaning of Section 9-503
of the Code) and jurisdiction of organization of each Loan Party and each of
its Subsidiaries is set forth on Schedule 4.6(a) (as such Schedule
may be updated from time to time to reflect changes permitted to be made under Section 6.5).

 

(b)           The chief executive office where the books
and records are maintained of each Loan Party and each of its Subsidiaries is
located at the address indicated on Schedule 4.6(b) (as such
Schedule may be updated from time to time to reflect changes permitted to be
made under Section 5.14).

 

(c)           Each Loan Party’s and each of its
Subsidiaries’ tax identification numbers and organizational identification
numbers, if any, are identified on Schedule 4.6(c) (as such
Schedule may be updated from time to time to reflect changes permitted to be
made under Section 6.5).

 

(d)           As of the Closing Date, no Loan Party and no
Subsidiary of a Loan Party holds any commercial tort claim, except as set forth
on Schedule 4.6(d).

 

4.7           Litigation.

 

(a)           There are no actions, suits, or proceedings
pending or, to the best knowledge of Borrower, threatened in writing against a
Loan Party or any of its Subsidiaries that either individually or in the
aggregate could reasonably be expected to result in a Material Adverse Change.

 

(b)           Schedule 4.7(b) sets forth a complete and accurate
description, with respect to each of the actions, suits, or proceedings with
asserted liabilities in excess of, or that could reasonably be expected to
result in liabilities in excess of, $100,000 that, as of the Closing Date, is
pending or, to the best knowledge

 

19

 

of Borrower, threatened in writing against a Loan Party or any of its
Subsidiaries, of (i) the parties to such actions, suits, or proceedings, (ii) the
nature of the dispute that is the subject of such actions, suits, or
proceedings, (iii) the reasonably anticipated maximum amount of the
liability of Loan Parties and their Subsidiaries in connection with such
actions, suits, or proceedings, (iv) the status, as of the Closing Date,
with respect to such actions, suits, or proceedings, and (v) whether any
liability of the Loan Parties’ and their Subsidiaries in connection with such
actions, suits, or proceedings is covered by insurance.

 

4.8           Compliance with Laws.  No Loan Party nor any of its Subsidiaries (a) is in violation of
any applicable laws, rules, regulations, executive orders, or codes (including
Environmental Laws) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Change, or (b) is subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Change.

 

4.9           No Material Adverse Change.  All financial statements relating to the Loan Parties and their
Subsidiaries that have been delivered by Borrower to Agent have been prepared
in accordance with GAAP (except, in the case of unaudited financial statements,
for the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, the Loan Parties’ and their
Subsidiaries’ consolidated financial condition as of the date thereof and
results of operations for the period then ended.  Since December 31, 2006, no event,
circumstance, or change has occurred that has or could reasonably be expected
to result in a Material Adverse Change with respect to the Loan Parties and
their Subsidiaries.

 

4.10         Fraudulent Transfer.

 

(a)           Each Loan Party is Solvent.

 

(b)           No transfer of property is being made by any
Loan Party and no obligation is being incurred by any Loan Party in connection
with the transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay, or defraud either present or future
creditors of such Loan Party.

 

4.11         Employee Benefits.  No Loan Party, none of their Subsidiaries, nor any of their ERISA
Affiliates maintains or contributes to any Benefit Plan.

 

4.12         Environmental Condition.  Except as set forth on Schedule 4.12, (a) to Borrower’s
knowledge, no Loan Party’s or its Subsidiaries’ properties or assets has ever
been used by a Loan Party, its Subsidiaries, or by previous owners or operators
in the disposal of, or to produce, store, handle, treat, release, or transport,
any Hazardous Materials, where such use, production, storage, handling,
treatment, release or transport was in violation, in any material respect, of
any applicable Environmental Law, (b) to Borrower’s knowledge, no Loan
Party’s or its Subsidiaries’ properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) no Loan Party nor any of its
Subsidiaries has received notice that a Lien arising under any Environmental
Law has attached to any revenues or to any Real Property owned or operated by a
Loan Party or its Subsidiaries, and (d) no Loan Party nor any of its
Subsidiaries nor any of their respective facilities or operations is subject to
any outstanding written order, consent decree, or settlement agreement with any
Person relating to any Environmental Law or Environmental Liability that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Change.

 

4.13         Intellectual Property.  Each Loan Party and its Subsidiaries own, or hold licenses
in, all trademarks, trade names, copyrights, patents, and licenses that are
necessary to the conduct of its business as currently conducted, and attached
hereto as Schedule 4.13 (as updated from time to time) is a true,
correct, and complete listing of all material trademarks, trade names,
copyrights, patents, and licenses as to which Borrower

 

20

 

or one of its Subsidiaries is the owner or is an exclusive licensee; provided,
however, that Borrower may amend Schedule 4.13 to add additional
intellectual property so long as such amendment occurs by written notice to
Agent not less than 30 days after the date on which the applicable Loan Party
or its Subsidiary acquires any such property after the Closing Date.

 

4.14         Leases.  Each Loan Party and its Subsidiaries enjoy peaceful and undisturbed
possession under all leases material to their business and to which they are
parties or under which they are operating, and, subject to Permitted Protests,
all of such material leases are valid and subsisting and no material default by
the applicable Loan Party or its Subsidiaries exists under any of them.

 

4.15         Deposit Accounts and
Securities Accounts.  Set forth on Schedule 4.15 (as updated
pursuant to the provisions of the Security Agreement from time to time) is a
listing of all of the Loan Parties’ and their Subsidiaries’ Deposit Accounts
and Securities Accounts, including, with respect to each bank or securities
intermediary (a) the name and address of such Person, and (b) the
account numbers of the Deposit Accounts or Securities Accounts maintained with
such Person.

 

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

 

4.17         Material Contracts.  Set
forth on Schedule 4.17 (as updated from time to time) is a list of the
Material Contracts of each Loan Party and its Subsidiaries; provided, however,
that Borrower may amend Schedule 4.17 to add additional Material
Contracts so long as such amendment occurs by written notice to Agent at the
time that Borrower provides its quarterly financial statements pursuant to Section 5.1.  Except for matters which, either individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change, each Material Contract (other than those that have expired at
the end of their normal terms) (a) is in full force and effect and is
binding upon and enforceable against the applicable Loan Party or its
Subsidiary and, to the best of Borrower’s knowledge, each other Person that is
a party thereto in accordance with its terms, (b) has not been otherwise
amended or modified (other than amendments or modifications permitted by Section 6.7(d)),
and (c) is not in default due to the action or inaction of the applicable
Loan Party or its Subsidiary, except to the extent that such default could not
reasonably be expected to result in a Material Adverse Change.

 

4.18         Patriot Act.  To the extent applicable, each Loan Party is in compliance, in all
material respects, with the (a) Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the Untied States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other
enabling legislation or executive order relating thereto, and (b) Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).  No part of the proceeds of the loans made
hereunder will be used, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or

 

21

 

obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.

 

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

 

4.20         Payment of Taxes.  Except as otherwise permitted under Section 5.5, all tax
returns and reports of each Loan Party and its Subsidiaries required to be
filed by any of them have been timely filed, and all taxes shown on such tax
returns to be due and payable and all assessments, fees and other governmental
charges upon a Loan Party and its Subsidiaries and upon their respective
assets, income, businesses and franchises that are due and payable have been
paid when due and payable.  Each Loan
Party and each of its Subsidiaries have made adequate provision in accordance
with GAAP for all taxes not yet due and payable.  Borrower knows of no proposed tax assessment
against a Loan Party or any of its Subsidiaries that is not being actively
contested by such Loan Party or such Subsidiary diligently, in good faith, and
by appropriate proceedings; provided such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made or provided therefor.  No Loan
Party nor any of its Subsidiaries has ever been a party to any understanding or
arrangement constituting a “tax shelter” within the meaning of Section 6662(d)(2)(C)(iii) of
the IRC or within the meaning of Section 6111(c) or Section 6111(d) of
the IRC as in effect immediately prior to the enactment of the American Jobs
Creation Act of 2004, or has ever “participated” in a “reportable transaction”
within the meaning of Treasury Regulation Section 1.6011-4, except as
would not be reasonably expected to, individually or in the aggregate, result
in a Material Adverse Change.

 

4.21         Margin Stock.  No Loan Party nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the loans made to
Borrower will be used to purchase or carry any such Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock or for any purpose that violates, or is inconsistent with, the provisions
of Regulation T, U or X of said Board of Governors.

 

4.22         Governmental Regulation.  No Loan Party nor any of its Subsidiaries is subject to regulation
under the Federal Power Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.  No Loan Party
nor any of its Subsidiaries is a “registered investment company” or a company “controlled”
by a “registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

 

4.23         OFAC.  No Loan Party nor any of its Subsidiaries is in violation of any of the
country or list based economic and trade sanctions administered and enforced by
OFAC.  No Loan Party nor any of its
Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has
a more than 10% of its assets located in Sanctioned Entities, or (c) derives
more than 10% of its revenues from investments in, or transactions with
Sanctioned Persons or Sanctioned Entities. 
The proceeds of any Advance will not be used to fund any operations in,
finance any investments or activities in, or make any payments to, a Sanctioned
Person or a Sanctioned Entity.

 

4.24         Eligible Accounts.  As to each Account that is identified by Borrower as an Eligible
Account in a Borrowing Base Certificate submitted to Agent, such Account is (a) a
bona fide existing payment obligation of the applicable Account Debtor created
by the sale and delivery of Inventory or the rendition of services to such
Account Debtor in the ordinary course of Borrower’s business, (b) owed to
Borrower without 

 

22

 

any known defenses, disputes, offsets, counterclaims, or rights of
return or cancellation, and (c) not excluded as ineligible by virtue of
one or more of the excluding criteria set forth in the definition of Eligible
Accounts.

 

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

 

4.26         Location of Inventory and
Equipment.  The Inventory and Equipment (other than (i) vehicles,
(ii) Equipment and Inventory out for repair or (iii) other Equipment
having a value of less than $100,000 in the aggregate, including, without
limitation, laptop computers) of the Loan Parties and their Subsidiaries are
not stored with a bailee, warehouseman, or similar party and are located only
at, or in-transit between, the locations identified on Schedule 4.26 (as
such Schedule may be updated pursuant to Section 5.14); provided,
however, Inventory and Equipment may be stored with a bailee, warehouseman or
similar party to the extent (1) Agent has received a Collateral Access
Agreement for such location, (2) the aggregate book value of all Inventory
and Equipment stored at each such location (other than the locations in
Mississauga, Ontario) does not exceed $400,000, or (3) the aggregate book
value of all Inventory and Equipment stored at the locations in Mississauga,
Ontario does not exceed $4,000,000.

 

4.27         Inventory Records.  Each Loan Party  keeps correct
and accurate records itemizing and describing the type, quality, and quantity
of its and its Subsidiaries’ Inventory and the book value thereof.

 

4.28         Permits,
Etc. .  Each Loan Party has, and is in
compliance with, all permits, licenses, authorizations, approvals, entitlements
and accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business and the Real Property currently owned,
leased, managed or operated, or to be acquired, by such Person, except where
the failure to be in compliance could not reasonably be expected to result in a
Material Adverse Change.  No condition
exists or event has occurred which, in itself or with the giving of notice or
lapse of time or both, would result in the suspension, revocation, impairment,
forfeiture or non-renewal of any such permit, license, authorization, approval,
entitlement or accreditation, which could result in a Material Adverse Change
and to each Loan Party’s knowledge, there is no claim that any thereof is not
in full force and effect.

 

4.29         Customers and Suppliers .  There
exists no actual or overtly threatened termination in writing, cancellation or
limitation of, or modification to or change in, the business relationship
between (i) any Loan Party, on
the one hand, and any customer or any group thereof, on the other hand that is
reasonably likely to result in a Material Adverse Change, or (ii) any Loan Party, on the one hand, and any
material supplier thereof, on the other hand that is reasonably likely to
result in a Material Adverse Change.

 

4.30         Insurance .  Each Loan Party and each of its Subsidiaries
keeps its property adequately insured and maintains (or Parent maintains
coverage for such Loan Party’s and such Subsidiaries’ property or otherwise for
such Loan Party’s or such Subsidiaries’ benefit) (a) insurance to such
extent and against such risks, including fire, as is consistent with past
practice or is customary with companies in the same or similar businesses, (b) workers’
compensation insurance in the amount required by applicable law, (c) public
liability insurance, which shall include product liability insurance, in the
amount consistent with past practice or customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by it and insurance against larceny, embezzlement
or other criminal misappropriation, and (d) such other insurance as may be
required by Law.  Schedule 4.30
sets forth a list of all insurance policies maintained by each Loan Party on
the Closing Date.

 

4.31         Brokerage
Fees . 
Except for Durham Capital Corporation, Borrower and its
Subsidiaries have not utilized the services of any broker or finder in
connection with obtaining financing from the Lender Group under this Agreement
and no brokerage commission or finders fee is payable by Borrower or its Subsidiaries
in connection herewith.

 

23

 

5.             AFFIRMATIVE COVENANTS.

 

Borrower covenants and
agrees that, until termination of all of the Commitments and payment in full of
the Obligations, the Loan Parties shall and shall cause each of their
Subsidiaries to comply with each of the following:

 

5.1           Financial Statements,
Reports, Certificates.  Deliver to Agent, with copies to each Lender,
each of the financial statements, reports, and other items set forth on Schedule
5.1 at the times specified therein. 
In addition, Borrower agrees that no Subsidiary of a Loan Party will
have a fiscal year different from that of Borrower.  In addition, Borrower agrees to maintain a
system of accounting that enables Borrower to produce financial statements in
accordance with GAAP.  Each Loan Party
shall also (a) keep a reporting system that shows all additions, sales,
claims, returns, and allowances with respect to its and its Subsidiaries’
sales, and (b) maintain its billing systems/practices as approved by Agent
prior to the Closing Date and shall only make material modifications thereto
with notice to, and with the consent of, Agent.

 

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

 

5.3           Existence.  Except as otherwise permitted under Section 6.3, each Loan
Party to, and cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its existence (including being in good standing in its
jurisdiction of organization) and all rights and franchises, licenses and
permits material to its business; provided, however, that no Loan
Party or any of its Subsidiaries shall be required to preserve any such right
or franchise, licenses or permits if such Person’s board of directors (or
similar governing body) shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such Person, and that the
loss thereof is not disadvantageous in any material respect to such Person or
to the Lenders.

 

5.4           Maintenance of Properties.  Maintain and preserve all of its assets that are necessary or useful in
the proper conduct of its business in good working order and condition,
ordinary wear, tear, and casualty excepted and Permitted Dispositions excepted,
and comply with the material provisions of all material leases to which it is a
party as lessee, so as to prevent the loss or forfeiture thereof, unless such
provisions are the subject of a Permitted Protest.

 

5.5           Taxes.  Cause all assessments and taxes imposed, levied, or assessed against
any Loan Party or its Subsidiaries, or any of their respective assets or in
respect of any of its income, businesses, or franchises to be paid in full,
before delinquency or before the expiration of any extension period, except to
the extent that (i) the validity of such assessment or tax shall be the
subject of a Permitted Protest and so long as, in the case of an assessment or
tax that has or may become a Lien against any of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such assessment or tax, or (ii) the aggregate amount
of such unpaid assessment or tax is not in excess of $100,000.  Borrower will and will cause each of its
Subsidiaries to make timely payment or deposit of all tax payments and
withholding taxes required of it and them by applicable laws, including those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Agent with proof
reasonably satisfactory to Agent indicating that Borrower and its Subsidiaries
have made such payments or deposits.

 

5.6           Insurance.  At Borrower’s expense, maintain insurance respecting each of the Loan
Parties’ and their Subsidiaries’ assets wherever located (or Parent maintains
coverage for such Loan Party’s and such Subsidiaries’ assets), covering loss or
damage by fire, theft, explosion, and all other hazards and risks as ordinarily
are insured against by other Persons engaged in the same or similar businesses.
Borrower (or Parent maintains coverage for Borrower’s benefit and its
Subsidiaries’ benefit) also shall maintain (with respect to each of the Loan
Parties and their Subsidiaries) public liability, and product liability
insurance, as well as

 

24

 

insurance
against larceny, embezzlement, and criminal misappropriation.  All such policies of insurance shall be with
responsible and reputable insurance companies and in such amounts as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated and located and in any event in amount, adequacy
and scope reasonably satisfactory to Agent. All property insurance policies
covering the Collateral are to be made payable to Agent for the benefit of
Agent and the Lenders, as their interests may appear, in case of loss, pursuant
to a standard loss payable endorsement with a standard non contributory “lender”
or “secured party” clause and are to contain such other provisions as Agent may
reasonably require to fully protect the Lenders’ interest in the Collateral and
to any payments to be made under such policies. 
All certificates of insurance are to be delivered to Agent, with the
loss payable and additional insured endorsement in favor of Agent and shall
provide for not less than 30 days (10 days in the case of non-payment) prior
written notice to Agent of the exercise of any right of cancellation.  If Borrower fails to maintain such insurance,
Agent may arrange for such insurance, but at Borrower’s expense and without any
responsibility on Agent’s part for obtaining the insurance, the solvency of the
insurance companies, the adequacy of the coverage, or the collection of
claims.  Borrower shall give Agent prompt
notice of any loss exceeding $250,000 covered by its casualty insurance.  Upon the occurrence and during the
continuance of an Event of Default, Agent shall have the sole right to file
claims under any insurance policies, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies. 
If no Event of Default exists, Borrower shall have the sole right to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.

 

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

 

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

 

5.9           Environmental.

 

(a)           Keep any property either owned or operated by
Borrower or its Subsidiaries free of any Environmental Liens or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens,

 

(b)           comply, in all material respects, with
Environmental Laws and provide to Agent documentation of such compliance which
Agent reasonably requests,

 

(c)           promptly notify Agent of any release of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by Borrower or its Subsidiaries and take any Remedial Actions required
to abate said release or otherwise to come into compliance with applicable
Environmental Law, and

 

(d)           promptly, but in any event within 5 Business
Days of its receipt thereof, provide Agent with written notice of any of the
following:  (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of Borrower or its Subsidiaries, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against Borrower or
its Subsidiaries, and

 

25

 

(iii) notice
of a violation, citation, or other administrative order which could reasonably
be expected to result in a Material Adverse Change.

 

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

 

5.11         Formation of Subsidiaries.  At the time that any Loan Party forms any direct or indirect Subsidiary
or acquires any direct or indirect Subsidiary after the Closing Date, such Loan
Party shall (a) within 3 Business Days of such formation or acquisition
cause any such new Subsidiary to provide to Agent a joinder to the Guaranty and
the Security Agreement, together with such other security documents (including
mortgages with respect to any Real Property owned in fee of such new Subsidiary
with a fair market value of at least $250,000), as well as appropriate
financing statements (and with respect to all property subject to a mortgage,
fixture filings), all in form and substance reasonably satisfactory to Agent
(including being sufficient to grant Agent a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary); provided that the Guaranty, the Security Agreement, and such
other security documents shall not be required to be provided to Agent with
respect to any Subsidiary of Borrower that is a CFC, (b) within 10 days of
such formation or acquisition (or such later date as permitted by Agent in its
sole discretion) provide to Agent a pledge agreement and appropriate
certificates and powers or financing statements, hypothecating all of the
direct or beneficial ownership interest in such new Subsidiary reasonably
satisfactory to Agent; provided that only 65% of the total outstanding
voting Stock of any first tier Subsidiary of Borrower that is a CFC and none of
the total outstanding voting Stock of any other Subsidiary of such CFC shall be
required to be pledged (which pledge, if reasonably requested by Agent, shall
be governed by the laws of the jurisdiction of such Subsidiary), and (c) within
10 days of such formation or acquisition (or such later date as permitted by
Agent in its sole discretion) provide to Agent all other documentation,
including one or more opinions of counsel reasonably satisfactory to Agent,
which in its opinion is appropriate with respect to the execution and delivery
of the applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all Real Property owned in fee
and subject to a mortgage).  Any
document, agreement, or instrument executed or issued pursuant to this Section 5.11
shall be a Loan Document.

 

5.12         Further Assurances.  At any time upon the reasonable request of Agent, execute or deliver to
Agent any and all financing statements, fixture filings, security agreements,
pledges, assignments, endorsements of certificates of title, mortgages, deeds
of trust, opinions of counsel, and all other documents (collectively, the “Additional
Documents”) that Agent may reasonably request in form and substance
reasonably satisfactory to Agent, to create, perfect, and continue perfected or
to better perfect the Agent’s Liens in all of the assets of Borrower and its
Subsidiaries (whether now owned or hereafter arising or acquired, tangible or
intangible, real or personal), to create and perfect Liens in favor of Agent in
any Real Property acquired by Borrower or its Subsidiaries after the Closing
Date with a fair market value in excess of $250,000, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents); provided that the foregoing shall not apply to any
Subsidiary of Borrower that is a CFC.  To
the maximum extent permitted by applicable law, Borrower authorizes Agent to
execute any such Additional Documents in the applicable Loan Party’s or its
Subsidiary’s name, as applicable, and authorizes Agent to file such executed
Additional Documents in any appropriate filing office.  In furtherance and not in limitation of the
foregoing, each Loan Party shall take such actions as Agent may reasonably
request from time to time to ensure that the Obligations are guarantied by the
Guarantors and are secured by substantially all of the assets of Borrower and
its Subsidiaries and all of the outstanding Capital Stock of Borrower’s
Subsidiaries (subject to limitations contained in the Credit Documents with
respect to any CFC).

 

26

 

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

 

5.14         Location of Inventory and
Equipment.  Keep each Loan Parties’ and its Subsidiaries’
Inventory and Equipment (other than (i) vehicles, (ii) Equipment and
Inventory out for repair and (iii) other Equipment having a value of less
than $100,000 in the aggregate, including, without limitation, laptop
computers) only at the locations identified on Schedule 4.26 or
in-transit between the locations identified on Schedule 4.26 (as such Schedule
4.26 may be updated pursuant to Section 5.14) and their chief
executive offices (where books and records are located) only at the locations
identified on Schedule 4.6(b); provided, however, that
Borrower may amend Schedule 4.26 or Schedule 4.6(b) so long
as such amendment occurs by written notice to Agent not less than 10 days prior
to the date on which such Inventory or Equipment is moved to such new location
or such chief executive office is relocated and so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, Borrower provides Agent a Collateral Access Agreement
with respect thereto.

 

5.15         Intentionally Omitted.

 

5.16         Organizational ID Number; Commercial Tort Claims .  As promptly as practicable, but in any event
within 5 days, (i) upon obtaining an organizational identification
number (to the extent that any Loan Party has not been issued such number on or
prior to the Closing Date), notify Agent in writing and deliver an updated Schedule
4.6(c), and (ii) upon obtaining any commercial tort claim that would
have been required to be disclosed to Agent under this Agreement and the other
Loan Documents if it existed as of the Closing Date, deliver an updated Schedule
4.6(d) and the other documents required under the Security Agreement.

 

5.17         Obtaining Permits, Etc.   Obtain, maintain and preserve and take all
necessary action to timely renew, all permits, licenses, authorizations,
approvals, entitlements and accreditations that if not obtained, maintained or
preserved could reasonably be expected to result in a Material Adverse Change.

 

6.             NEGATIVE COVENANTS.

 

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

 

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

 

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

 

6.3           Restrictions on Fundamental
Changes.

 

(a)           Other than in order to consummate a Permitted
Transaction, enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock;

 

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

 

(c)           Suspend or go out of a substantial portion of
its or their business, except as permitted pursuant to clauses (a) or (b) above
or in connection with the transactions permitted pursuant to Section 6.4.

 

27

 

6.4           Disposal of Assets.  Other than Permitted Dispositions, Permitted Investments, Permitted
Transactions, or transactions expressly permitted by Sections 6.3 and 6.11,
convey, sell, lease, license, assign, transfer, or otherwise dispose of (or
enter into an agreement to convey, sell, lease, license, assign, transfer, or
otherwise dispose of) any of Borrower’s or its Subsidiaries assets.

 

6.5           Change Name.  Change Borrower’s or any of its Subsidiaries’ name, organizational
identification number, state of organization or organizational identity; provided,
however, that Borrower or any of its Subsidiaries may change their names
upon at least 10 days prior written notice to Agent of such change.

 

6.6           Nature of Business.  Make any change in the nature of its or their business as described in Schedule
6.6 or acquire any properties or assets that are not reasonably related to
the conduct of such business activities; provided that Borrower and its
Subsidiaries may engage in any business that is reasonably related or ancillary
to its or their business.

 

6.7           Prepayments and Amendments.

 

(a)           Except in connection with Refinancing
Indebtedness permitted by Section 6.1,

 

(i)            optionally prepay, redeem, defease, purchase,
or otherwise acquire any Indebtedness of Borrower or its Subsidiaries, other
than (i) the Obligations in accordance with this Agreement, and (ii) Permitted
Intercompany Advances,

 

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

 

(b)           Directly or indirectly, amend, modify, or
change any of the terms or provisions of

 

(i)            any agreement, instrument, document,
indenture, or other writing evidencing 
or concerning Indebtedness permitted under Section 6.1 other
than (A) the Obligations in accordance with this Agreement, (B) Permitted
Intercompany Advances, and (C) Indebtedness permitted under clauses
(c), (g) and (h) of the definition of Permitted
Indebtedness,

 

(ii)           any Material Contract except to the extent
that such amendment, modification, alteration, increase, or change could not,
individually or in the aggregate, reasonably be expected to be materially
adverse to the interests of the Lenders, or

 

(iii)          the Governing Documents of any Loan Party or
any of its Subsidiaries if the effect thereof, either individually or in the
aggregate, could reasonably be expected to be materially adverse to the
interests of the Lenders.

 

6.8           Intentionally Omitted.

 

6.9           Distributions.  Make any distribution or declare or pay
any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of Borrower’s Stock, of any class,
whether now or hereafter outstanding; provided, however, that, so
long as it is permitted by applicable law, Borrower and its Subsidiaries may
make distributions to Parent for the sole purpose of allowing Parent to, and Parent
shall use the proceeds thereof solely to (i) pay federal and state income
taxes and franchise taxes solely arising out of the consolidated operations of
Parent and its Subsidiaries, after taking into account all available credits
and deductions (provided that neither Borrower nor any of its Subsidiaries
shall make any distribution to Parent in any amount greater than the share of
such taxes arising out of Borrower’s consolidated net income), and (ii) so
long as no Event of Default shall have occurred and be continuing or would
result therefrom, pay (x) other reasonable administrative and maintenance
expenses (other than insurance and payroll

 

28

 

costs allocated to
Borrower) arising solely out of the consolidated operations (including
maintenance of existence) of Parent and its Subsidiaries, in an aggregate
amount not to exceed $250,000 in any fiscal year and (y) insurance and
payroll costs allocated to Borrower, in an aggregate amount not to exceed
$500,000 in any fiscal year.

 

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

 

6.11         Investments.  Except for Permitted Investments, directly or indirectly, make or
acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however,
that (other than (a) an aggregate amount of not more than $25,000 at any
one time, in the case of Borrower and its Subsidiaries, and (b) amounts
deposited into Deposit Accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for Borrower’s
or its Subsidiaries’ employees). 
Borrower and its Subsidiaries shall not have Permitted Investments
consisting of cash, Cash Equivalents, or amounts credited to Deposit Accounts
or Securities Accounts unless Borrower or its Subsidiary, as applicable, and
the applicable securities intermediary or bank have entered into Control Agreements
with Agent governing such Permitted Investments in order to perfect (and
further establish) the Agent’s Liens in such Permitted Investments. Subject to
the foregoing proviso, Borrower shall not and shall not permit its Subsidiaries
to establish or maintain any Deposit Account or Securities Account unless Agent
shall have received a Control Agreement in respect of such Deposit Account or
Securities Account.

 

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

 

(a)           so long as Borrower is in compliance with the
provisions of Section 6.16, transactions (other the payment of management,
consulting, monitoring, or advisory fees) between Borrower or its Subsidiaries,
on the one hand, and any Affiliate of Borrower or its Subsidiaries, on the
other hand, so long as such transactions (i) are upon fair and reasonable
terms, (ii) are fully disclosed to Agent prior to the consummation thereof,
if they involve one or more payments by Borrower or its Subsidiaries in excess
of $1,000,000 for any single transaction or series of related transactions, and
(iii) are no less favorable, taken as a whole, to Borrower or its
Subsidiaries, as applicable, than would be obtained in an arm’s length
transaction with a non-Affiliate,

 

(b)           so long as it has been approved by Borrower’s
Board of Directors in accordance with applicable law, any indemnity provided
for the benefit of directors of Borrower,

 

(c)           so long as it has been approved by Borrower’s
Board of Directors, the payment of reasonable fees, compensation, or employee
benefit arrangements to employees, officers, and outside directors of Borrower
in the ordinary course of business and consistent with industry practice, and

 

(d)           transactions permitted by Section 6.3,
Section 6.9 or Section 6.16, or any Permitted
Intercompany Advance.

 

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

 

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

 

29

 

6.15         Inventory and Equipment with Bailees.  Store the Inventory or Equipment of Borrower
or its Subsidiaries (other than Equipment or Inventory out for repair) at any
time now or hereafter with a bailee, warehouseman, or similar party, unless (1) Agent has received a Collateral
Access Agreement for such location, (2) the aggregate book value of all
Inventory and Equipment stored at each such location (other than the locations
in Mississauga, Ontario) does not exceed $400,000, or (3) the aggregate
book value of all Inventory and Equipment stored at the locations in
Mississauga, Ontario does not exceed $4,000,000.

 

6.16         Intercompany Payables.  After giving effect to the transactions on
the Closing Date, (i) permit the aggregate amount payable to Parent from
Borrower to be less than $133,000,000 at anytime any Obligations are
outstanding (the “Minimum Parent Payable Amount”) or (ii) at
anytime any Obligations are outstanding, make any payment to Parent with
respect to amounts payable to Parent in excess of the Minimum Parent Payable
Amount unless (x) no Default or Event of Default shall have occurred and
be continuing or would result therefrom and (y) Excess Availability is not
less than $10,000,000 immediately after giving effect to such payment; provided,
that any payments made by Borrower to Parent in the ordinary course of business
(1) pursuant to Section 6.9 and (2) pursuant to Section 6.12(a) with
respect to (x) the purchase of goods and services from Parent and (y) for
reimbursement by Borrower to Parent for payroll expenses and trade accounts
payable paid by Parent on behalf of Borrower, in each case, shall not be
subject to this Section 6.16.

 

7.             FINANCIAL COVENANTS.

 

Borrower covenants and
agrees that, until termination of all of the Commitments and payment in full of
the Obligations, Borrower will comply with each of the following financial
covenants:

 

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

 

	
  Applicable Amount

  	
   

  	
  Applicable Period

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  4,177,000

  	
   

  	
  For the 2 month period
  ending April 30, 2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  8,310,000

  	
   

  	
  For the 3 month period
  ending May 31, 2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  12,628,000

  	
   

  	
  For the 4 month period
  ending June 30, 2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  17,432,000

  	
   

  	
  For the 5 month period
  ending July 31, 2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  23,805,000

  	
   

  	
  For the 6 month period
  ending August 31, 2008

  	
   

  

 

8.             EVENTS OF DEFAULT.

 

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

 

8.1           If Borrower fails to pay when due and
payable, or when declared due and payable, (a) all or any portion of the
Obligations consisting of interest, fees, or charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts (other than any
portion thereof constituting principal) constituting 

 

30

 

Obligations
(including any portion thereof that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or
in part as a claim in any such Insolvency Proceeding), and such failure continues
for a period of 3 Business Days, or (b) all or any portion of the
principal of the Obligations;

 

8.2           If
any Loan Party or any of its Subsidiaries:

 

(a)           fails
to perform or observe any covenant or other agreement contained in any of (i) Sections
5.1, 5.2, 5.3, 5.5, 5.6, 5.7, 5.10
or 5.11 of this Agreement, (ii) Sections 6.1 through 6.16
of this Agreement, (iii) Section 7 of this Agreement, or (iv) Section 6
of the Security Agreement;

 

(b)           fails to perform or observe any covenant or
other agreement contained in any of Sections 5.4, 5.8, 5.9,
5.12, 5.13, 5.14, 5.16 or 5.17 of this
Agreement and such failure continues for a period of 10 Business Days after the
earlier of (i) the date on which such failure shall first become known to
any officer of Borrower or (ii) the date on which written notice thereof
is given to Borrower by Agent; or

 

(c)           fails to perform or observe any covenant or
other agreement contained in this Agreement, or in any of the other Loan
Documents, in each case, other than any such covenant or agreement that is the
subject of another provision of this Section 8 (in which event such
other provision of this Section 8 shall govern), and such failure
continues for a period of 30 days after the earlier of (i) the date on
which such failure shall first become known to any officer of Borrower or (ii) the
date on which written notice thereof is given to Borrower by Agent;

 

8.3           If one or more judgments, orders, or awards
involving an aggregate amount of $500,000, or more (except to the extent fully
covered by insurance pursuant to which the insurer has accepted liability
therefor in writing) shall be entered or filed against a Loan Party or any of
its Subsidiaries or with respect to any of their respective assets, and the
same is not released, discharged, bonded against, or stayed pending appeal
before the earlier of 30 days after the date it first arises or 5 days prior to
the date on which such asset is subject to being forfeited by such Loan Party
or its Subsidiary;

 

8.4           If an Insolvency Proceeding is commenced by a
Loan Party or any of its Subsidiaries;

 

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

 

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

 

8.7           If there is a default in one or more
agreements to which a Loan Party or any of its Subsidiaries is a party with one
or more third Persons relative to a Loan Party’s or any of its Subsidiaries’
Indebtedness involving an aggregate amount of $500,000 or more, and such
default (i) occurs at the final maturity of the obligations thereunder, or
(ii) results in a right by such third Person, irrespective of whether
exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s
obligations thereunder;

 

8.8           If any warranty, representation, statement,
or Record made herein or in any other Loan Document or delivered in writing to
Agent or any Lender in connection with this Agreement or any other Loan
Document proves to be untrue in any material respect (except that such materiality
qualifier shall not be 

 

31

 

applicable
to any representations and warranties that already are qualified or modified by
materiality in the text thereof) as of the date of issuance or making or deemed
making thereof;

 

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

 

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

 

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

 

8.12         The indictment of any
Loan Party or any of its Subsidiaries under any criminal statute, or
commencement of criminal or civil proceedings against any Loan Party or any of
its Subsidiaries, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture to any Governmental Authority
of any portion of the property of such Person which would result in a Material
Adverse Change; or

 

8.13         If a Change of Control
occurs (other than as a result of the consummation of a Permitted Transaction).

 

9.             RIGHTS AND REMEDIES.

 

9.1           Rights and Remedies.  Upon the occurrence and during the continuation of an Event of Default,
Agent may, and, at the instruction of the Required Lenders, shall, in each case
by written notice to Borrower and in addition to any other rights or remedies
provided for hereunder or under any other Loan Document or by applicable law,
do any one or more of the following on behalf of the Lender Group:

 

(a)           declare the Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable, whereupon the same shall become and be immediately due and
payable, without presentment, demand, protest, or further notice or other
requirements of any kind, all of which are hereby expressly waived by Borrower;
and

 

(b)           declare the Revolver Commitments terminated,
whereupon the Revolver Commitments shall immediately be terminated together
with any obligation of any Lender hereunder to make Advances and the obligation
of the Issuing Lender to issue Letters of Credit.

 

The foregoing to the
contrary notwithstanding, upon the occurrence of any Event of Default described
in Section 8.4 or Section 8.5, in addition to the
remedies set forth above, without any notice to Borrower or any other Person or
any act by the Lender Group, the Commitments shall automatically terminate and
the Obligations then outstanding, together with all accrued and unpaid interest
thereon and all fees and all other amounts due under this Agreement and the
other Loan Documents, shall automatically and immediately become due and
payable, without presentment, demand, protest, or notice of any kind, all of
which are expressly waived by Borrower.

 

9.2           Remedies Cumulative.  The rights and remedies of the Lender Group under this Agreement, the
other Loan Documents, and all other agreements shall be cumulative.  The Lender Group shall have all

 

32

 

other
rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity.  No exercise by the
Lender Group of one right or remedy shall be deemed an election, and no waiver
by the Lender Group of any Event of Default shall be deemed a continuing
waiver.  No delay by the Lender Group
shall constitute a waiver, election, or acquiescence by it.

 

10.           WAIVERS; INDEMNIFICATION.

 

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

 

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

 

10.3         Indemnification.  Borrower shall pay, indemnify, defend, and hold the Agent-Related
Persons, and the Lender-Related Persons (each, an “Indemnified Person”)
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, liabilities,
fines, costs, penalties, and damages, and all reasonable fees and disbursements
of attorneys, experts, or consultants and all other costs and expenses actually
incurred in connection therewith or in connection with the enforcement of this
indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of
them (a) in connection with or as a result of or related to the execution
and delivery (provided that Borrower shall not be liable for costs and expenses
(including attorneys fees) of any Lender (other than WFF) incurred in advising,
structuring, drafting, reviewing, administering or syndicating the Loan
Documents), enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby or the
monitoring of Borrower’s and its Subsidiaries’ compliance with the terms of the
Loan Documents (other than disputes solely between the Lenders), (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto, and (c) in connection with or arising out of any presence or
release of Hazardous Materials at, on, under, to or from any assets or
properties owned, leased or operated by Borrower or any of its Subsidiaries or
any Environmental Actions, Environmental Liabilities and Costs or Remedial
Actions related in any way to any such assets or properties of Borrower or any
of its Subsidiaries (each and all of the foregoing, the “Indemnified
Liabilities”).  The foregoing to the
contrary notwithstanding, Borrower shall have no obligation to any Indemnified
Person under this Section 10.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person or its officers, directors, employees, attorneys, or agents.  This provision shall survive the termination
of this Agreement and the repayment of the Obligations.  If any Indemnified Person makes any payment
to any other Indemnified Person with respect to an Indemnified Liability as to
which Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be indemnified
and reimbursed by Borrower with respect thereto.  WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY
OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF
ANY OTHER PERSON.

 

33

 

11.           NOTICES.

 

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

 

 

	
  If
  to Borrower:

  	
  UTSTARCOM
  PERSONAL COMMUNICATIONS LLC

  
	
   

  	
  c/o
  UTSTARCOM, INC.

  
	
   

  	
  1275
  Harbor Bay Parkway

  
	
   

  	
  Alameda,
  California 94502

  
	
   

  	
  Attn:
  Keith San Felipe, VP, Treasurer

  
	
   

  	
  Attn:
  Susan Marsch, VP, General Counsel

  
	
   

  	
  Fax
  No.: 510-864-8802

  
	
   

  	
   

  
	
  with
  copies to:

  	
  WILSON
  SONSINI GOODRICH & ROSATI, 

  P.C.

  
	
   

  	
  650
  Page Mill Road

  
	
   

  	
  Palo
  Alto, California 94304

  
	
   

  	
  Attn:
  John A. Fore, Esq.

  
	
   

  	
  Fax
  No.: 650-493-6811

  
	
   

  	
   

  
	
  If
  to Agent:

  	
  WELLS FARGO FOOTHILL, LLC

  
	
   

  	
  One
  Boston Place, Suite 1800

  
	
   

  	
  Boston,
  Massachusetts 02108

  
	
   

  	
  Attn:
  Business Finance Division Manager

  
	
   

  	
  Fax
  No.: 617-523-1697

  
	
   

  	
   

  
	
  with
  copies to:

  	
  SCHULTE
  ROTH & ZABEL LLP

  
	
   

  	
  919
  Third Avenue

  
	
   

  	
  New
  York, New York 10022

  
	
   

  	
  Attn: Frederic L. Ragucci, Esq.

  
	
   

  	
  Fax
  No.: 212-593-5955

  

 

Any party hereto may change
the address at which they are to receive notices hereunder, by notice in
writing in the foregoing manner given to the other party.  All notices or demands sent in accordance
with this Section 10, shall be deemed received on the earlier of
the date of actual receipt or 3 Business Days after the deposit thereof in the
mail; provided, that (a) notices sent by overnight courier service
shall be deemed to have been given when received, (b) notices by facsimile
shall be deemed to have been given when sent (except that, if not given during
normal business hours for the receipient, shall be deemed to have been given at
the opening on business on the next Business Day for the receipient) and (c) notices
by electronic mail shall be deemed received upon the sender’s receipt of an
acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return email or other written
acknowledgment).

 

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

 

(a)           THE VALIDITY OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF 

 

34

 

THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

 

(b)           THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING
SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER AND EACH MEMBER OF THE LENDER GROUP
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM  NON  CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 11(b).

 

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

 

13.           ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS.

 

13.1         Assignments and Participations.

 

(a)           With
the prior written consent of Agent, which consent of Agent shall not be
unreasonably withheld, delayed or conditioned, and shall not be required in
connection with an assignment to a Person that is a Lender or an Affiliate
(other than individuals) of a Lender, any Lender may assign and delegate to one
or more assignees (each an “Assignee”; provided that no Loan Party or
Affiliate of a Loan Party shall be permitted to become an Assignee) all or any
portion of the Obligations, the Commitments and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount (unless waived by the Agent) of $10,000,000 (except such minimum
amount shall not apply to (x) an assignment or delegation by any Lender to
any other Lender or an Affiliate of any Lender or (y) a group of new
Lenders, each of which is an Affiliate of each other or a Related Fund of such
new Lender to the extent that the aggregate amount to be assigned to all such
new Lenders is at least $10,000,000); provided, however, that
Borrower and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to Borrower
and Agent by such Lender and the Assignee, (ii) such Lender and its
Assignee have delivered to Borrower and Agent an Assignment and Acceptance and
Agent has notified the assigning Lender of its receipt thereof in accordance
with Section 13.1(b), and (iii) unless waived by the Agent,
the assigning Lender or Assignee has paid to Agent for Agent’s separate account
a processing fee in the amount of $3,500.

 

(b)           From and after the date that Agent notifies
the assigning Lender (with a copy to Borrower) that it has received an executed
Assignment and Acceptance and, if applicable, payment of the

 

35

 

required
processing fee, (i) the Assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assigning
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 10.3
hereof) and be released from any future obligations under this Agreement (and
in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement
and the other Loan Documents, such Lender shall cease to be a party hereto and
thereto), and such assignment shall effect a novation among Borrower, the
assigning Lender, and the Assignee; provided, however, that
nothing contained herein shall release any assigning Lender from obligations
that survive the termination of this Agreement, including such assigning Lender’s
obligations under Section 14 and Section 17.9(a) of
this Agreement.

 

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

 

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

 

(e)           Any Lender may at any time sell to one or
more commercial banks, financial institutions, or other Persons (a “Participant”)
participating interests in all or any portion of its Obligations, its
Commitment, and the other rights and interests of that Lender (the “Originating
Lender”) hereunder and under the other Loan Documents; provided, however,
that (i) the Originating Lender shall remain a “Lender” for all purposes
of this Agreement and the other Loan Documents and the Participant receiving
the participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute a
“Lender” hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower, Agent, and the Lenders shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend
the final maturity date of the Obligations hereunder in which such Participant
is participating,

 

36

 

(B) reduce
the interest rate applicable to the Obligations hereunder in which such
Participant is participating, (C) release all or substantially all of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating, (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such Lender,
or (E) change the amount or due dates of scheduled principal repayments or
prepayments or premiums, and (v) all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of set
off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement.  The rights of any Participant only shall be derivative
through the Originating Lender with whom such Participant participates and no
Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to the other Lenders, Agent, Borrower, the
Collections of Borrower or its Subsidiaries, the Collateral, or otherwise in
respect of the Obligations.  No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. 
The provisions of this Section 13.1(e) are solely for the
benefit of the Lender Group and Loan Parties shall not have any rights as third
party beneficiaries of any such provisions.

 

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

 

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

 

(h)           Agent (as a non-fiduciary agent on behalf of
Borrower) shall maintain, or cause to be maintained, a register (the “Register”)
on which it enters the name and address of each Lender as the registered owner
of each Advance (and the principal amount thereof and stated interest thereon)
held by such Lender (each, a “Registered Loan”).  A Registered Loan (and the registered note,
if any, evidencing the same) may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register (and each registered
note shall expressly so provide).  Any
assignment or sale of all or part of such Registered Loan (and the registered
note, if any, evidencing the same) may be effected only by registration of such
assignment or sale on the Register, together with the surrender of the
registered note, if any, evidencing the same duly endorsed by (or accompanied
by a written instrument of assignment or sale duly executed by) the holder of
such registered note, whereupon, at the request of the designated assignee(s) or
transferee(s), one or more new registered notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or
transferee(s).  Prior to the registration
of assignment or sale of any Registered Loan (and the registered note, if any
evidencing the same), Borrower shall treat the Person in whose name such
Registered Loan (and the registered note, if any, evidencing the same) is
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes, notwithstanding notice to the contrary.

 

(i)            In the event that a Lender sells
participations in the Registered Loan, such Lender, as a non-fiduciary agent on
behalf of Borrower, shall maintain a register on which it enters the name of
all participants in the Registered Loans held by it (the “Participant
Register”).  A Registered Loan (and
the Registered Note, if any, evidencing the same) may be participated in whole
or in part only by registration of such participation on the Participant
Register (and each registered note shall expressly so provide).  Any participation of such Registered Loan
(and the registered note, if any, evidencing the same) may be effected only by
the registration of such participation on the Participant Register.

 

37

 

(j)            Agent shall make a copy of the Register (and
each Lender shall make a copy of its Participant Register in the extent it has
one) available for review by Borrower from time to time as Borrower may
reasonably request.

 

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

 

14.           AMENDMENTS; WAIVERS.

 

14.1         Amendments and Waivers.

 

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

 

(i)            increase the amount of or extend the
expiration date of any Commitment of any Lender,

 

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

 

(iii)          reduce the principal of, or the rate of
interest on, any loan or other extension of credit hereunder, or reduce any
fees or other amounts payable hereunder or under any other Loan Document
(except (y) in connection with the waiver of applicability of Section 2.6(c) (which
waiver shall be effective with the written consent of the Required Lenders),
and (z) that any amendment or modification of defined terms used in the
financial covenants in this Agreement shall not constitute a reduction in the
rate of interest or a reduction of fees for purposes of this clause (iii)),

 

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

 

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

 

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

 

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

 

(viii)        other than in connection with a merger,
liquidation, dissolution or sale of such Person expressly permitted by the terms
hereof or the other Loan Documents, release Borrower or any Guarantor from any
obligation for the payment of money or consent to the assignment or transfer by
the Borrower or any Guarantor of any of its rights or duties under this
Agreement or the other Loan Documents,

 

38

 

(ix)           amend any of the provisions of Section 2.4(b)(i) or
(ii) or Section 2.4(e) or (f),

 

(x)            amend Section 13.1(a) to
permit a Loan Party or an Affiliate of a Loan Party to be permitted to become
an Assignee, or

 

(xi)           change the definition of Borrowing Base or
any of the defined terms (including the definitions of Eligible Accounts and
Eligible Inventory) that are used in such definition to the extent that any
such change results in more credit being made available to Borrower based upon
the Borrowing Base, but not otherwise, or the definitions of Maximum Revolver
Amount, or change Section 2.1(c).

 

(b)           No amendment, waiver, modification, or
consent shall amend, modify, or waive (i) the definition of, or any of the
terms or provisions of, the Fee Letter, without the written consent of Agent
and Borrower (and shall not require the written consent of any of the Lenders),
and (ii) any provision of Section 15 pertaining to Agent, or any other
rights or duties of Agent under this Agreement or the other Loan Documents,
without the written consent of Agent, Borrower, and the Required Lenders,

 

(c)           No amendment, waiver, modification, or
consent shall amend, modify, or waive any provision of this Agreement or the
other Loan Documents pertaining to Issuing Lender, or any other rights or
duties of Issuing Lender under this Agreement or the other Loan Documents,
without the written consent of Issuing Lender, Agent, Borrower, and the
Required Lenders,

 

(d)           No amendment, waiver, modification, or
consent shall amend, modify, or waive any provision of this Agreement or the
other Loan Documents pertaining to Swing Lender, or any other rights or duties
of Swing Lender under this Agreement or the other Loan Documents, without the
written consent of Swing Lender, Agent, Borrower, and the Required Lenders,

 

(e)           Anything in this Section 14.1 to
the contrary notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
Borrower, shall not require consent by or the agreement of  Borrower.

 

14.2         Replacement of Holdout
Lender.

 

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

 

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

 

39

 

Loan Documents, the Holdout Lender shall remain obligated to make the
Holdout Lender’s Pro Rata Share of Advances and to purchase a participation in
each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.

 

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

 

15.           AGENT; THE LENDER GROUP.

 

15.1         Appointment and
Authorization of Agent.  Each Lender hereby designates and appoints
WFF as its representative under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agent to execute and deliver each of
the other Loan Documents on its behalf and to take such other action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 15.  The provisions of this Section 15
are solely for the benefit of Agent and the Lenders, and, except for the last
sentence of Section 15.9, Borrower and its Subsidiaries shall have
no rights as a third party beneficiary of any of the provisions contained
herein.  Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word “Agent” is for
convenience only, that WFF is merely the representative of the Lenders, and
only has the contractual duties set forth herein.  Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect
to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions that Agent expressly is entitled to take
or assert under or pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the
Obligations, the Collateral, the Collections of Borrower and its Subsidiaries,
and related matters, (b) execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of
Lenders as provided in the Loan Documents, (d) exclusively receive, apply,
and distribute the Collections of Borrower and its Subsidiaries as provided in
the Loan Documents, (e) open and maintain such bank accounts and cash
management arrangements as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections of Borrower and its Subsidiaries, (f) perform,
exercise, and enforce any and all other rights and remedies of the Lender Group
with respect to Borrower or its Subsidiaries, the Obligations, the Collateral,
the Collections of Borrower and its Subsidiaries, or otherwise related to any
of same as provided in the Loan Documents, and (g) incur and pay such
Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.

 

15.2         Delegation of Duties.  Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys in fact and shall be
entitled to advice of counsel 

 

40

 

concerning all matters pertaining to such duties.  Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

 

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

 

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

 

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

 

15.6         Credit Decision.  Each Lender acknowledges that none of the Agent-Related Persons has
made any representation or warranty to it, and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender.  Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and 

 

41

 

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

 

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

 

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

 

42

 

15.9         Successor Agent.  Agent may resign as Agent upon 30 days prior written notice to the
Lenders (unless such notice is waived by the Required Lenders) and Borrower (unless
such notice is waived by Borrower).  If
Agent resigns under this Agreement, the Required Lenders shall be entitled,
with (so long as no Event of Default has occurred and is continuing) the
consent of Borrower (such consent not to be unreasonably withheld, delayed, or
conditioned), appoint a successor Agent for the Lenders.  If, at the time that Agent’s resignation is
effective, it is acting as the Issuing Lender or the Swing Lender, such
resignation shall also operate to effectuate its resignation as the Issuing
Lender or the Swing Lender, as applicable, and it shall automatically be
relieved of any further obligation to issue Letters of Credit or make Swing
Loans.  If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders and Borrower, a successor
Agent.  If Agent has materially breached
or failed to perform any material provision of this Agreement or of applicable
law, the Required Lenders may agree in writing to remove and replace Agent with
a successor Agent from among the Lenders. 
In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers,
and duties of the retiring Agent and the term “Agent” shall mean such successor
Agent and the retiring Agent’s appointment, powers, and duties as Agent shall
be terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 14
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. 
If no successor Agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.  Any successor Agent will be a U.S. financial
institution within the meaning of Treasury Regulations Section 1.165-12(c)(1)(iv).

 

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

 

15.11       Collateral Matters.

 

(a)           The Lenders hereby irrevocably authorize
Agent, at its option and in its sole discretion, to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Borrower certifies to Agent that the sale or
disposition is permitted under Section 6.4 of this Agreement or the
other Loan Documents (and Agent may rely conclusively on any such certificate,
without further inquiry), (iii) constituting property in which Borrower or
its Subsidiaries owned no interest at the time the Agent’s Lien was granted nor
at any time thereafter, or (iv) constituting property leased to Borrower
or its Subsidiaries under a lease that has expired or is terminated in a
transaction permitted under this Agreement. 
Except as provided above, Agent will not execute and deliver a release
of any Lien on any Collateral without the prior written authorization of (y) if
the release is of all or substantially all of the Collateral, all of the
Lenders, or (z) otherwise, the Required Lenders.  Upon request by Agent or Borrower at any
time, the Lenders will confirm in writing Agent’s authority to release any such
Liens on particular types or items of Collateral pursuant to this Section 15.11;
provided, however, that (1) Agent shall not be required to
execute any document necessary to evidence such release on terms that, in Agent’s
opinion, would expose Agent to liability or create any obligation or entail any
consequence other than the

 

43

 

release of such Lien without recourse, representation, or warranty, and
(2) such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of Borrower in respect of) all interests retained by Borrower,
including, the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.

 

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

 

15.12       Restrictions on Actions by
Lenders; Sharing of Payments.

 

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

 

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

 

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

 

15.14       Payments by Agent to the
Lenders.  All payments to be made by Agent to the
Lenders shall be made by bank wire transfer of immediately available funds
pursuant to such wire transfer instructions as each party may designate for
itself by written notice to Agent. 
Concurrently with each such payment, Agent 

 

44

 

shall identify whether such payment (or any portion thereof) represents
principal, premium, fees, or interest of the Obligations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

45

 

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

 

16.           WITHHOLDING TAXES.

 

(a)           All
payments made by Borrower hereunder or under any note or other Loan Document
will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future Taxes, and in the event any deduction or withholding of Taxes is
required, Borrower shall comply with the next sentence of this Section 16(a).  If any Taxes are so levied or imposed,
Borrower agrees to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 16(a) after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein;
provided, however, that Borrower shall not be required to increase any such
amounts if the increase in such amount payable results from Agent’s or such
Lender’s own willful misconduct or gross negligence (as finally determined by a
court of competent jurisdiction). 
Borrower will furnish to Agent as promptly as possible after the date
the payment of any Tax is due pursuant to applicable law, certified copies of
tax receipts evidencing such payment by Borrower.

 

(b)           Borrower agrees to pay any present or future
stamp, value added or documentary taxes or any other excise or property taxes,
charges, or similar levies that arise from any payment made hereunder or from
the execution, delivery, performance, recordation, or filing of, or otherwise
with respect to this Agreement or any other Loan Document.

 

(c)           If a Lender or Participant is entitled to
claim an exemption or reduction from United States withholding or backup
withholding tax, such Lender or Participant agrees to deliver to Agent (or, in
the case of a Participant, to the Lender granting the participation only) one
of the following before receiving its first payment under this Agreement:

 

(i)            if such Lender or Participant is entitled to
claim an exemption from United States withholding tax pursuant to its portfolio
interest exception, (A) a statement of the Lender or Participant, signed
under penalty of perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of
the IRC, (II) a 10% shareholder of Borrower (within the meaning of Section 871(h)(3)(B) of
the IRC), or (III) a controlled foreign corporation related to Borrower
within the meaning of Section 864(d)(4) of the IRC, and (B) a
properly completed and executed IRS Form W-8BEN or Form W-8IMY (with
proper attachments);

 

(ii)           if such Lender or Participant is entitled to
claim an exemption from, or a reduction of, withholding tax under a United
States tax treaty, a properly completed and executed copy of IRS Form W-8BEN;

 

46

 

(iii)          if such Lender or Participant is
entitled  to claim that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, a
properly completed and executed copy of IRS Form W-8ECI;

 

(iv)          if such Lender or Participant is entitled to
claim that interest paid under this Agreement is exempt from United States
withholding tax because such Lender or Participant serves as an intermediary, a
properly completed and executed copy of IRS Form W-8IMY (with proper
attachments); or

 

(v)           a properly completed and executed copy of any
other form or forms, including IRS Form W-9, as may be required under the
IRC or other laws of the United States as a condition to exemption from, or reduction
of, United States withholding or backup withholding tax.

 

Each Lender or Participant
shall provide new forms (or successor forms) upon the expiration or
obsolescence of any previously delivered forms and to promptly notify Agent
(or, in the case of a Participant, to the Lender granting the participation
only) of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.

 

(d)           If a Lender or Participant claims an
exemption from withholding tax in a jurisdiction other than the United States,
such Lender or such Participant agrees to deliver to Agent (or, in the case of
a Participant, to the Lender granting the participation only) any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement, but only if such
Lender or such Participant is legally able to deliver such forms, provided,
however, that nothing in this Section 16(d) shall require a
Lender or Participant to disclose any information that it deems to be
confidential (including without limitation, its tax returns).  Each Lender and each Participant shall
provide new forms (or successor forms) upon the expiration or obsolescence of
any previously delivered forms and to promptly notify Agent (or, in the case of
a Participant, to the Lender granting the participation only) of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.

 

(e)           If a Lender or Participant claims exemption
from, or reduction of, withholding tax and such Lender or Participant sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender or Participant, such Lender or
Participant agrees to notify Agent (or, in the case of a sale of a
participation interest, to the Lender granting the participation only) of  the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrower to such Lender or
Participant.  To the extent of such
percentage amount, Agent will treat such Lender’s or such Participant’s
documentation provided pursuant to Section 16(c) or 16(d) as no
longer valid.  With respect to such percentage
amount, such Participant or Assignee may provide new documentation, pursuant to
Section 16(c) or 16(d), if applicable.  Borrower agrees that each Participant shall
be entitled to the benefits of this Section 16 with respect to its
participation in any portion of the Commitments and the Obligations so long as
such Participant complies with the obligations set forth in this Section 16
with respect thereto.

 

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

 

(g)           If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
(or, in the case of a Participant, to the Lender granting the participation)
did not properly withhold tax from amounts paid to or for the account of any
Lender or any Participant due to a 

 

47

 

failure on the part of the Lender or any Participant (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent (or such Participant failed to notify the Lender
granting the participation) of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless (or, in the case of
a Participant, such Participant shall indemnify and hold the Lender granting
the participation harmless) for all amounts paid, directly or indirectly, by
Agent (or, in the case of a Participant, to the Lender granting the
participation), as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
(or, in the case of a Participant, to the Lender granting the participation
only) under this Section 16, together with all costs and expenses
(including attorneys fees and expenses). 
The obligation of the Lenders and the Participants under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of Agent.

 

(h)           If Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section 16, so long as no Default or Event of
Default has occurred and is continuing, it shall pay over such refund to
Borrower (but only to the extent of payments made, or additional amounts paid,
by Borrower under this Section 16 with respect to Taxes giving rise to
such a refund), net of all out-of-pocket expenses of Agent or such Lender and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such a refund); provided, that Borrower, upon the
request of Agent or such Lender, agrees to repay the amount paid over to Borrower
(plus any penalties, interest or other charges, imposed by the relevant
Governmental Authority, other than such penalties, interest or other charges
imposed as a result of the willful misconduct or gross negligence of Agent
hereunder) to Agent or such Lender in the event Agent or such Lender is
required to repay such refund to such Governmental Authority.  Notwithstanding anything in this Credit
Agreement to the contrary, this Section 16 shall not be construed to
require Agent or any Lender to make available its tax returns (or any other
information which it deems confidential) to Borrower or any other Person.

 

17.           GENERAL PROVISIONS.

 

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

 

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

 

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

 

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

 

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

 

48

 

to any Bank Product Provider unless such Bank Product Provider has
notified Agent in writing of the amount of any such liability owed to it prior
to such distribution.

 

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

 

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

 

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

 

17.9         Confidentiality.

 

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

 

49

 

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

 

17.10       Lender
Group Expenses.  Borrower agrees to pay any and all Lender
Group Expenses promptly after demand therefor by Agent and agrees that its
obligations contained in this Section 17.10 shall
survive payment or satisfaction in full of all other Obligations.  Notwithstanding anything in this Agreement
(including Section 10.3), in connection with or as a result of or related
to advising, structuring, drafting, reviewing, administering or syndicating the
Loan Documents, Borrower shall not be liable for more than $100,000 in Lender
Group Expenses incurred up to and including the Closing Date and provided
further, that Borrower shall not be liable for costs and expenses (including
attorneys fees) of any Lender (other than WFF) incurred up to and including the
Closing Date in advising, structuring, drafting, reviewing, administering or
syndicating the Loan Documents).

 

17.11       USA
PATRIOT Act. Each Lender that is subject to the requirements of
the Patriot Act hereby notifies the Borrower that pursuant to the requirements
of the Act, it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Patriot Act.

 

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

 

[Signature pages to follow.]

 

50

 

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

 

	
   

  	
  UTSTARCOM
  PERSONAL COMMUNICATIONS LLC,

  a Delaware limited liability company, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ KEITH SAN FELIPE

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, LLC.,

  a Delaware limited
  liability company, as Agent and as a

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ERIK R. SAWYER

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS
  AND CONSTRUCTION

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
  1

  
	
   

  	
  1.3

  	
  Code

  	
  1

  
	
   

  	
  1.4

  	
  Construction

  	
  1

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
  2

  
	
  2.

  	
  LOAN
  AND TERMS OF PAYMENT

  	
  2

  
	
   

  	
  2.1

  	
  Revolver Advances

  	
  2

  
	
   

  	
  2.2

  	
  Intentionally Omitted

  	
  2

  
	
   

  	
  2.3

  	
  Borrowing Procedures and Settlements

  	
  3

  
	
   

  	
  2.4

  	
  Payments; Reductions of Commitments; Prepayments

  	
  6

  
	
   

  	
  2.5

  	
  Overadvances

  	
  9

  
	
   

  	
  2.6

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

  	
  9

  
	
   

  	
  2.7

  	
  Crediting Payments

  	
  10

  
	
   

  	
  2.8

  	
  Designated Account

  	
  10

  
	
   

  	
  2.9

  	
  Maintenance of Loan Account; Statements of
  Obligations

  	
  11

  
	
   

  	
  2.10

  	
  Fees

  	
  11

  
	
   

  	
  2.11

  	
  Letters of Credit

  	
  11

  
	
   

  	
  2.12

  	
  LIBOR Option

  	
  14

  
	
   

  	
  2.13

  	
  Capital Requirements

  	
  16

  
	
  3.

  	
  CONDITIONS;
  TERM OF AGREEMENT

  	
  16

  
	
   

  	
  3.1

  	
  Conditions Precedent to the Initial Extension of
  Credit

  	
  16

  
	
   

  	
  3.2

  	
  Conditions Precedent to all Extensions of Credit

  	
  17

  
	
   

  	
  3.3

  	
  Term

  	
  17

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
  17

  
	
   

  	
  3.5

  	
  Early Termination by Borrower

  	
  17

  
	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  17

  
	
   

  	
  4.1

  	
  Due Organization and Qualification; Subsidiaries

  	
  18

  
	
   

  	
  4.2

  	
  Due Authorization; No Conflict

  	
  18

  
	
   

  	
  4.3

  	
  Governmental Consents

  	
  18

  
	
   

  	
  4.4

  	
  Binding Obligations; Perfected Liens

  	
  19

  
	
   

  	
  4.5

  	
  Title to Assets; No Encumbrances

  	
  19

  

 

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

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

  	
  19

  
	
   

  	
  4.7

  	
  Litigation

  	
  19

  
	
   

  	
  4.8

  	
  Compliance with Laws

  	
  20

  
	
   

  	
  4.9

  	
  No Material Adverse Change

  	
  20

  
	
   

  	
  4.10

  	
  Fraudulent Transfer

  	
  20

  
	
   

  	
  4.11

  	
  Employee Benefits

  	
  20

  
	
   

  	
  4.12

  	
  Environmental Condition

  	
  20

  
	
   

  	
  4.13

  	
  Intellectual Property

  	
  20

  
	
   

  	
  4.14

  	
  Leases

  	
  21

  
	
   

  	
  4.15

  	
  Deposit Accounts and Securities Accounts

  	
  21

  
	
   

  	
  4.16

  	
  Complete Disclosure

  	
  21

  
	
   

  	
  4.17

  	
  Material Contracts

  	
  21

  
	
   

  	
  4.18

  	
  Patriot Act

  	
  21

  
	
   

  	
  4.19

  	
  Indebtedness

  	
  22

  
	
   

  	
  4.20

  	
  Payment of Taxes

  	
  22

  
	
   

  	
  4.21

  	
  Margin Stock

  	
  22

  
	
   

  	
  4.22

  	
  Governmental Regulation

  	
  22

  
	
   

  	
  4.23

  	
  OFAC

  	
  22

  
	
   

  	
  4.24

  	
  Eligible Accounts

  	
  22

  
	
   

  	
  4.25

  	
  Eligible Inventory

  	
  23

  
	
   

  	
  4.26

  	
  Location of Inventory and Equipment

  	
  23

  
	
   

  	
  4.27

  	
  Inventory Records

  	
  23

  
	
   

  	
  4.28

  	
  Permits, Etc.

  	
  23

  
	
   

  	
  4.29

  	
  Customers and Suppliers

  	
  23

  
	
   

  	
  4.30

  	
  Insurance

  	
  23

  
	
   

  	
  4.27

  	
  Brokerage Fees

  	
  23

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
  23

  
	
   

  	
  5.1

  	
  Financial Statements, Reports, Certificates

  	
  24

  
	
   

  	
  5.2

  	
  Collateral Reporting

  	
  24

  
	
   

  	
  5.3

  	
  Existence

  	
  24

  
	
   

  	
  5.4

  	
  Maintenance of Properties

  	
  24

  

 

2

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Taxes

  	
  24

  
	
   

  	
  5.6

  	
  Insurance

  	
  24

  
	
   

  	
  5.7

  	
  Inspection

  	
  25

  
	
   

  	
  5.8

  	
  Compliance with Laws

  	
  25

  
	
   

  	
  5.9

  	
  Environmental

  	
  25

  
	
   

  	
  5.10

  	
  Disclosure Updates

  	
  26

  
	
   

  	
  5.11

  	
  Formation of Subsidiaries

  	
  26

  
	
   

  	
  5.12

  	
  Further Assurances

  	
  26

  
	
   

  	
  5.13

  	
  Material Contracts

  	
  27

  
	
   

  	
  5.14

  	
  Location of Inventory and Equipment

  	
  27

  
	
   

  	
  5.15

  	
  Intentionally Omitted

  	
  27

  
	
   

  	
  5.16

  	
  Organizational ID Number; Commercial Tort Claims

  	
  27

  
	
   

  	
  5.17

  	
  Obtaining Permits, Etc.

  	
  27

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
  27

  
	
   

  	
  6.1

  	
  Indebtedness

  	
  27

  
	
   

  	
  6.2

  	
  Liens

  	
  27

  
	
   

  	
  6.3

  	
  Restrictions on Fundamental Changes

  	
  27

  
	
   

  	
  6.4

  	
  Disposal of Assets

  	
  28

  
	
   

  	
  6.5

  	
  Change Name

  	
  28

  
	
   

  	
  6.6

  	
  Nature of Business

  	
  28

  
	
   

  	
  6.7

  	
  Prepayments and Amendments

  	
  28

  
	
   

  	
  6.8

  	
  Intentionally Omitted

  	
  28

  
	
   

  	
  6.9

  	
  Distributions

  	
  28

  
	
   

  	
  6.10

  	
  Accounting Methods

  	
  29

  
	
   

  	
  6.11

  	
  Investments

  	
  29

  
	
   

  	
  6.12

  	
  Transactions with Affiliates

  	
  29

  
	
   

  	
  6.13

  	
  Use of Proceeds

  	
  29

  
	
   

  	
  6.14

  	
  Consignments

  	
  29

  
	
   

  	
  6.15

  	
  Inventory and Equipment with Bailees

  	
  30

  
	
   

  	
  6.16

  	
  Intercompany Payables

  	
  30

  
	
   

  	
  6.16

  	
  Borrowing Base

  	
   

  
	
  7.

  	
  FINANCIAL COVENANTS

  	
  30

  

 

3

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
  30

  
	
   

  	
   

  	
   

  
	
  9.

  	
  RIGHTS AND REMEDIES

  	
  32

  
	
   

  	
  9.1

  	
  Rights and Remedies

  	
  32

  
	
   

  	
  9.2

  	
  Remedies Cumulative

  	
  32

  
	
  10.

  	
  WAIVERS;
  INDEMNIFICATION

  	
  33

  
	
   

  	
  10.1

  	
  Demand; Protest; etc

  	
  33

  
	
   

  	
  10.2

  	
  The Lender Group’s Liability for Collateral

  	
  33

  
	
   

  	
  10.3

  	
  Indemnification

  	
  33

  
	
  11.

  	
  NOTICES

  	
  34

  
	
  12.

  	
  CHOICE OF LAW AND
  VENUE; JURY TRIAL WAIVER

  	
  34

  
	
  13.

  	
  ASSIGNMENTS AND
  PARTICIPATIONS; SUCCESSORS

  	
  35

  
	
   

  	
  13.1

  	
  Assignments and Participations

  	
  35

  
	
   

  	
  13.2

  	
  Successors

  	
  38

  
	
  14.

  	
  AMENDMENTS; WAIVERS

  	
  38

  
	
   

  	
  14.1

  	
  Amendments and Waivers

  	
  38

  
	
   

  	
  14.2

  	
  Replacement of Holdout Lender

  	
  39

  
	
   

  	
  14.3

  	
  No Waivers; Cumulative Remedies

  	
  40

  
	
  15.

  	
  AGENT; THE LENDER GROUP

  	
  40

  
	
   

  	
  15.1

  	
  Appointment and Authorization of Agent

  	
  40

  
	
   

  	
  15.2

  	
  Delegation of Duties

  	
  40

  
	
   

  	
  15.3

  	
  Liability of Agent

  	
  41

  
	
   

  	
  15.4

  	
  Reliance by Agent

  	
  41

  
	
   

  	
  15.5

  	
  Notice of Default or Event of Default

  	
  41

  
	
   

  	
  15.6

  	
  Credit Decision

  	
  41

  
	
   

  	
  15.7

  	
  Costs and Expenses; Indemnification

  	
  42

  
	
   

  	
  15.8

  	
  Agent in Individual Capacity

  	
  42

  
	
   

  	
  15.9

  	
  Successor Agent

  	
  43

  
	
   

  	
  15.10

  	
  Lender in Individual Capacity

  	
  43

  
	
   

  	
  15.11

  	
  Collateral Matters

  	
  43

  
	
   

  	
  15.12

  	
  Restrictions on Actions by Lenders; Sharing of Payments

  	
  44

  
	
   

  	
  15.13

  	
  Agency for Perfection

  	
  44

  
	
   

  	
  15.14

  	
  Payments by Agent to the Lenders

  	
  44

  
	
   

  	
  15.15

  	
  Concerning the Collateral and Related Loan Documents

  	
  45

  

 

4

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.16

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

  	
  45

  
	
   

  	
  15.17

  	
  Several Obligations; No Liability

  	
  46

  
	
  16.

  	
  WITHHOLDING TAXES

  	
  46

  
	
  17.

  	
  GENERAL PROVISIONS

  	
  48

  
	
   

  	
  17.1

  	
  Effectiveness

  	
  48

  
	
   

  	
  17.2

  	
  Section Headings

  	
  48

  
	
   

  	
  17.3

  	
  Interpretation

  	
  48

  
	
   

  	
  17.4

  	
  Severability of Provisions

  	
  48

  
	
   

  	
  17.5

  	
  Bank Product Providers

  	
  48

  
	
   

  	
  17.6

  	
  Debtor-Creditor Relationship

  	
  49

  
	
   

  	
  17.7

  	
  Counterparts; Electronic Execution

  	
  49

  
	
   

  	
  17.8

  	
  Revival and Reinstatement of Obligations

  	
  49

  
	
   

  	
  17.9

  	
  Confidentiality

  	
  49

  
	
   

  	
  17.10

  	
  Lender Group Expenses

  	
  50

  
	
   

  	
  17.11

  	
  USA PATRIOT Act

  	
  50

  
	
   

  	
  17.12

  	
  Integration

  	
  50

  

 

5

 

EXHIBITS
AND SCHEDULES

 

	
  Exhibit A-1

  	
  Form of
  Assignment and Acceptance

  
	
  Exhibit B-1

  	
  Form of
  Borrowing Base Certificate

  
	
  Exhibit C-1

  	
  Form of
  Compliance Certificate

  
	
  Exhibit L-1

  	
  Form of
  LIBOR Notice

  
	
   

  	
   

  
	
  Schedule A-1

  	
  Agent’s
  Account

  
	
  Schedule A-2

  	
  Authorized
  Persons

  
	
  Schedule C-1

  	
  Commitments

  
	
  Schedule D-1

  	
  Designated
  Account

  
	
  Schedule E-1

  	
  Eligible
  Inventory Locations

  
	
  Schedule P-1

  	
  Permitted
  Investments

  
	
  Schedule P-2

  	
  Permitted
  Liens

  
	
  Schedule R-1

  	
  Real
  Property Collateral

  
	
  Schedule 1.1

  	
  Definitions

  
	
  Schedule 3.1

  	
  Conditions
  Precedent

  
	
  Schedule 3.1(j)

  	
  Collateral Access
  Agreement Locations

  
	
  Schedule 4.1(b)

  	
  Capitalization
  of Borrower

  
	
  Schedule 4.1(c)

  	
  Capitalization
  of Borrower’s Subsidiaries

  
	
  Schedule 4.6(a)

  	
  States
  of Organization

  
	
  Schedule 4.6(b)

  	
  Chief
  Executive Offices

  
	
  Schedule 4.6(c)

  	
  Organizational
  Identification Numbers

  
	
  Schedule 4.6(d)

  	
  Commercial
  Tort Claims

  
	
  Schedule 4.7

  	
  Litigation

  
	
  Schedule 4.12

  	
  Environmental
  Matters

  
	
  Schedule 4.13

  	
  Intellectual
  Property

  
	
  Schedule 4.15

  	
  Deposit
  Accounts and Securities Accounts

  
	
  Schedule 4.17

  	
  Material
  Contracts

  
	
  Schedule 4.19

  	
  Permitted
  Indebtedness

  
	
  Schedule 4.26

  	
  Locations
  of Inventory and Equipment

  
	
  Schedule 4.30

  	
  Insurance

  
	
  Schedule 5.1

  	
  Financial
  Statements, Reports, Certificates

  
	
  Schedule 5.2

  	
  Collateral
  Reporting

  

 

 

Schedule
1.1

 

As
used in the Agreement, the following terms shall have the following
definitions:

 

“Account” means an account (as that term is
defined in the Code).

 

“Account Debtor” means any Person who is
obligated on an Account, chattel paper, or a general intangible.

 

“ACH Transactions” means any cash management or
related services (including the Automated Clearing House processing of
electronic fund transfers through the direct Federal Reserve Fedline system)
provided by a Bank Product Provider for the account of Borrower or its
Subsidiaries.

 

“Additional Documents” has the meaning
specified therefor in Section 5.12.

 

“Advances” has the meaning specified therefor
in Section 2.1(a).

 

“Affected Lender” has the meaning specified
therefor in Section 2.13(b).

 

 “Affiliate”
means, as applied to any Person, any other Person who controls, is controlled
by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person,
whether through the ownership of Stock, by contract, or otherwise; provided,
however, that, for purposes of the definition of Eligible Accounts  and Section 6.12 of the
Agreement: (a) any Person which owns directly or indirectly 10% or more of
the Stock having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed an Affiliate of such Person, (b) each director (or
comparable manager) of a Person shall be deemed to be an Affiliate of such
Person, and (c) each partnership in which a Person is a general partner
shall be deemed an Affiliate of such Person.

 

“Agent” has the meaning specified therefor in
the preamble to the Agreement.

 

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

 

“Agent’s Account” means the Deposit Account of
Agent identified on Schedule A-1.

 

“Agent’s Liens” means the Liens granted by
Borrower or its Subsidiaries to Agent under the Loan Documents.

 

“Agreement” means the Credit Agreement to which
this Schedule 1.1 is attached.

 

“Application Event”
means the occurrence of (a) a failure by Borrower to repay all of the Obligations
on the Maturity Date, or (b) an Event of Default and the election by the
Agent or the Required Lenders to require that payments and proceeds of
Collateral be applied pursuant to Section 2.4(b)(ii).

 

 “Assignee”
has the meaning specified therefor in Section 13.1(a).

 

 

“Assignment and Acceptance” means an Assignment
and Acceptance Agreement substantially in the form of Exhibit A-1.

 

“Authorized Person” means any one of the
individuals identified on Schedule A-2.

 

 “Availability”
means, as of any date of determination, the amount that Borrower is entitled to
borrow as Advances under Section 2.1 of the Agreement (after giving
effect to all then outstanding Obligations other than Bank Product
Obligations).

 

“Availability Reserve” means $20,000,000.

 

 “Bank
Product” means any financial accommodation extended to Borrower or its
Subsidiaries by a Bank Product Provider (other than pursuant to the Agreement)
including:  (a) credit cards, (b) credit
card processing services, (c) debit cards, (d) purchase cards, (e) ACH
Transactions, (f) cash management, including controlled disbursement,
accounts or services, or (g) transactions under Hedge Agreements.

 

“Bank Product Agreements” means those
agreements entered into from time to time by Borrower or its Subsidiaries with
a Bank Product Provider in connection with the obtaining of any of the Bank
Products.

 

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the
benefit of the Bank Product Providers in an amount determined by Agent as
sufficient to satisfy the reasonably estimated credit exposure with respect to
the then existing Bank Products.

 

 “Bank
Product Obligations” means (a) all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by Borrower or its Subsidiaries to any
Bank Product Provider pursuant to or evidenced by a Bank Product Agreement and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, and (b) all amounts that Borrower or its Subsidiaries are
obligated to reimburse to Agent or any member of the Lender Group as a result
of Agent or such member of the Lender Group purchasing participations from, or
executing guarantees or indemnities or reimbursement obligations to, a Bank
Product Provider with respect to the Bank Products provided by such Bank
Product Provider to Borrower or its Subsidiaries.

 

“Bank Product Provider” means Wells Fargo or
any of its Affiliates.

 

 “Bank
Product Reserve” means, as of any date of determination, the amount of
reserves that Agent has established (based upon the Bank Product Providers’
reasonable determination of the credit exposure of Borrower and its
Subsidiaries in respect of Bank Products) in respect of Bank Products then
provided or outstanding.

 

 “Bankruptcy
Code” means title 11 of the United States Code, as in effect from time to
time.

 

“Base LIBOR Rate” means the greater of (a) three
(3) percent per annum, and (b) the rate per annum, determined by
Agent in accordance with its customary procedures, and utilizing such
electronic or other quotation sources as it considers appropriate, to be the
rate at which Dollar deposits (for delivery on the first day of the requested
Interest Period) are offered to major banks in the London interbank market 2
Business Days prior to the commencement of the requested Interest Period, for a
term and in an amount comparable to the Interest Period and the amount of the
LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a
continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a
LIBOR Rate Loan) by Borrower in accordance with the Agreement, which
determination shall be conclusive in the absence of manifest error.

 

2

 

 “Base Rate”
means the greatest of (a) four and one-half (4 1/2) percent per annum, (b) the
Federal Funds Rate plus 1⁄2%, and (c) the rate of interest announced, from time
to time, within Wells Fargo at its principal office in San Francisco as its “prime
rate”, with the understanding that the “prime rate” is one of Wells Fargo’s
base rates (not necessarily the lowest of such rates) and serves as the basis
upon which effective rates of interest are calculated for those loans making
reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as Wells Fargo may designate.

 

“Base Rate Loan” means the portion of the
Advances that bears interest at a rate determined by reference to the Base
Rate.

 

“Base Rate Margin” means two (2.00) percentage
points.

 

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

 

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

 

 “Borrower”
has the meaning specified therefor in the preamble to the Agreement.

 

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

 

“Borrowing Base” means, as of any date of
determination, the result of:

 

(a)           the lesser of

 

(i) 85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution
Reserve, and

 

(ii) an amount equal to Borrower’s Collections
with respect to Accounts for the immediately preceding 30 day period, plus

 

(b)           the lowest of

 

(i) $37,500,000,

 

(ii) 65% of the value of Eligible Inventory,

 

(iii) 85% times
the most recently determined Net Liquidation Percentage times the book value of Borrower’s
Inventory, and

 

(iv) 100% of the amount of credit availability
created by clause (a) above, minus

 

(c)           the
sum of (i) the Bank Product Reserve, (ii) the Availability Reserve,
and (iii) the aggregate amount of reserves, if any, established by Agent
under Section 2.1(b).

 

“Borrowing Base Certificate” means a
certificate in the form of Exhibit B-1.

 

3

 

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

 

“Capitalized Lease Obligation” means that
portion of the obligations under a Capital Lease that is required to be
capitalized in accordance with GAAP.

 

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

 

“Cash Equivalents”
means (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within 1
year from the date of acquisition thereof, (b) marketable direct
obligations issued or fully guaranteed by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors
Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than
270 days from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates
of deposit, time deposits, overnight bank deposits or bankers’ acceptances
maturing within 1 year from the date of acquisition thereof issued by any bank
organized under the laws of the United States or any state thereof or the District
of Columbia or any United States branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000,
(e) Deposit Accounts maintained with (i) any bank that satisfies the
criteria described in clause (d) above, or (ii) any other bank
organized under the laws of the United States or any state thereof so long as
the amount maintained with any such other bank is less than or equal to
$100,000 and is insured by the Federal Deposit Insurance Corporation, (f) repurchase
obligations of any commercial bank satisfying the requirements of clause (d) of
this definition or recognized securities dealer having combined capital and
surplus of not less than $250,000,000, having a term of not more than seven days,
with respect to securities satisfying the criteria in clauses (a) or (d) above,
(g) debt securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by any commercial bank
satisfying the criteria described in clause (d) above, and (h) Investments
in money market funds substantially all of whose assets are invested in the
types of assets described in clauses (a) through (g) above.

 

 “CFC” means a controlled foreign
corporation (as that term is defined in the IRC).

 

 “Change of
Control” means that (a) Parent fails to own and control, directly or
indirectly, 100% of the Stock of Borrower, or (B) Borrower fails to own
and control, directly or indirectly, 100% of the Stock of each other Loan
Party.

 

“Closing Date” means the date of the making of
the initial Advance (or other extension of credit) hereunder.

 

“Code” means the New York Uniform Commercial
Code, as in effect from time to time.

 

“Collateral” means all assets and interests in
assets and proceeds thereof now owned or hereafter acquired by Borrower or its
Subsidiaries in or upon which a Lien is granted by such Person in favor of
Agent or the Lenders under any of the Loan Documents.

 

“Collateral Access Agreement” means a landlord
waiver, bailee letter, or acknowledgement agreement of any lessor,
warehouseman, processor, consignee, or other Person in possession of, having a
Lien upon, or having rights or interests in Borrower’s or its Subsidiaries’
books and records, Equipment, or Inventory, in each case, in form and substance
reasonably satisfactory to Agent.

 

4

 

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

 

“Commitment” means, with respect to each
Lender, its Revolver Commitment or its Total Commitment, as the context
requires, and, with respect to all Lenders, their Revolver Commitments or their
Total Commitments, as the context requires, in each case as such Dollar amounts
are set forth beside such Lender’s name under the applicable heading on Schedule
C-1 or in the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder, as such amounts may be reduced or increased from
time to time pursuant to assignments made in accordance with the provisions of Section 13.1.

 

“Compliance Certificate” means a certificate
substantially in the form of Exhibit C-1 delivered by the treasurer
of Borrower to Agent.

 

“Control Agreement” means a control agreement,
in form and substance reasonably satisfactory to Agent, executed and delivered
by Borrower or one of its Subsidiaries, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with respect to a
Deposit Account).

 

“Copyright Security Agreement” has the meaning
specified therefor in the Security Agreement.

 

“Daily Balance” means, as of any date of
determination and with respect to any Obligation, the amount of such Obligation
owed at the end of such day.

 

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

 

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

 

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

 

“Deposit Account” means any deposit account (as
that term is defined in the Code).

 

“Designated Account” means the Deposit Account
of Borrower identified on Schedule D-1.

 

“Designated Account Bank” has the meaning
specified therefor in Schedule D-1.

 

“Dilution” means, as of any date of
determination, a percentage, based upon the experience of the immediately prior
90 consecutive days, that is the result of dividing the Dollar amount of (a) bad
debt write-downs, discounts, advertising allowances, credits, or other dilutive
items with respect to Borrower’s Accounts during such period, by (b) Borrower’s
billings with respect to Accounts during such period.

 

“Dilution Reserve” means, as of any date of
determination, an amount sufficient to reduce the advance rate against Eligible
Accounts by 1 percentage point for each percentage point by which Dilution is
in excess of 5%.

 

“Dollars” or “$” means United States
dollars.

 

“EBITDA” means, with
respect to any fiscal period, Borrower’s consolidated net earnings (or loss),
minus extraordinary gains, interest income, plus
non-cash extraordinary losses, interest expense, income taxes, and depreciation
and amortization for such period, in each case, determined on a consolidated
basis in 

 

5

 

accordance
with GAAP, plus the amount of (i) the closing fee set forth in the Fee
Letter and (ii) the Lender Group Expenses incurred through the Closing
Date (solely to the extent that the closing costs and expenses incurred in
connection with this Agreement are allocated to Borrower’s profits and losses).

 

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

 

(a)           Accounts
that the Account Debtor has failed to pay within 90 days of original invoice
date or Accounts with selling terms of more than 60 days,

 

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

 

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

 

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

 

(e)           Accounts
that are not payable in Dollars,

 

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

 

(g)           Accounts
with respect to which the Account Debtor is either (i) the United States
or any department, agency, or instrumentality of the United States (exclusive,
however, of Accounts with respect to which Borrower has complied, to the
reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC
§3727), or (ii) any state of the United States,

 

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

 

(i)            Accounts
with respect to an Account Debtor whose total obligations owing to Borrower
exceed 10% (or, in the case of any of T-Mobile, Sprint and Verizon, 25%) (such
percentage, as applied to a particular Account Debtor, being subject to
reduction by Agent in its Permitted Discretion if the creditworthiness of such
Account Debtor deteriorates) of all Eligible Accounts, to the extent of the
obligations owing by such Account Debtor in excess of such percentage; provided,
however, that, in each case, the amount of Eligible Accounts that are
excluded because they exceed the foregoing percentage shall be determined by 

 

6

 

Agent based on all of the
otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit,

 

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

 

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

 

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

 

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

 

(n)           Accounts
with respect to which the Account Debtor is a Sanctioned Person or Sanctioned
Entity, or

 

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

 

“Eligible Inventory” means Inventory consisting
of first quality finished goods held for sale in the ordinary course of
Borrower’s business, that complies with each of the representations and
warranties respecting Eligible Inventory made in the Loan Documents, and that
is not excluded as ineligible by virtue of one or more of the excluding
criteria set forth below; provided, however, that such criteria
may be revised from time to time by Agent in Agent’s Permitted Discretion to
address the results of any audit or appraisal performed by Agent from time to
time after the Closing Date.  In
determining the amount to be so included, Inventory shall be valued at the
lower of cost or market on a basis consistent with Borrower’s historical
accounting practices.  An item of
Inventory shall not be included in Eligible Inventory if:

 

(a)           Borrower
does not have good, valid, and marketable title thereto,

 

(b)           it
is not located at one of the locations in the continental United States set
forth on Schedule E-1 (or in-transit from one such location to another
such location),

 

(c)           it
is located on real property leased by Borrower or in a contract warehouse, in
each case, unless it is subject to a Collateral Access Agreement executed by
the lessor or warehouseman, as the case may be, or otherwise deemed eligible by
Agent, and unless it is segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises,

 

(d)           it
is not subject to a valid and perfected first priority Agent’s Lien,

 

(e)           it
consists of goods returned or rejected by Borrower’s customers, or

 

(f)            it
consists of goods that are obsolete, restrictive or custom items,
work-in-process, raw materials, or goods that constitute spare parts, packaging
and shipping materials, supplies used or consumed in Borrower’s business, bill
and hold goods, defective goods, “seconds,” or Inventory acquired on
consignment.

 

“Environmental Action”
means any written complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other written 

 

7

 

communication
from any Governmental Authority, or any third party involving violations of
Environmental Laws or releases of Hazardous Materials from (a) any assets,
properties, or businesses of any Borrower, any Subsidiary of a Borrower, or any
of their predecessors in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Borrower, any Subsidiary of a Borrower, or any of
their predecessors in interest.

 

“Environmental Law” means any applicable
federal, state, provincial, foreign or local statute, law, rule, regulation,
ordinance, code, binding and enforceable guideline, binding and enforceable
written policy, or rule of common law now or hereafter in effect and in
each case as amended, or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment, in
each case, to the extent binding on Borrower or its Subsidiaries, relating to
the environment, the effect of the environment on employee health, or Hazardous
Materials, in each case as amended from time to time.

 

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

 

“Environmental Lien” means any Lien in favor of
any Governmental Authority for Environmental Liabilities.

 

“Equipment” means equipment (as that term is
defined in the Code).

 

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

 

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

 

“Event of Default” has the meaning specified
therefor in Section 8.

 

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

 

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

 

“Fee Letter” means that certain fee letter
between Borrower and Agent, in form and substance reasonably satisfactory to
Agent.

 

8

 

“Federal Funds Rate” means, for any period, a
fluctuating interest rate per annum equal to, for each day during such period,
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions received
by Agent from three Federal funds brokers of recognized standing selected by
it.

 

“Foreign
Lender” shall mean any Lender or Participant that is not a United States
person within the meaning of IRC section 7701(a)(30).

 

“Funding Date” means the date on which a
Borrowing occurs.

 

“Funding Losses” has the meaning specified
therefor in Section 2.12(b)(ii).

 

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

 

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

 

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

 

“Guarantors” means each Subsidiary of Borrower
and “Guarantor” means any one of them.

 

“Guaranty” means that certain general
continuing guaranty executed and delivered by each Guarantor in favor of Agent,
for the benefit of the Lender Group and the Bank Product Providers, in form and
substance reasonably satisfactory to Agent.

 

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

 

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

 

“Holdout Lender” has the meaning specified
therefor in Section 14.2(a).

 

“Indebtedness” means (a) all
obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, or other
financial products, (c) all obligations as a lessee under Capital Leases, (d) all
obligations or liabilities of others secured by a Lien on any asset of a Person
or its Subsidiaries, 

 

9

 

irrespective
of whether such obligation or liability is assumed, (e) all obligations to
pay the deferred purchase price of assets (other than trade payables incurred
in the ordinary course of business and repayable in accordance with customary
trade practices), (f) all obligations owing under Hedge Agreements (which
amount shall be calculated based on the amount that would be payable by such
Person if the Hedge Agreement were terminated on the date of determination),
and (g) any obligation guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with
recourse) any obligation of any other Person that constitutes Indebtedness
under any of clauses (a) through (f) above.  For purposes of this definition, (i) the
amount of any Indebtedness represented by a guaranty or other similar
instrument shall be the lesser of the principal amount of the obligations
guaranteed and still outstanding and the maximum amount for which the
guaranteeing Person may be liable pursuant to the terms of the instrument
embodying such Indebtedness, and (ii) the amount of any Indebtedness
described in clause (d) above shall be the lower of the amount of the
obligation and the fair market value of the assets securing such obligation.

 

“Indemnified Liabilities” has the meaning
specified therefor in Section 10.3.

 

“Indemnified Person” has the meaning specified
therefor in Section 10.3.

 

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

 

“Intercompany Subordination Agreement” means a
subordination agreement executed and delivered by Parent, Borrower, each of
Borrower’s Subsidiaries, and Agent, the form and substance of which is
reasonably satisfactory to Agent.

 

“Interest Expense” means, for any period, the
aggregate of the interest expense of Borrower for such period, determined on a
consolidated basis in accordance with GAAP.

 

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

 

“Inventory” means inventory (as that term is
defined in the Code).

 

“Investment” means, with respect to any Person,
any investment by such Person in any other Person (including Affiliates) in the
form of loans, guarantees, advances, capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona
fide Accounts arising in the ordinary course of business consistent
with past practice), or acquisitions of Indebtedness, Stock, or all or
substantially all of the assets of such other Person (or of any division or
business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.

 

10

 

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

 

“Issuing Lender” means WFF or any other Lender
that, at the request of Borrower and with the consent of Agent, agrees, in such
Lender’s sole discretion, to become an Issuing Lender for the purpose of
issuing L/Cs or L/C Undertakings pursuant to Section 2.11.

 

“L/C” has the meaning specified therefor in Section 2.11(a).

 

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

 

“L/C Undertaking” has the meaning specified
therefor in Section 2.11(a).

 

“Lender” and “Lenders” have the
respective meanings set forth in the preamble to the Agreement, and shall
include any other Person made a party to the Agreement in accordance with the
provisions of Section 13.1.

 

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

 

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

 

11

 

“Lender-Related Person” means, with respect to
any Lender, such Lender, together with such Lender’s Affiliates, officers,
directors, employees, attorneys, and agents.

 

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

 

“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including
provisions that specify that the Letter of Credit fee set forth in the
Agreement will continue to accrue while the Letters of Credit are outstanding)
to be held by Agent for the benefit of those Lenders with a Revolver Commitment
in an amount equal to 105% of the then existing Letter of Credit Usage, (b) causing
the Underlying Letters of Credit to be returned to the Issuing Lender, or (c) providing
Agent with a standby letter of credit, in form and substance reasonably
satisfactory to Agent, from a commercial bank acceptable to the Agent (in its
sole discretion) in an equal to 105% of the then existing Letter of Credit
Usage (it being understood that the Letter of Credit fee set forth in the
Agreement will continue to accrue while the Letters of Credit are outstanding
and that any such fee that accrues must be an amount that can be drawn under
any such standby letter of credit).

 

“Letter of Credit Usage” means, as of any date
of determination, the aggregate undrawn amount of all outstanding Letters of Credit.

 

“LIBOR Deadline” has the meaning specified
therefor in Section 2.12(b)(i).

 

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

 

“LIBOR Option” has the meaning specified
therefor in Section 2.12(a).

 

“LIBOR Rate” means, for each Interest Period
for each LIBOR Rate Loan, the rate per annum determined by Agent by dividing (a) the Base LIBOR Rate for
such Interest Period, by (b) 100% minus
the Reserve Percentage.  The
LIBOR Rate shall be adjusted on and as of the effective day of any change in
the Reserve Percentage.

 

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

 

“LIBOR Rate Margin” means four (4) percentage
points.

 

“Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest of a
lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.

 

“Loan Account” has
the meaning specified therefor in Section 2.9.

 

“Loan Documents” means the Agreement, the Bank
Product Agreements, any Borrowing Base Certificate, the Controlled Account
Agreements, the Control Agreements, the Copyright Security Agreement, the Fee
Letter, the Guaranty, the Intercompany Subordination Agreement, the Letters of
Credit, the Mortgages, the Patent Security Agreement, the Security Agreement,
the Trademark Security Agreement, any note or notes executed by Borrower in
connection with the Agreement and payable to a member of the Lender Group, and
any other agreement entered into, now or in the future, by Borrower or any of
its Subsidiaries and the Lender Group in connection with the Agreement.

 

“Loan Party” means Borrower or any Guarantor.

 

12

 

“Margin Stock” as defined in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.

 

“Material Adverse Change” means (a) a
material adverse change in the business, operations, results of operations,
assets, liabilities or financial condition of Borrower and its Subsidiaries,
taken as a whole, (b) a material impairment of Borrower’s and its
Subsidiaries ability to perform their obligations under the Loan Documents to
which they are parties or of the Lender Group’s ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment
of the enforceability or priority of the Agent’s Liens with respect to the
Collateral as a result of an action or failure to act on the part of Borrower
or its Subsidiaries.

 

“Material Contract” means, with respect to any
Person, (i) each contract or agreement to which such Person or any of its
Subsidiaries is a party involving aggregate consideration payable to or by such
Person or such Subsidiary of $1,000,000 or more (other than purchase orders in
the ordinary course of the business of such Person or such Subsidiary and other
than contracts that by their terms may be terminated by such Person or
Subsidiary in the ordinary course of its business upon less than 60 days notice
without penalty or premium), and (ii) all other contracts or agreements
material to the business, operations, condition (financial or otherwise),
performance, prospects or properties of such Person or such Subsidiary.

 

“Maturity Date” has the meaning specified
therefor in Section 3.3.

 

“Maximum Revolver Amount”
means $75,000,000, as such amount may be decreased in accordance with Section 2.4(c).

 

“Minimum Parent Payable Amount” has the meaning
specified therefor in Section 6.16.

 

“Moody’s” has the meaning specified therefor in
the definition of Cash Equivalents.

 

“Mortgages” means, individually and
collectively, one or more mortgages, deeds of trust, or deeds to secure debt,
executed and delivered by Borrower or its Subsidiaries in favor of Agent, in
form and substance reasonably satisfactory to Agent, that encumber the Real
Property Collateral.

 

“Net Cash Proceeds”
means:

 

(a) with
respect to any sale or disposition by Borrower or any of its Subsidiaries of
assets, the amount of cash proceeds received (directly or indirectly) from time
to time (whether as initial consideration or through the payment of deferred
consideration) by or on behalf of Borrower or its Subsidiaries, in connection
therewith after deducting therefrom only (i) the amount of any
Indebtedness secured by any Permitted Lien on any asset (other than (A) Indebtedness
owing to Agent or any Lender under the Agreement or the other Loan Documents
and (B) Indebtedness assumed by the purchaser of such asset) which is
required to be, and is, repaid in connection with such sale or disposition, (ii) reasonable
fees, commissions, and expenses related thereto and required to be paid by
Borrower or such Subsidiary in connection with such sale or disposition and (iii) taxes
paid or payable to any taxing authorities by Borrower or such Subsidiary in
connection with such sale or disposition, in each case to the extent, but only
to the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid or payable to a Person that is not an Affiliate of Borrower
or any of its Subsidiaries, and are properly attributable to such transaction;
and

 

(b) with
respect to the issuance or incurrence of any Indebtedness by Borrower or any of
its Subsidiaries, or the issuance by Borrower or any of its Subsidiaries of any
shares of its Stock, the aggregate amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of Borrower
or such Subsidiary in connection with such issuance or incurrence, after
deducting therefrom only (i) reasonable fees, commissions, and expenses
related thereto and required to be paid by Borrower or such Subsidiary in
connection with such issuance or incurrence, (ii) taxes paid or payable to
any taxing authorities by Borrower or 

 

13

 

such
Subsidiary in connection with such issuance or incurrence, in each case to the
extent, but only to the extent, that the amounts so deducted are, at the time
of receipt of such cash, actually paid or payable to a Person that is not an
Affiliate of Borrower or any of its Subsidiaries, and are properly attributable
to such transaction.

 

“Net Liquidation Percentage” means the
percentage of the book value of Borrower’s Inventory that is estimated to be
recoverable in an orderly liquidation of such Inventory net of all associated
costs and expenses of such liquidation, such percentage to be as determined
from time to time by an appraisal company selected by Agent.

 

“Obligations” means (a) all loans,
Advances, debts, principal, interest (including any interest that accrues after
the commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding),
contingent reimbursement obligations with respect to outstanding Letters of
Credit, premiums, liabilities (including all amounts charged to the Loan Account
pursuant to the Agreement), obligations (including indemnification
obligations), fees (including the fees provided for in the Fee Letter), Lender
Group Expenses (including any fees or expenses that accrue after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding),
guaranties, covenants, and duties of any kind and description owing by Borrower
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, and including all interest not paid when due and all other expenses or
other amounts that Borrower is required to pay or reimburse by the Loan
Documents or by law or otherwise in connection with the Loan Documents, and (b) all
Bank Product Obligations.  Any reference
in the Agreement or in the Loan Documents to the Obligations shall include all
or any portion thereof and any extensions, modifications, renewals, or
alterations thereof, both prior and subsequent to any Insolvency Proceeding.

 

“OFAC” means The Office of Foreign Assets
Control of the U.S. Department of the Treasury.

 

“Officers’
Certificate” means the representations and warranties of officers form
submitted by Agent to Borrower, together with the Loan Parties’ completed
responses to the inquiries set forth therein, the form and substance of such
responses to be reasonably satisfactory to Agent.

 

“Originating Lender” has the meaning specified
therefor in Section 13.1(e).

 

“Overadvance” has the meaning specified
therefor in Section 2.5.

 

“Parent” means UTStarcom, Inc., a Delaware
corporation.

 

“Participant” has the
meaning specified therefor in Section 13.1(e).

 

“Participant Register”
has the meaning set forth in Section 13.1(i).

 

“Patent Security Agreement” has the meaning
specified therefor in the Security Agreement.

 

“Patriot Act” has the
meaning specified therefor in Section 4.18.

 

“Payoff Date” means
the first date on which all of the Obligations are paid in full and the
Commitments of the Lenders are terminated.

 

“Permitted Discretion” means a determination
made in the exercise of reasonable (from the perspective of a secured lender)
business judgment.

 

14

 

“Permitted Dispositions” means:

 

(a) sales, abandonment, or other dispositions of Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business,

 

(b) sales of Inventory to buyers in the ordinary course of
business,

 

(c) the use or transfer of money or Cash Equivalents in a manner
that is not prohibited by the terms of the Agreement or the other Loan
Documents,

 

(d) the licensing, on a non-exclusive basis, of patents,
trademarks, copyrights, and other intellectual property rights in the ordinary
course of business,

 

(e) the granting of Permitted Liens,

 

(f) the sale or discount, in each case
without recourse, of Accounts arising in the ordinary course of business, but
only in connection with the compromise or collection thereof,

 

(g) any involuntary loss, damage or
destruction of property,

 

(h) any involuntary condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, or
confiscation or requisition of use of property,

 

(i) the leasing or subleasing of assets
of Borrower or its Subsidiaries in the ordinary course of business,

 

(j)  the lapse of registered patents,
trademarks and other intellectual property of Borrower and its Subsidiaries to
the extent not economically desirable in the conduct of their business and so
long as such lapse is not materially adverse to the interests of the Lenders,
and

 

 (k) dispositions
of assets (other than Accounts, intellectual property, licenses, Stock of
Subsidiaries of Borrower, or Material Contracts) not otherwise permitted in clauses
(a) through (j) above so long as made at fair market value and
the aggregate fair market value of all assets disposed of in all such
dispositions since the Closing Date (including the proposed disposition) would
not exceed $250,000.

 

 “Permitted
Indebtedness” means:

 

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

 

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

 

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

 

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

 

(e) Indebtedness consisting of (i) unsecured
guarantees incurred in the ordinary course of business with respect to surety
and appeal bonds, performance bonds, bid bonds, appeal bonds, completion
guarantee and similar obligations; and (ii) unsecured guarantees arising with
respect to customary indemnification obligations to purchasers in connection
with Permitted Dispositions;

 

15

 

(f) Indebtedness incurred in the
ordinary course of business under performance, surety, statutory, and appeal
bonds,

 

(g) Indebtedness owed to any Person
providing property, casualty, liability, or other insurance to Borrower or any
of its Subsidiaries, so long as the amount of such Indebtedness is not in
excess of the amount of the unpaid cost of, and shall be incurred only to defer
the cost of, such insurance for the year in which such Indebtedness is incurred
and such Indebtedness is outstanding only during such year,

 

(h) the incurrence by Borrower or its
Subsidiaries of Indebtedness under Hedging Agreements that are incurred for the
bona fide purpose of hedging the interest rate or foreign currency risk
associated with Borrower’s and its Subsidiaries’ operations and not for speculative
purposes,

 

(i) unsecured Indebtedness incurred in
respect of netting services, overdraft protection, and other like services, in
each case, incurred in the ordinary course of business,

 

(j) Indebtedness composing Permitted
Investments, and

 

(k)  other Indebtedness in an aggregate
principal amount not to exceed $100,000.

 

“Permitted Intercompany Advances”
means loans made by (a) a Loan Party to another Loan Party, (b) a
non-Loan Party to another non-Loan Party, and (c) a non-Loan Party to a
Loan Party, so long as the parties thereto are party to the Intercompany
Subordination Agreement.

 

 “Permitted Investments”
means:

 

(a) Investments in cash and Cash Equivalents,

 

(b) Investments in negotiable instruments deposited or to be
deposited for collection in the ordinary course of business,

 

(c) advances made in connection with purchases of goods or
services in the ordinary course of business,

 

(d) Investments received in settlement of amounts due to any Loan
Party or any of its Subsidiaries effected in the ordinary course of business or
owing to any Loan Party or any of its Subsidiaries as a result of Insolvency
Proceedings involving an Account Debtor or upon the foreclosure or enforcement
of any Lien in favor of a Loan Party or its Subsidiaries,

 

(e) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on 

Schedule P-1,

 

(f) guarantees permitted under the definition of Permitted
Indebtedness,

 

(g) Permitted Intercompany Advances,

 

(h) Stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to a Loan
Party or its Subsidiaries (in bankruptcy of customers or suppliers or otherwise
outside the ordinary course of business) or as security for any such
Indebtedness or claims,

 

(i) deposits of cash made in the ordinary course of business to
secure performance of operating leases,

 

16

 

(j)  Investments in Deposit Accounts and Securities Accounts
provided Borrower or its Subsidiaries, as applicable, and the applicable securities
intermediary or bank have entered into Control Agreements with Agent governing
such Permitted Investments in order to perfect (and further establish) the
Agent’s Liens in such Permitted Investments; and

 

(k)  so long as no Event of Default has occurred and is continuing
or would result therefrom, any
other Investments in an aggregate amount not to exceed $250,000 during the term
of the Agreement.

 

“Permitted Liens” means

 

(a) Liens held by Agent to secure the Obligations,

 

(b) Liens for unpaid taxes, assessments, or other governmental
charges or levies that either (i) are not yet delinquent, or (ii) do
not have priority over Agent’s Liens and the underlying taxes, assessments, or
charges or levies are the subject of Permitted Protests,

 

(c) judgment Liens arising solely as a result of the existence of
judgments, orders, or awards that do not constitute an Event of Default under Section 8.3,

 

(d) Liens set forth on Schedule P-2, provided that any such
Lien only secures the Indebtedness that it secures on the Closing Date and any
Refinancing Indebtedness in respect thereof,

 

(e) the interests of lessors under operating leases and
non-exclusive licensors under license agreements,

 

(f) purchase money Liens or the interests of lessors under Capital
Leases to the extent that such Liens or interests secure Permitted Purchase
Money Indebtedness and so long as (i) such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, and (ii) such Lien only
secures the Indebtedness that was incurred to acquire the asset purchased or
acquired or any Refinancing Indebtedness in respect thereof,

 

(g) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
in the ordinary course of business and not in connection with the borrowing of
money, and which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests,

 

(h) Liens on amounts deposited in connection with obtaining worker’s
compensation or other unemployment insurance,

 

(i) Liens on amounts deposited in connection with the making or
entering into of bids, tenders, or leases in the ordinary course of business
and not in connection with the borrowing of money,

 

(j) Liens on amounts deposited as security for surety or appeal
bonds in connection with obtaining such bonds in the ordinary course of
business,

 

(k) with respect to any Real Property, easements, rights of way,
and zoning restrictions that do not materially interfere with or impair the use
or operation thereof,

 

(l) non-exclusive licenses of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of business,

 

17

 

(m) Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is the subject of permitted Refinancing
Indebtedness and so long as the replacement Liens only encumber those assets
that secured the original Indebtedness,

 

(n) rights of setoff or bankers’ liens upon deposits of cash or
securities in favor of banks, financial institutions or other depository
institutions, solely to the extent incurred in connection with the maintenance
of such deposit or securities accounts in the ordinary course of business,

 

(o) any interest or title of a non-exclusive licensor or lessor
under any lease or license permitted by this Agreement,

 

(p) Liens granted in the ordinary course of business on the
unearned portion of insurance premiums securing the financing of insurance
premiums to the extent the financing is permitted under the definition of
Permitted Indebtedness, and

 

(q) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.

 

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

 

“Permitted Purchase Money Indebtedness” means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate principal amount outstanding at any one time not in excess of
$500,000.

 

“Permitted Transaction” means any transaction pursuant to which
Borrower or any of its Subsidiaries (a) sells, assigns, transfers, or
otherwise disposes of any of Borrower’s or its Subsidiaries’ assets or (b) merges
or consolidates  with another Person; provided
that (i) a condition to the consummation of such transaction is that all
Obligations shall be paid in full, Borrower shall provide Letter of Credit
Collateralization and Bank Product Collateralization and all Commitments of the
Lenders shall be terminated and (ii) all Obligations are paid in full,
Borrower has provided Letter of Credit Collateralization and Bank Product
Collateralization and all Commitments of the Lenders are terminated upon the
consummation of such transaction.

 

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

 

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

 

“Pro Rata Share” means, as of any date of determination:

 

(a)           with respect to a
Lender’s obligation to make Advances and right to receive payments of
principal, interest, fees, costs, and expenses with respect thereto, (i) prior
to the Revolver Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Revolver 

 

18

 

Commitment, by (z) the
aggregate Revolver Commitments of all Lenders, and (ii) from and after the
time that the Revolver Commitments have been terminated or reduced to zero, the
percentage obtained by dividing (y) the outstanding principal amount of
such Lender’s Advances by (z) the outstanding principal amount of all
Advances,

 

(b)           with respect to a
Lender’s obligation to participate in Letters of Credit, to reimburse the
Issuing Lender, and right to receive payments of fees with respect thereto, (i) prior
to the Revolver Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Revolver Commitment, by (z) the
aggregate Revolver Commitments of all Lenders, and (ii) from and after the
time that the Revolver Commitments have been terminated or reduced to zero, the
percentage obtained by dividing (y) the outstanding principal amount of
such Lender’s Advances by (z) the outstanding principal amount of all
Advances, and

 

(c)           with respect to all
other matters as to a particular Lender (including the indemnification obligations
arising under Section 15.7), the percentage obtained by dividing (i) such
Lender’s Revolver Commitment, by (ii) the aggregate amount of Revolver
Commitments of all Lenders; provided, however, that in the event
the Revolver Commitments have been terminated or reduced to zero, Pro Rata
Share under this clause shall be the percentage obtained by dividing (A) the
outstanding principal amount of such Lender’s Advances plus such Lender’s
ratable portion of the Risk Participation Liability with respect to outstanding
Letters of Credit, by (B) the outstanding principal amount of all Advances
plus the aggregate amount of the Risk Participation Liability with respect to
outstanding Letters of Credit.

 

“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i).

 

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

 

“Qualified Cash” means, as of any date of determination, the
amount of unrestricted cash and Cash Equivalents of Borrower and its
Subsidiaries that is in Deposit Accounts or in Securities Accounts, or any
combination thereof, and which such Deposit Account or Securities Account is
the subject of a Control Agreement and is maintained by a branch office of the
bank or securities intermediary located within the United States.

 

“Real Property” means any estates or interests in real property
now owned or hereafter acquired by Borrower or its Subsidiaries and the
improvements thereto.

 

“Real Property Collateral” means the Real Property identified on
Schedule R-1 and any Real Property hereafter acquired by Borrower or its
Subsidiaries.

 

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

 

“Refinancing Indebtedness” means
refinancings, renewals, or extensions of Indebtedness so long as:

 

(a) the terms and conditions of such
refinancings, renewals, or extensions do not, in Agent’s reasonable judgment,
materially impair the prospects of repayment of the Obligations by Borrower or
materially impair Borrower’s creditworthiness,

 

(b) such refinancings, renewals, or
extensions do not result in an increase in the principal amount of the
Indebtedness so refinanced, renewed, or extended,

 

19

 

(c) such refinancings, renewals, or
extensions do not result in an increase in the interest rate with respect to
the Indebtedness so refinanced, renewed, or extended,

 

(d) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or
restrictive to Borrower,

 

(e) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension must include subordination terms and conditions that are at least as
favorable to the Lender Group as those that were applicable to the refinanced,
renewed, or extended Indebtedness, and

 

(f) the Indebtedness that is refinanced,
renewed, or extended is not recourse to any Person that is liable on account of
the Obligations other than those Persons which were obligated with respect to
the Indebtedness that was refinanced, renewed, or extended.

 

“Register” has the meaning set forth
in Section 13.1(h).

 

“Registered Loan” has the meaning set
forth in Section 13.1(h).

 

“Related Fund” means, with respect to
any Lender that is an investment fund, any other investment fund that invests
in commercial loans and that is managed or advised by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.

 

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

 

“Replacement Lender” has the meaning specified therefor in Section 2.13(b).

 

“Report” has the meaning specified therefor in Section 15.16.

 

“Required Lenders” means, at any time, Lenders whose aggregate
Pro Rata Shares (calculated under clause (c) of the definition of Pro Rata
Shares) exceed 50%; provided,
however, that at any time there are 2 or more Lenders, “Required Lenders”
must include at least 2 Lenders.

 

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

 

“Revolver Commitment” means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on Schedule C-1 or in the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder, as such amounts may be reduced or increased from time to time
pursuant to assignments made in accordance with the provisions of Section 13.1.

 

20

 

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

 

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

 

“Sanctioned Entity” means (a) a country or a government of
a country, (b) an agency of the government of a country, (c) an
organization directly or indirectly controlled by a country or its government, (d) a
Person resident in or determined to be resident in a country, in each case,
that is subject to a country sanctions program administered and enforced by
OFAC.

 

“Sanctioned Person” means a person named on the list of
Specially Designated Nationals maintained by OFAC.

 

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

 

“Securities Account” means a securities account (as that term is
defined in the Code).

 

“Securities Act” means the Securities Act of 1933, as amended
from time to time, and any successor statute.

 

“Security Agreement” means a security agreement, in form and
substance reasonably satisfactory to Agent, executed and delivered by Borrower
and Guarantors  to Agent.

 

“Settlement” has the meaning specified therefor in Section 2.3(e)(i).

 

“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i).

 

“Solvent” means, with respect to any Person on a particular
date, that, at fair valuations, the sum of such Person’s assets is greater than
all of such Person’s debts.

 

“S&P” has the meaning specified therefor in the definition
of Cash Equivalents.

 

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

 

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

 

“Swing Lender” means WFF or any other Lender that, at the
request of Borrower and with the consent of Agent agrees, in such Lender’s sole
discretion, to become the Swing Lender under Section 2.3(b).

 

“Swing Loan” has the meaning specified therefor in Section 2.3(b).

 

21

 

“Taxes” shall mean, any taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments and all interest,
penalties or similar liabilities with respect thereto; provided that
Taxes shall exclude (i) any such taxes, levies, imposts, duties, fees,
assessments or other charges imposed on the net income or net profits of any
Lender or any Participant (including any branch
profits taxes) and franchise taxes in lieu of any of the foregoing, in each
case imposed by the jurisdiction (or by any political subdivision or
taxing authority thereof) in which such Lender or such Participant is organized or the jurisdiction (or by any
political subdivision or taxing authority thereof) in which such Lender’s or such Participant’s principal office or lending
office is located or as a result of a present or former connection between such
Lender or such Participant and the
jurisdiction or taxing authority imposing the tax (other than any such
connection arising solely from such Lender or
such Participant having executed, delivered or performed its obligations
or received payment under, or enforced its rights or remedies under the
Agreement or any other Loan Document); (ii) taxes
resulting from a Lender’s or a Participant’s failure to comply with the
requirements of Section 16(c) or (d), and (iii) any
United States federal withholding taxes that would be imposed on amounts
payable to a Foreign Lender based upon the applicable withholding rate in
effect at the time such Foreign Lender becomes a party to the Agreement (or
designates a new lending office) or becomes a Participant, except that
Taxes shall include (A) any amount that such Foreign Lender (or its
assignor, if any) was previously entitled to receive pursuant to Section 16(a),
if any, with respect to such withholding tax at the time such Foreign Lender
becomes a party to this Agreement (or designates a new lending office), and (B) additional
United States federal withholding taxes that may be imposed after the time such
Foreign Lender becomes a party to the Agreement (or designates a new lending
office), as a result of a change in law, rule, regulation, order or other
decision with respect to any of the foregoing by any Governmental Authority.

 

“Total Commitment” means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, their Total Commitments, in each
case as such Dollar amounts are set forth beside such Lender’s name under the
applicable heading on Schedule C-1 attached hereto or on the signature page of
the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder, as such amounts may be reduced or increased from time to time
pursuant to assignments made in accordance with the provisions of Section 13.1.

 

“Trademark Security Agreement” has the meaning specified
therefor in the Security Agreement.

 

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

 

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

 

“United States” means the United States of America.

 

“Voidable Transfer” has the meaning specified therefor in Section 17.8.

 

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

 

“WFF” means Wells Fargo Foothill, LLC, a Delaware limited
liability company.

 

22

 

Schedule 3.1

 

The obligation of each Lender to
make its initial extension of credit provided for in the Agreement is subject
to the fulfillment, to the satisfaction of each Lender (the making of such
initial extension of credit by any Lender being conclusively deemed to be its
satisfaction or waiver of the following), of each of the following conditions
precedent:

 

(a)           the Closing Date shall occur on or
before March 21, 2008;

 

(b)           Agent shall have received a letter
duly executed by Borrower and each Guarantor authorizing Agent to file
appropriate financing statements in such office or offices as may be necessary
or, in the opinion of Agent, desirable to perfect the security interests to be
created by the Loan Documents;

 

(c)           Agent shall have received evidence
that appropriate financing statements have been duly filed in such office or
offices as may be necessary or, in the opinion of Agent, desirable to perfect
the Agent’s Liens in and to the Collateral, and Agent shall have received
searches reflecting the filing of all such financing statements, and evidencing
the absence of any other Liens on the Collateral, other than Liens acceptable
to Agent;

 

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

 

(i)         the Agreement,

 

(ii)        the Control Agreements,

 

(iii)       the Security Agreement,

 

(iv)       the Fee Letter,

 

(v)        the Intercompany Subordination
Agreement, and

 

(vi)       the Officers’ Certificate.

 

(e)           Agent shall have received a
certificate from the Secretary of each Loan Party (i) attesting to the
resolutions of such Loan Party’s Board of Directors authorizing its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which such Loan Party is a party, (ii) authorizing specific officers of
such Loan Party to execute the same, and (iii) attesting to the incumbency
and signatures of such specific officers of such Loan Party;

 

(f)            Agent shall have received copies of
each Loan Party’s Governing Documents, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of such Loan Party;

 

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

 

 

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

 

(i)            Agent shall have received a
certificate of insurance, together with the endorsements thereto (including
loss payable endorsements), as are required by Section 5.6, the
form and substance of which shall be satisfactory to Agent;

 

(j)            Agent shall have received Collateral
Access Agreements with respect to the locations set forth on Schedule 3.1(j);

 

(k)           Agent shall have received an opinion
of Wilson Sonsini Goodrich & Rosati, P.C., Loan Parties’ counsel, in
form and substance satisfactory to Agent;

 

(l)            Agent shall have received a
certificate of the treasurer of Borrower certifying (i) as to the truth
and accuracy of the representations and warranties of each Loan Party contained
in Section 4 of the Agreement, (ii) the absence of any Events of
Default, and (iii) that after giving effect to the incurrence of
Indebtedness under the Agreement, the Loan Parties, taken as a whole, are
Solvent, on and as of the date of such extension of credit;

 

(m)          Agent shall have completed its
business, legal, and collateral due diligence, including, without limitation, (i) a
collateral audit and review of Borrower’s and its Subsidiaries books and
records and verification of Borrower’s representations and warranties to Lender
Group, the results of which shall be satisfactory to Agent, (ii) an
inspection of each of the locations where Borrower’s and its Subsidiaries’
Inventory is located, the results of which shall be satisfactory to Agent, (iii) a
review of all outstanding material litigation of Loan Parties, the results of
which shall be satisfactory to Agent, (iv) a review of all of Loan Parties’
Material Contracts, the results of which shall be satisfactory to Agent, and (v) receipt
and review of all bill and hold letters, the results of which shall be
satisfactory to Agent;

 

(n)           Agent shall have received completed
reference checks with respect to Borrower’s senior management and USA Patriot
Act searches, the results of which, in each case, are satisfactory to Agent in
its sole discretion;

 

(o)           Agent shall have received an
appraisal of the Liquidation Percentage applicable to Borrower’s and its
Subsidiaries’ Inventory, the results of which shall be satisfactory to Agent;

 

(p)           Agent shall have received a set of
Projections of Borrower for the period from the Closing Date through December 31,
2008, on a month by month basis, in form and substance (including as to scope
and underlying assumptions) satisfactory to Agent;

 

(q)           Borrower shall have paid all Lender
Group Expenses incurred in connection with the transactions evidenced by this
Agreement;

 

(r)            Agent shall have received copies of
each Material Contract, together with a certificate of the Secretary of
Borrower certifying each such document as being a true, correct, and complete
copy thereof, and that such Material Contracts remain in full force and effect,
and that none of the Loan Parties is in breach or default in any material
respect in any of its obligations under such Material Contracts;

 

(s)           Agent shall be reasonably satisfied
with the cash management systems of Loan Parties;

 

2

 

(t)            there shall exist no claim, action,
suit, investigation, litigation or proceeding pending or threatened in writing
in any court or before any Governmental Authority which relates to the
transactions contemplated by the Loan Documents or which, in the Permitted
Discretion of any Lender, has a reasonable likelihood of having a material
adverse effect on (A) the ability of Loan Parties to perform their
obligations under the Loan Documents, or (B) the ability of Lenders to
enforce the Loan Documents;

 

(u)           Borrower and each of its Subsidiaries
shall have received all licenses, approvals or evidence of other actions
required by any Governmental Authority in connection with the execution and
delivery by Borrower or its Subsidiaries of the Loan Documents or with the
consummation of the transactions contemplated thereby; and

 

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

 

3

 

Schedule 5.1

 

Deliver to Agent, with
copies to each Lender, each of the financial statements, reports, or other
items set forth set forth below at the following times in form satisfactory to
Agent:

 

	
  as soon as available, but in any event within 30
  days (45 days in the case of a month that is the end of one of Borrower’s
  fiscal quarters) after the end of each month during each of Borrower’s fiscal
  years

  	
   

  	
  (a)     an
  unaudited consolidated and consolidating balance sheet, income statement, and
  statement of cash flow covering Borrower’s and its Subsidiaries’ operations
  during such period, and 

   

  (b)     a
  Compliance Certificate.

  
	
   

  	
   

  	
   

  
	
  as soon as available, but in any event within 90
  days after the end of each of Parent’s fiscal years

  	
   

  	
  (c)     consolidated
  financial statements of Parent for each such fiscal year, audited by
  independent certified public accountants reasonably acceptable to Agent and
  certified, without any qualifications (including any (A) “going concern”
  or like qualification or exception, (B) qualification or exception as to
  the scope of such audit, or (C) qualification which relates to the
  treatment or classification of any item and which, as a condition to the
  removal of such qualification, would require an adjustment to such item, the
  effect of which would be to cause any noncompliance with the provisions of
  Section 7), by such accountants to have been prepared in accordance with
  GAAP (such audited financial statements to include a balance sheet, income
  statement, and statement of cash flow and, if prepared, such accountants’
  letter to management), 

   

  (d)     consolidating
  financial statements of Parent for each such fiscal year, and 

   

  (e)     a
  Compliance Certificate.

  
	
   

  	
   

  	
   

  
	
  if and when filed by Parent,

  	
   

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

   

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

   

  (h)     any
  other information that is provided by Parent to its shareholders generally.

  

 

 

	
  promptly, but in any event within 5 Business Days
  after a Loan Party has knowledge of any event or condition that constitutes a
  Default or an Event of Default,

  	
   

  	
  (i)      notice
  of such event or condition and a statement of the curative action that
  Borrower proposes to take with respect thereto.

  
	
   

  	
   

  	
   

  
	
  promptly after the commencement thereof, but in any
  event within 5 Business Days after the service of process with respect
  thereto on Borrower or any of its Subsidiaries,

  	
   

  	
  (j)      notice
  of all actions, suits, or proceedings brought by or against Borrower or any
  of its Subsidiaries before any Governmental Authority which reasonably could
  be expected to result in a Material Adverse Change.

  
	
   

  	
   

  	
   

  
	
  promptly, but in any event within 5 Business Days
  after a Loan Party has knowledge of termination or cancellation of any
  Material Contract,

  	
   

  	
  (k)     notice
  of such event or condition.

  
	
   

  	
   

  	
   

  
	
  upon the request of Agent,

  	
   

  	
  (l)      any
  other information reasonably requested relating to the financial condition of
  Borrower or its Subsidiaries.

  

 

2

 

Schedule
5.2

 

Provide
Agent (and if so requested by Agent, with copies for each Lender) with each of
the documents set forth below at the following times in form satisfactory to
Agent:

 

	
  Weekly

  	
   

  	
  (a)     an Account roll-forward
  with supporting details supplied from sales journals, collection journals,
  credit registers and any other records, 

   

  (b)     notice of all claims,
  offsets, or disputes asserted by Account Debtors with respect to Borrower’s
  and its Subsidiaries’ Accounts, 

   

  (c)     Inventory
  system/perpetual reports specifying the cost and the wholesale market value
  of Borrower’s and its Subsidiaries’ Inventory, by category (delivered
  electronically in an acceptable format, if Borrower has implemented
  electronic reporting), and 

   

  (d)     a detailed report of all
  intercompany activity between (i) Parent and its Subsidiaries (other
  than Borrower) and (ii) Borrower, including without limitation, any
  payments made by Borrower to Parent and its Subsidiaries.

  
	
   

  	
   

  	
   

  
	
  Monthly
  (no later than the 10th day of each month)

  	
   

  	
  (e)     a Borrowing Base
  Certificate, 

   

  (f)     a detailed aging, by
  total, of Borrower’s Accounts, together with a reconciliation and supporting
  documentation for any reconciling items noted (delivered electronically in an
  acceptable format, if Borrower has implemented electronic reporting), 

   

  (g)     a detailed calculation
  of those Accounts that are not eligible for the Borrowing Base, if Borrower
  has not implemented electronic reporting, 

   

  (h)     a detailed Inventory
  system/perpetual report together with a reconciliation to Borrower’s general
  ledger accounts (delivered electronically in an acceptable format, if
  Borrower has implemented electronic reporting), 

   

  (i)      a detailed calculation
  of Inventory categories that are not eligible for the Borrowing Base, if
  Borrower has not implemented electronic reporting, 

   

  (j)      a summary aging, by
  vendor, of Borrower’s and its Subsidiaries’ accounts payable and any book
  overdraft (delivered electronically in an acceptable format, if Borrower has
  implemented electronic reporting) and an aging, by vendor, of any held
  checks, 

   

  (k)     a detailed report
  regarding Borrower’s and its Subsidiaries’ cash and Cash Equivalents,
  including an indication of which amounts constitute Qualified Cash, and 

   

  (l)      a monthly Account
  roll-forward, in a format acceptable to Agent in its discretion, tied to the
  beginning and ending account receivable balances of Borrower’s general
  ledger.

  
	
   

  	
   

  	
   

  
	
  Monthly (no later than the
  30th day of each month)

  	
   

  	
  (m)   a reconciliation of
  Accounts, trade accounts payable, and Inventory of Borrower’s general ledger
  accounts to its monthly financial statements including any book reserves
  related to each category.

  
	
   

  	
   

  	
   

  
	
  Monthly

  	
   

  	
  (n)     a report regarding
  Borrower’s and its Subsidiaries’ accrued, but unpaid, ad valorem
  taxes.

  

 

 

	
  Upon
  request by Agent

  	
   

  	
  (o)     copies of purchase
  orders and invoices for Inventory and Equipment acquired by Borrower or its
  Subsidiaries, 

   

  (p)     such other reports as to
  the Collateral or the financial condition of Borrower and its Subsidiaries,
  as Agent may reasonably request, and 

   

  (q)     copies of invoices
  together with corresponding shipping and delivery documents, and credit memos
  together with corresponding supporting documentation, with respect to
  invoices and credit memos in excess of an amount determined in the sole
  discretion of Agent, from time to time.

  

 

2Exhibit 10.2

 

SECURITY AGREEMENT

 

This SECURITY
AGREEMENT (this “Agreement”), dated as of March 21, 2008
among Grantors listed on the signature pages hereof and those additional
entities that hereafter become parties hereto by executing the form of Supplement
attached hereto as Annex 1 (collectively, jointly and severally, the “Grantors”
and each, individually, a “Grantor”), and WELLS FARGO
FOOTHILL, LLC, in its capacity as agent for the Lender Group and the
Bank Product Providers (together with its successors, the “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit Agreement of even
date herewith (as amended, restated, supplemented, or otherwise modified from
time to time, including all schedules thereto, the “Credit Agreement”)
among UTStarcom Personal Communications LLC, as borrower (“Borrower”),
the lenders party thereto as “Lenders” (“Lenders”), and Agent, the
Lender Group has agreed to make certain financial accommodations available to
Borrower from time to time pursuant to the terms and conditions thereof, and

 

WHEREAS, Agent has agreed to act as agent for the benefit
of the Lender Group and the Bank Product Providers in connection with the
transactions contemplated by the Credit Agreement and this Agreement, and

 

WHEREAS, in order to induce the Lender Group to enter into
the Credit Agreement and the other Loan Documents and to induce the Lender
Group to make financial accommodations to Borrower as provided for in the
Credit Agreement, Grantors have agreed to grant a continuing security interest
in and to the Collateral in order to secure the prompt and complete payment,
observance and performance of, among other things, the Secured Obligations, and

 

NOW, THEREFORE, for and in consideration of the recitals
made above and other good and valuable consideration, the receipt, sufficiency
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.             Defined Terms. All
capitalized terms used herein (including in the preamble and recitals hereof)
without definition shall have the meanings ascribed thereto in the Credit
Agreement.  Any terms used in this
Agreement that are defined in the Code shall be construed and defined as set
forth in the Code unless otherwise defined herein or in the Credit Agreement; provided,
however, that to the extent that the Code is used to define any term
herein and if such term is defined differently in different Articles of the
Code, the definition of such term contained in Article 9 of the Code shall
govern. In addition to those terms defined elsewhere in this Agreement, as used
in this Agreement, the following terms shall have the following meanings:

 

(a)           “Account” means an
account (as that term is defined in Article 9 of the Code).

 

(b)           “Account Debtor”
means an account debtor (as that term is defined in the Code).

 

(c)           “Agent” has the
meaning specified therefore in the preamble to this Agreement.

 

(d)           “Agent’s Lien” has
the meaning specified therefor in the Credit Agreement.

 

 

(e)           “Bank Product Obligations”
has the meaning specified therefor in the Credit Agreement.

 

(f)            “Bank Product Provider”
has the meaning specified therefor in the Credit Agreement.

 

(g)           “Books” means books
and records (including each Grantor’s Records indicating, summarizing, or
evidencing such Grantor’s assets (including the Collateral) or liabilities,
each Grantor’s Records relating to such Grantor’s business operations or
financial condition, and each Grantor’s goods or General Intangibles related to
such information).

 

(h)           “Borrower” has the
meaning specified therefor in the recitals to this Agreement.

 

(i)            “Cash Equivalents”
has the meaning specified therefor in the Credit Agreement.

 

(j)            “Chattel Paper” means
chattel paper (as that term is defined in the Code) and includes tangible
chattel paper and electronic chattel paper.

 

(k)           “Code” means the New
York Uniform Commercial Code, as in effect from time to time; provided, however,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection, priority, or remedies with respect to Agent’s Lien
on any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies.

 

(l)            “Collateral” has the
meaning specified therefor in Section 2.

 

(m)          “Collections” has the
meaning specified therefor in the Credit Agreement.

 

(n)           “Commercial Tort Claims”
means commercial tort claims (as that term is defined in the Code), and
includes those commercial tort claims listed on Schedule 1 attached
hereto.

 

(o)           “Controlled Account”
has the meaning specified therefor in Section 6(l).

 

(p)           “Controlled Account
Agreements” means those certain cash management agreements, in form and
substance reasonably satisfactory to Agent, each of which is among Borrower or
one of its Subsidiaries, Agent, and one of the Controlled Account Banks.

 

(q)           “Controlled Account Bank”
has the meaning specified therefor in Section 6(l).

 

(r)            “Copyrights” means
any and all copyrights and copyright registrations, including, (i) the
copyright registrations and recordings thereof and all applications in
connection therewith listed on Schedule 2 attached hereto and made a
part hereof, (ii) all reissues, continuations, extensions or renewals
thereof, (iii) all income, royalties, damages and payments now and
hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and
payments for past or future infringements or dilutions thereof, (iv) the
right to sue for past, present and future infringements and dilutions thereof, (v) the
goodwill of each Grantor’s business symbolized by the foregoing or connected
therewith, and (vi) all of each Grantor’s rights corresponding thereto
throughout the world.

 

(s)           “Copyright Security
Agreement” means each Copyright Security Agreement among Grantors, or any
of them, and Agent, for the benefit of the Lender Group and the Bank Product
Providers, in substantially the form of Exhibit A attached hereto,
pursuant to which Grantors have granted to Agent, for the benefit of the Lender
Group and the Bank Product Providers, a security interest in all their
respective Copyrights.

 

2

 

(t)            “Credit Agreement”
has the meaning specified therefor in the recitals to this Agreement.

 

(u)           “Deposit Account”
means a deposit account (as that term is defined in the Code).

 

(v)           “Equipment” means
equipment (as that term is defined in the Code).

 

(w)          “Event of Default”
has the meaning specified therefor in the Credit Agreement.

 

(x)            “General Intangibles”
means general intangibles (as that term is defined in the Code) and includes
payment intangibles, contract rights, rights to payment, rights arising under
common law, statutes, or regulations, choses or things in action, goodwill
(including the goodwill associated with any Trademark, Patent, or Copyright),
Patents, Trademarks, Copyrights, URLs and domain names, industrial designs,
other industrial or Intellectual Property or rights therein or applications
therefor, whether under license or otherwise, programs, programming materials,
blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, including Intellectual Property
Licenses, infringement claims, computer programs, information contained on
computer disks or tapes, software, literature, reports, catalogs, pension plan
refunds, pension plan refund claims, insurance premium rebates, tax refunds,
and tax refund claims, interests in a partnership or limited liability company
which do not constitute a security under Article 8 of the Code, and any
other personal property other than Commercial Tort Claims, money, Accounts,
Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable
Collateral, and oil, gas, or other minerals before extraction.

 

(y)           “Grantor” and “Grantors”
have the respective meanings specified therefor in the recitals to this
Agreement.

 

(z)            “Guaranty” has the
meaning specified therefor in the Credit Agreement.

 

(aa)         “Insolvency Proceeding”
has the meaning specified therefor in the Credit Agreement.

 

(bb)         “Intellectual Property”
means any and all Intellectual Property Licenses, Patents, Copyrights,
Trademarks, the goodwill associated with such Trademarks, trade secrets and
customer lists.

 

(cc)         “Intellectual Property
Licenses” means rights under or interests in any patent, trademark,
copyright or other intellectual property, including software license agreements
with any other party, whether the applicable Grantor is a licensee or licensor
under any such license agreement (but excluding any off-the-shelf software
license agreement), including the license agreements listed on Schedule 3
attached hereto and made a part hereof, and the right to use the foregoing in
connection with the enforcement of the Lender Group’s rights under the Loan
Documents, including the right to prepare for sale and sell any and all
Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses.

 

(dd)         “Inventory” means
inventory (as that term is defined in the Code).

 

(ee)         “Investment Related
Property” means (i) any and all investment property (as that term is
defined in the Code), and (ii) any and all of the following (regardless of
whether classified as investment property under the Code):  all Pledged Interests, Pledged Operating
Agreements, and Pledged Partnership Agreements.

 

(ff)           “Lender Group” has
the meaning specified therefor in the Credit Agreement.

 

(gg)         “Loan Document” has
the meaning specified therefor in the Credit Agreement.

 

3

 

(hh)         “Loan Party” has the
meaning specified therefor in the Credit Agreement.

 

(ii)           “Negotiable Collateral”
means letters of credit, letter-of-credit rights, instruments, promissory
notes, drafts and documents (as that term is defined in the Code).

 

(jj)           “Obligations” has the
meaning specified therefor in the Credit Agreement.

 

(kk)         “Patents” means
patents and patent applications, including, (i) the patents and patent
applications listed on Schedule 4 attached hereto and made a part
hereof, (ii) all renewals thereof, (iii) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or
dilutions thereof, (iv) the right to sue for past, present and future
infringements and dilutions thereof, and (v) all of each Grantor’s rights
corresponding thereto throughout the world.

 

(ll)           “Patent Security
Agreement” means each Patent Security Agreement among Grantors, or any of
them, and Agent, for the benefit of the Lender Group and the Bank Product
Providers, in substantially the form of Exhibit B attached hereto,
pursuant to which Grantors have granted to Agent, for the benefit of the Lender
Group and the Bank Product Providers, a security interest in all their
respective Patents.

 

(mm)       “Permitted Liens” has
the meaning specified therefor in the Credit Agreement.

 

(nn)         “Person” has the
meaning specified therefor in the Credit Agreement.

 

(oo)         “Pledged Companies”
means, each Person listed on Schedule 5 hereto as a “Pledged Company”,
together with each other Person, all or a portion of whose Stock, is acquired
or otherwise owned by a Grantor after the Closing Date.

 

(pp)         “Pledged Interests”
means all of each Grantor’s right, title and interest in and to all of the
Stock now or hereafter owned by such Grantor, regardless of class or
designation, including, in each of the Pledged Companies, and all substitutions
therefor and replacements thereof, all proceeds thereof and all rights relating
thereto, also including any certificates representing the Stock, the right to
receive any certificates representing any of the Stock, all warrants, options,
share appreciation rights and other rights, contractual or otherwise, in
respect thereof and the right to receive all dividends, distributions of
income, profits, surplus, or other compensation by way of income or liquidating
distributions, in cash or in kind, and all cash, instruments, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in addition to, in substitution of, on account of, or in exchange
for any or all of the foregoing.

 

(qq)         “Pledged Interests
Addendum” means a Pledged Interests Addendum substantially in the form of Exhibit C
to this Agreement.

 

(rr)           “Pledged Operating
Agreements” means all of each Grantor’s rights, powers, and remedies under
the limited liability company operating agreements of each of the Pledged
Companies that are limited liability companies.

 

(ss)         “Pledged Partnership
Agreements” means all of each Grantor’s rights, powers, and remedies under
the partnership agreements of each of the Pledged Companies that are
partnerships.

 

(tt)           “Proceeds” has the
meaning specified therefor in Section 2.

 

(uu)         “Real Property” means
any estates or interests in real property now owned or hereafter acquired by
any Grantor or any Subsidiary of any Grantor and the improvements thereto.

 

4

 

(vv)         “Records” means
information that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable form.

 

(ww)       “Secured Obligations”
means each and all of the following: (a) all of the present and future
obligations of Grantors arising from this Agreement, the Credit Agreement, or
the other Loan Documents (including any Guaranty), (b) all Bank Product
Obligations, and (c) all Obligations of Borrower, including, in the case
of each of clauses (a), (b) and (c), 
reasonable attorneys fees and expenses and any interest, fees, or
expenses that accrue after the filing of an Insolvency Proceeding, regardless
of whether allowed or allowable in whole or in part as a claim in any
Insolvency Proceeding.

 

(xx)          “Securities Account”
means a securities account (as that term is defined in the Code).

 

(yy)         “Security Interest”
has the meaning specified therefor in Section 2.

 

(zz)          “Stock” has the
meaning specified therefor in the Credit Agreement

 

(aaa)       “Supporting Obligations”
means supporting obligations (as such term is defined in the Code) and includes
letters of credit and guaranties issued in support of Accounts, Chattel Paper,
documents, General Intangibles, instruments or Investment Related Property.

 

(bbb)      “Trademarks” means
any and all trademarks, trade names, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, including (i) the trade names, registered trademarks,
trademark applications, registered service marks and service mark applications
listed on Schedule 6 attached hereto and made a part hereof, (ii) all
renewals thereof, (iii) all income, royalties, damages and payments now
and hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and
payments for past or future infringements or dilutions thereof, (iv) the
right to sue for past, present and future infringements and dilutions thereof, (v) the
goodwill of each Grantor’s business symbolized by the foregoing or connected
therewith, and (vi) all of each Grantor’s rights corresponding thereto
throughout the world.

 

(ccc)       “Trademark Security
Agreement” means each Trademark Security Agreement among Grantors, or any
of them, and Agent, for the benefit of the Lender Group and the Bank Product
Providers, in substantially the form of Exhibit D attached hereto,
pursuant to which Grantors have granted to Agent, for the benefit of the Lender
Group and the Bank Product Providers, a security interest in all their
respective Trademarks.

 

(ddd)      “URL” means “uniform
resource locator,” an internet web address.

 

2.             Grant of Security.  Each Grantor hereby unconditionally grants
and pledges to Agent, for the benefit of the Lender Group and the Bank Product
Providers, to secure the Secured Obligations, a continuing security interest
hereinafter referred to as the “Security Interest” in all personal property
of such Grantor whether now owned or hereafter acquired or arising and wherever
located, including such Grantor’s right, title, and interest in and to the
following, whether now owned or hereafter acquired or arising and wherever
located (the “Collateral”):

 

(a)           all of such Grantor’s
Accounts;

 

(b)           all of such Grantor’s Books;

 

(c)           all of such Grantor’s
Chattel Paper;

 

(d)           all of such Grantor’s
interest with respect to any Deposit Account;

 

5

 

(e)           all of such Grantor’s
Equipment and fixtures;

 

(f)            all of such Grantor’s
General Intangibles;

 

(g)           all of such Grantor’s
Inventory;

 

(h)           all of such Grantor’s
Investment Related Property;

 

(i)            all of such Grantor’s
Negotiable Collateral;

 

(j)            all of such Grantor’s rights
in respect of Supporting Obligations;

 

(k)           all of such Grantor’s
interest with respect to any Commercial Tort Claims;

 

(l)            all of such Grantor’s money,
Cash Equivalents, or other assets of each such Grantor that now or hereafter
come into the possession, custody, or control of Agent or any other member of
the Lender Group;

 

(m)          all of the proceeds and
products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance or Commercial Tort Claims covering or relating to any or
all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Related
Property, Negotiable Collateral, Supporting Obligations, money, or other
tangible or intangible property resulting from the sale, lease, license,
exchange, collection, or other disposition of any of the foregoing, the
proceeds of any award in condemnation with respect to any of the foregoing, any
rebates or refunds, whether for taxes or otherwise, and all proceeds of any
such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the
above, whether insured or not insured, and, to the extent not otherwise
included, any indemnity, warranty, or guaranty payable by reason of loss or
damage to, or otherwise with respect to any of the foregoing (the “Proceeds”).  Without limiting the generality of the
foregoing, the term “Proceeds” includes whatever is receivable or received when
Investment Related Property or proceeds are sold, exchanged, collected, or
otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes proceeds of any indemnity or guaranty payable to any Grantor or
Agent from time to time with respect to any of the Investment Related Property.

 

Notwithstanding anything contained in this Agreement
to the contrary, the term “Collateral” shall not include: (i) voting Stock
of any CFC, solely to the extent that such Stock represents more than 65% of
the outstanding voting Stock of such CFC; or (ii) any rights or interest
in any contract, lease, permit, license, charter or license agreement covering
real or personal property of any Grantor if under the terms of such contract,
lease, permit, license, charter or license agreement, or applicable law with
respect thereto, the grant of a security interest or lien therein is prohibited
as a matter of law or under the terms of such contract, lease, permit, license,
charter or license agreement and such prohibition has not been waived or the
consent of the other party to such contract, lease, permit, license, charter or
license agreement has not been obtained (provided, that, the foregoing
exclusions of this clause (ii) shall in no way be construed (A) to
apply to the extent that any described prohibition is unenforceable under Section 9-406,
9-407, 9-408, or 9-409 of the Code or other applicable law, (B) to limit,
impair, or otherwise affect the Lender Group’s continuing security interests in
and liens upon any rights or interests of any Grantor in or to (x) monies
due or to become due under any described contract, lease, permit, license,
charter or license agreement (including any Accounts), or (y) any proceeds
from the sale, license, lease, or other dispositions of any such contract,
lease, permit, license, charter, license agreement, or Stock, or (C) apply
to the extent that any consent or waiver has been obtained that would permit
the security interest of lien notwithstanding the prohibition).

 

3.             Security for Obligations.  The Security Interest created hereby secures
the payment and performance of the Secured Obligations, whether now existing or
arising hereafter.  Without limiting the 

 

6

 

generality of the foregoing,
this Agreement secures the payment of all amounts which constitute part of the
Secured Obligations and would be owed by Grantors, or any of them, to Agent,
the Lender Group, the Bank Product Providers or any of them, but for the fact
that they are unenforceable or not allowable due to the existence of an
Insolvency Proceeding involving any Grantor.

 

4.             Grantors Remain Liable.  Anything herein to the contrary
notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral, including the Pledged
Operating Agreements and the Pledged Partnership Agreements, to perform all of
the duties and obligations thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by Agent or any other member of
the Lender Group of any of the rights hereunder shall not release any Grantor
from any of its duties or obligations under such contracts and agreements
included in the Collateral, and (c) none of the members of the Lender Group
shall have any obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall any of the
members of the Lender Group be obligated to perform any of the obligations or
duties of any Grantors thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder. 
Until an Event of Default shall occur and be continuing, except as
otherwise provided in this Agreement, the Credit Agreement, or other Loan
Documents, Grantors shall have the right to possession and enjoyment of the
Collateral for the purpose of conducting the ordinary course of their
respective businesses, subject to and upon the terms hereof and of the Credit
Agreement and the other Loan Documents. 
Without limiting the generality of the foregoing, it is the intention of
the parties hereto that record and beneficial ownership of the Pledged
Interests, including all voting, consensual, and dividend rights, shall remain
in the applicable Grantor until the occurrence of an Event of Default and until
Agent shall notify the applicable Grantor of Agent’s exercise of voting,
consensual, or dividend rights with respect to the Pledged Interests pursuant
to Section 15 hereof.

 

5.             Representations and
Warranties.  Each
Grantor hereby represents and warrants as follows:

 

(a)           The exact legal name of each
of the Grantors is set forth on the signature pages of this Agreement or a
written notice provided to Agent pursuant to Section 6.5 of the
Credit Agreement.

 

(b)           Schedule 7 attached
hereto sets forth all Real Property owned by Grantors as of the Closing Date.

 

(c)           As of the Closing Date, no
Grantor has any interest in, or title to, any Copyrights, Intellectual Property
Licenses, Patents, or Trademarks except as set forth on Schedules 2, 3, 4,
and 6, respectively, attached hereto. 
This Agreement is effective to create a valid and continuing Lien on
such Copyrights, Intellectual Property Licenses, Patents and Trademarks and,
upon filing of the Copyright Security Agreement with the United States
Copyright Office and filing of the Patent Security Agreement and the Trademark
Security Agreement with the United States Patent and Trademark Office, and the
filing of appropriate financing statements in the jurisdictions listed on Schedule
8 hereto, all action necessary or desirable to protect and perfect the
Security Interest in and to on each Grantor’s Patents, Trademarks, or
Copyrights has been taken and such perfected Security Interest is enforceable
as such as against any and all creditors of and purchasers from any
Grantor.  No Grantor has any interest in
any Copyright that is necessary in connection with the operation of such
Grantor’s business, except for those Copyrights identified on Schedule 2
attached hereto which have been registered with the United States Copyright
Office.

 

(d)           This Agreement creates a
valid security interest in the Collateral of each of Grantors, to the extent a
security interest therein can be created under the Code, securing the payment
of the Secured Obligations.  Except to
the extent a security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, 
all filings and other actions necessary or desirable to perfect and
protect such security interest have been duly taken or will have been taken
upon the filing of financing statements listing each applicable Grantor, as a
debtor, and Agent, as secured party, in the jurisdictions listed next to such
Grantor’s name on Schedule 8 attached hereto.  Upon the making of such filings, Agent shall
have a first priority perfected security interest in the Collateral of each
Grantor to the extent such security interest can be 

 

7

 

perfected by the filing of a
financing statement.  All action by any
Grantor necessary to protect and perfect such security interest on each item of
Collateral has been duly taken.

 

(e)           Except for the Security
Interest created hereby, each Grantor is and will at all times be the sole
holder of record and the legal and beneficial owner, free and clear of all
Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule
5 as being owned by such Grantor and, when acquired by such Grantor, any
Pledged Interests acquired after the Closing Date; (ii) all of the Pledged
Interests are duly authorized, validly issued, fully paid and nonassessable and
the Pledged Interests constitute or will constitute the percentage of the
issued and outstanding Stock of the Pledged Companies of such Grantor identified
on Schedule 5 hereto as supplemented or modified by any Pledged
Interests Addendum or any Supplement to this Agreement; (ii) such Grantor
has the right and requisite authority to pledge, the Investment Related
Property pledged by such Grantor to Agent as provided herein; (iii) all
actions necessary or desirable to perfect, establish the first priority of, or
otherwise protect, Agent’s Liens in the Investment Related Property, and the
proceeds thereof, have been duly taken, (A) upon the execution and
delivery of this Agreement; (B) upon the taking of possession by Agent of
any certificates constituting the Pledged Interests, to the extent such Pledged
Interests are represented by certificates, together with undated powers
endorsed in blank by the applicable Grantor; (C) upon the filing of
financing statements in the applicable jurisdiction set forth on Schedule 8
attached hereto for such Grantor with respect to the Pledged Interests of such
Grantor that are not represented by certificates, and (D) with respect to
any Securities Accounts, upon the delivery of Control Agreements with respect
thereto; and (iv) each Grantor has delivered to and deposited with Agent
(or, with respect to any Pledged Interests created or obtained after the
Closing Date, will deliver and deposit in accordance with Sections 6(a) and
8 hereof) all certificates representing the Pledged Interests owned by
such Grantor to the extent such Pledged Interests are represented by
certificates, and undated powers endorsed in blank with respect to such
certificates. None of the Pledged Interests owned or held by such Grantor has
been issued or transferred in violation of any securities registration,
securities disclosure, or similar laws of any jurisdiction to which such
issuance or transfer may be subject.

 

(f)            No consent, approval,
authorization, or other order or other action by, and no notice to or filing
with, any Governmental Authority or any other Person is required (i) for
the grant of a Security Interest by such Grantor in and to the Collateral
pursuant to this Agreement or for the execution, delivery, or performance of
this Agreement by such Grantor, or (ii) for the exercise by Agent of the
voting or other rights provided for in this Agreement with respect to the
Investment Related Property or the remedies in respect of the Collateral
pursuant to this Agreement, except as may be required in connection with such
disposition of Investment Related Property by laws affecting the offering and
sale of securities generally.  No
material Intellectual Property License to which such Grantor is a party
requires any consent for such Grantor to grant the security interest granted
hereunder in such Grantor’s right, title or interest in or to any Copyrights,
Patents, Trademarks or material Intellectual Property Licenses.

 

6.             Covenants.  Each Grantor,
jointly and severally, covenants and agrees with Agent that from and after the
date of this Agreement and until the date of termination of this Agreement in
accordance with Section 22 hereof:

 

(a)           Possession of Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, and if and to the extent that perfection or
priority of Agent’s Security Interest is dependent on or enhanced by
possession, and such Collateral has a value in excess of $100,000, the
applicable Grantor, immediately upon the request of Agent, shall execute such
other documents and instruments as shall be requested by Agent or, if applicable,
endorse and deliver physical possession of such Negotiable Collateral,
Investment Related Property, or Chattel Paper to Agent, together with such
undated powers endorsed in blank as shall be requested by Agent;

 

8

 

(b)           Chattel Paper.

 

(i)         Each Grantor shall take all
steps reasonably necessary to grant Agent control of all electronic Chattel
Paper having a value in excess of $100,000 in accordance with the Code and all “transferable
records” as that term is defined in Section 16 of the Uniform Electronic
Transaction Act and Section 201 of the federal Electronic Signatures in
Global and National Commerce Act as in effect in any relevant jurisdiction;

 

(ii)        If any Grantor retains
possession of any Chattel Paper or instruments (which retention of possession
shall be subject to the extent permitted hereby and by the Credit Agreement),
promptly upon the request of Agent, such Chattel Paper and instruments shall be
marked with the following legend: “This writing and the obligations evidenced
or secured hereby are subject to the Security Interest of Wells Fargo Foothill,
LLC, as Agent for the benefit of the Lender Group and the Bank Product
Providers”;

 

(c)           Control Agreements.

 

(i)         Except to the extent
otherwise permitted by the Credit Agreement, each Grantor shall obtain an
authenticated Control Agreement, from each bank maintaining a Deposit Account
for such Grantor;

 

(ii)        Except to the extent
otherwise permitted by the Credit Agreement, each Grantor shall obtain an
authenticated Control Agreement, from each issuer of uncertificated securities,
securities intermediary, or commodities intermediary issuing or holding any
financial assets or commodities to or for any Grantor;

 

(iii)       Except to the extent
otherwise permitted by the Credit Agreement, each Grantor shall obtain an
authenticated Control Agreement with respect to all of such Grantor’s
electronic chattel paper, investment property, and letter-of-credit rights;

 

(d)           Letter-of-Credit Rights.  Each Grantor that is or becomes the
beneficiary of a letter of credit having a face value in excess of $100,000
shall promptly (and in any event within 5 Business Days after becoming a
beneficiary), notify Agent thereof and, upon the request by Agent, enter into a
tri-party agreement with Agent and the issuer or confirming bank with respect
to letter-of-credit rights assigning such letter-of-credit rights to Agent and
directing all payments thereunder to Agent’s Account, all in form and substance
satisfactory to Agent;

 

(e)           Commercial Tort Claims.  Each Grantor shall promptly (and in any event
within 5 Business Days of receipt thereof), notify Agent in writing upon
incurring or otherwise obtaining a Commercial Tort Claim for an amount in
excess of $100,000 after the date hereof and, upon request of Agent, promptly
amend Schedule 1 to this Agreement to describe such after-acquired
Commercial Tort Claim in a manner that reasonably identifies such Commercial
Tort Claim, and hereby authorizes the filing of additional financing statements
or amendments to existing financing statements describing such Commercial Tort
Claims, and agrees to do such other acts or things deemed necessary or
desirable by Agent to give Agent a first priority, perfected security interest
in any such Commercial Tort Claim;

 

(f)            Government Contracts.  If any Account or Chattel Paper arises out of
a contract or contracts with the United States of America or any department,
agency, or instrumentality thereof pursuant to which more than $100,000 or more
may be paid in any calendar year, Grantors shall promptly (and in any event
within 5 Business Days of the creation thereof) notify Agent thereof in writing
and execute any instruments or take any steps reasonably required by Agent in
order that all moneys due or to become due under such contract or contracts
shall be assigned to Agent, for the benefit of the Lender Group and the Bank
Product Providers, and shall provide written notice thereof under the
Assignment of Claims Act or other applicable law;

 

9

 

(g)           Intellectual Property.

 

(i)         Upon request of Agent, in
order to facilitate filings with the United States Patent and Trademark Office
and the United States Copyright Office, each Grantor shall execute and deliver
to Agent one or more Copyright Security Agreements, Trademark Security
Agreements, or Patent Security Agreements to further evidence Agent’s Lien on
such Grantor’s Patents, Trademarks, or Copyrights, and the General Intangibles
of such Grantor relating thereto or represented thereby;

 

(ii)        Each Grantor shall have the
duty, to the extent required or materially economically desirable in the
operation of such Grantor’s business, (A) to promptly sue for
infringement, misappropriation, or dilution of any Intellectual Property and to
recover any and all damages for such infringement, misappropriation, or
dilution, (B) to prosecute diligently any trademark application or service
mark application that is part of the Trademarks pending as of the date hereof
or hereafter until the termination of this Agreement, (C) to prosecute
diligently any patent application that is part of the Patents pending as of the
date hereof or hereafter until the termination of this Agreement, and (D) to
take all reasonable and necessary action to preserve and maintain all of such
Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and
its rights therein, including the filing of applications for renewal,
affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings. 
Each Grantor shall promptly file an application with the United States
Copyright Office for any Copyright that has not been registered with the United
States Copyright Office if such Copyright is necessary in connection with the
operation of such Grantor’s business. Any expenses incurred in connection with
the foregoing shall be borne by the appropriate Grantor.  Each Grantor further agrees not to abandon
any Trademark, Patent, Copyright, or Intellectual Property License that is
required or materially economically desirable in the operation of such Grantor’s
business;

 

(iii)       Grantors acknowledge and
agree that the Lender Group shall have no duties with respect to the
Trademarks, Patents, Copyrights, or Intellectual Property Licenses.  Without limiting the generality of this Section 6(g),
Grantors acknowledge and agree that no member of the Lender Group shall be
under any obligation to take any steps necessary to preserve rights in the
Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any
other Person, but any member of the Lender Group may do so at its option from
and after the occurrence and during the continuance of an Event of Default, and
all expenses incurred in connection therewith (including reasonable fees and
expenses of attorneys and other professionals) shall be for the sole account of
Borrower and shall be chargeable to the Loan Account;

 

(iv)       In no event shall any
Grantor, either itself or through any agent, employee, licensee, or designee,
file an application for the registration of any Copyright with the United
States Copyright Office without giving Agent prior written notice thereof or
any Patent or Trademark with the United States Patent and Trademark Office
without giving Agent written notice thereof promptly thereafter.  Promptly upon any such filing, each Grantor
shall comply with Section 6(g)(i) hereof;

 

(h)           Investment Related Property.

 

(i)         If any Grantor shall receive
or become entitled to receive any Pledged Interests after the Closing Date, it
shall promptly (and in any event within 5 Business Days of receipt thereof)
deliver to Agent a duly executed Pledged Interests Addendum identifying such
Pledged Interests;

 

(ii)        All sums of money and
property paid or distributed in respect of the Investment Related Property
which are received by any Grantor shall be held by the Grantors in trust for
the benefit of Agent segregated from such Grantor’s other property, and such
Grantor shall deliver it forthwith to Agent’s in the exact form received;

 

(iii)       Each Grantor shall promptly
deliver to Agent a copy of each notice or other communication received by it in
respect of any Pledged Interests;

 

10

 

(iv)       No Grantor shall make or
consent to any amendment or other modification or waiver with respect to any
Pledged Interests, Pledged Operating Agreement, or Pledged Partnership
Agreement, or enter into any agreement or permit to exist any restriction with
respect to any Pledged Interests other than pursuant to the Loan Documents;

 

(v)        Each Grantor agrees that it
will cooperate with Agent in obtaining all necessary approvals and making all
necessary filings under federal, state, local, or foreign law in connection
with the Security Interest on the Investment Related Property or any sale or
transfer thereof;

 

(vi)       As to all limited liability
company or partnership interests, issued under any Pledged Operating Agreement
or Pledged Partnership Agreement, each Grantor hereby represents, warrants and
covenants that the Pledged Interests issued pursuant to such agreement (A) are
not and shall not be dealt in or traded on securities exchanges or in
securities markets, (B) do not and will not constitute investment company
securities, and (C) are not and will not be held by such Grantor in a
securities account.  In addition, none of
the Pledged Operating Agreements, the Pledged Partnership Agreements, or any
other agreements governing any of the Pledged Interests issued under any
Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall
provide that such Pledged Interests are securities governed by Article 8
of the Uniform Commercial Code as in effect in any relevant jurisdiction;

 

(i)            Real Property; Fixtures.  Each Grantor covenants and agrees that upon
the acquisition of any fee interest in Real Property it will promptly (and in
any event within 5 Business Days of acquisition) notify Agent of the
acquisition of such Real Property and will grant to Agent, for the benefit of
the Lender Group and the Bank Product Providers, a first priority Mortgage on
each fee interest in Real Property now or hereafter owned by such Grantor and
shall deliver such other documentation and opinions, in form and substance
satisfactory to Agent, in connection with the grant of such Mortgage as Agent
shall request in its Permitted Discretion, including title insurance policies,
financing statements, fixture filings and environmental audits and such Grantor
shall pay all recording costs, intangible taxes and other fees and costs
(including reasonable attorneys fees and expenses) incurred in connection
therewith.  Each Grantor acknowledges and
agrees that, to the extent permitted by applicable law, all of the Collateral
shall remain personal property regardless of the manner of its attachment or
affixation to real property;

 

(j)            Transfers and Other Liens.  Grantors shall not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Collateral, except expressly permitted by the
Credit Agreement, or (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral of any of Grantors, except for Permitted
Liens.  The inclusion of Proceeds in the
Collateral shall not be deemed to constitute Agent’s consent to any sale or
other disposition of any of the Collateral except as expressly permitted in
this Agreement or the other Loan Documents;

 

(k)           Other Actions as to Any and
All Collateral.  Each
Grantor shall promptly (and in any event within 5 Business Days of acquiring or
obtaining such Collateral) notify Agent in writing upon (i) acquiring or
otherwise obtaining any Collateral after the date hereof consisting of
Trademarks, Patents, Copyrights, Intellectual Property Licenses (other than inbound
licenses from customers granting a license to use such customer’s trade names,
trademarks and logos for packaging purposes), Investment Related Property,
Chattel Paper (electronic, tangible or otherwise), documents (as defined in Article 9
of  the Code), promissory notes (as
defined in the Code, or instruments (as defined in the Code), in each case, in
an amount in excess of $100,000 or (ii) any amount payable in excess of
$100,000 under or in connection with any of the Collateral being or becoming evidenced
after the date hereof by any Chattel Paper, documents, promissory notes, or
instruments and, in each such case upon the request of Agent, promptly execute
such other documents, or if applicable, deliver such Chattel Paper, other
documents or certificates evidencing any Investment Related Property and do
such other acts or things deemed necessary or desirable by Agent to protect
Agent’s Security Interest therein;

 

11

 

(l)            Controlled Accounts.

 

(i)         Borrower shall and shall
cause each Loan Party to (i) establish and maintain cash management
services of a type and on terms reasonably satisfactory to Agent at one or more
of the banks set forth on Schedule 6(l) (each a “Controlled
Account Bank”), and shall take reasonable steps to ensure that all of its
and its Subsidiaries’ Account Debtors forward payment of the amounts owed by
them directly to such Controlled Account Bank, and (ii) deposit or cause
to be deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all of their Collections (including those
sent directly by their Account Debtors to a Loan Party) into a bank account of
such Loan Party (each, a “Controlled Account”) at one of the Controlled
Account Banks.

 

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

 

(iii)       So long as no Default or
Event of Default has occurred and is continuing, Borrower may amend Schedule 6(l) to
add or replace a Controlled Account Bank or Controlled Account; provided,
however, that (i) such prospective Controlled Account Bank shall be
reasonably satisfactory to Agent, and (ii) prior to the time of the
opening of such Controlled Account, the applicable Loan Party and such
prospective Controlled Account Bank shall have executed and delivered to Agent
a Controlled Account Agreement.  Borrower
shall and shall cause each Loan Party to close any of its Controlled Accounts
(and establish replacement Controlled Account accounts in accordance with the
foregoing sentence) as promptly as practicable and in any event within 45 days
of notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Controlled Account Bank with
respect to Controlled Account accounts or Agent’s liability under any
Controlled Account Agreement with such Controlled Account Bank is no longer
acceptable in Agent’s reasonable judgment; and

 

(m)          Motor Vehicles.  Upon the reasonable request of Agent, with
respect to all motor vehicles owned by any Grantor having a value in excess of
$75,000, Grantor shall deliver to Agent, a certificate of title for all such
motor vehicles and shall cause those title certificates to be filed (with the
Agent’s Lien noted thereon) in the appropriate state motor vehicle filing
office.

 

7.             Relation to Other Security
Documents.  The provisions of this Agreement shall be read and construed with
the other Loan Documents referred to below in the manner so indicated.

 

(a)           Credit Agreement. In the event
of any conflict between any provision in this Agreement and a provision in the
Credit Agreement, such provision of the Credit Agreement shall control.

 

(b)           Patent, Trademark, Copyright
Security Agreements.  The
provisions of the Copyright Security Agreements, Trademark Security Agreements,
and Patent Security Agreements are supplemental to the provisions of this
Agreement, and nothing contained in the Copyright Security Agreements,
Trademark Security Agreements, or the Patent Security Agreements shall limit
any of the rights or remedies of Agent hereunder.

 

12

 

8.             Further Assurances.

 

(a)           Each Grantor
agrees that from time to time, at its own expense, such Grantor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Agent may reasonably request, in order to
perfect and protect the Security Interest granted or purported to be granted
hereby or to enable Agent to exercise and enforce its rights and remedies
hereunder with respect to any of the Collateral.

 

(b)           Each Grantor
authorizes the filing by Agent of financing or continuation statements, or
amendments thereto, and such Grantor will execute and deliver to Agent such
other instruments or notices, as may be necessary or as Agent may reasonably
request, in order to perfect and preserve the Security Interest granted or
purported to be granted hereby.

 

(c)           Each Grantor
authorizes Agent at any time and from time to time to file, transmit, or
communicate, as applicable, financing statements and amendments (i) describing
the Collateral as “all personal property of debtor” or “all assets of debtor”
or words of similar effect, (ii) describing the Collateral as being of
equal or lesser scope or with greater detail, or (iii) that contain any
information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance. Each Grantor also hereby ratifies any
and all financing statements or amendments previously filed by Agent in any
jurisdiction.

 

(d)           Each Grantor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
filed in connection with this Agreement without the prior written consent of
Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of
the Code.

 

9.             Agent’s Right to Perform Contracts, Exercise
Rights, etc. Upon the
occurrence and during the continuance of an Event of Default, Agent (or its
designee) (a) may proceed to perform any and all of the obligations of any
Grantor contained in any contract, lease, or other agreement and exercise any
and all rights of any Grantor therein contained as fully as such Grantor itself
could, (b) shall have the right to use any Grantor’s rights under
Intellectual Property Licenses in connection with the enforcement of the Agent’s
rights hereunder, including the right to prepare for sale and sell any and all
Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses, and (c) shall have the right to
request that any Stock that is pledged hereunder be registered in the name of
Agent or any of its nominees.

 

10.           Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints
Agent its attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, at such time as an Event
of Default has occurred and is continuing under the Credit Agreement, to take
any action and to execute any instrument which Agent may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including:

 

(a)           to ask, demand,
collect, sue for, recover, compromise, receive and give acquittance and
receipts for moneys due and to become due under or in connection with the
Accounts or any other Collateral of such Grantor;

 

(b)           to receive and
open all mail addressed to such Grantor and to notify postal authorities to
change the address for the delivery of mail to such Grantor to that of Agent;

 

(c)           to receive,
indorse, and collect any drafts or other instruments, documents, Negotiable
Collateral or Chattel Paper;

 

(d)           to file any
claims or take any action or institute any proceedings which Agent may deem
necessary or desirable for the collection of any of the Collateral of such
Grantor or otherwise to enforce the rights of Agent with respect to any of the
Collateral;

 

13

 

(e)           to repair,
alter, or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any Person obligated to such Grantor in respect of any
Account of such Grantor;

 

(f)            to use any
labels, Patents, Trademarks, trade names, URLs, domain names, industrial
designs, Copyrights, advertising matter or other industrial or intellectual
property rights, in advertising for sale and selling Inventory and other
Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor; and

 

(g)           Agent on behalf
of the Lender Group shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Trademarks, Patents, Copyrights and
Intellectual Property Licenses and, if Agent shall commence any such suit, the
appropriate Grantor shall, at the request of Agent, do any and all lawful acts
and execute any and all proper documents reasonably required by Agent in aid of
such enforcement.

 

To the extent permitted by
law, each Grantor hereby ratifies all that such attorney-in-fact shall lawfully
do or cause to be done by virtue hereof. This power of attorney is coupled with
an interest and shall be irrevocable until this Agreement is terminated.

 

11.           Agent May Perform. If any of the Grantors fails to perform any
agreement contained herein, Agent may itself perform, or cause performance of,
such agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable, jointly and severally, by Grantors.

 

12.           Agent’s Duties. The powers conferred on Agent hereunder are
solely to protect Agent’s interest in the Collateral, for the benefit of the
Lender Group and the Bank Product Providers, and shall not impose any duty upon
Agent to exercise any such powers. Except for the safe custody of any
Collateral in its actual possession and the accounting for moneys actually
received by it hereunder, Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral. Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its actual possession if such Collateral is accorded treatment substantially
equal to that which Agent accords its own property.

 

13.           Collection of Accounts, General Intangibles
and Negotiable Collateral. At
any time upon the occurrence and during the continuation of an Event of
Default, Agent or Agent’s designee may, to the extent permitted by law, (a) notify
Account Debtors of 

any Grantor that the
Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been
assigned to Agent, for the benefit of the Lender Group and the Bank Product
Providers, in connection with the exercise of its remedies hereunder, or that
Agent has a security interest therein, and (b) collect the Accounts,
General Intangibles and Negotiable Collateral directly, and any collection
costs and expenses shall constitute part of such Grantor’s Secured Obligations
under the Loan Documents.

 

14.           Disposition of Pledged Interests by Agent. None of the Pledged Interests existing as
of the date of this Agreement are, and none of the Pledged Interests hereafter
acquired on the date of acquisition thereof will be, registered or qualified
under the various federal or state securities laws of the United States and
disposition thereof after an Event of Default may be restricted to one or more
private (instead of public) sales in view of the lack of such registration. Each
Grantor understands that in connection with such disposition, Agent may
approach only a restricted number of potential purchasers and further
understands that a sale under such circumstances may yield a lower price for
the Pledged Interests than if the Pledged Interests were registered and
qualified pursuant to federal and state securities laws and sold on the open
market. Each Grantor, therefore, agrees that: 
(a) if Agent shall, pursuant to the terms of this Agreement, sell
or cause the Pledged Interests or any portion thereof to be sold at a private
sale, Agent shall have the right to rely upon the advice and opinion of any
nationally recognized brokerage or investment firm (but shall not be obligated
to seek such advice and the failure to do so shall not be considered in
determining the commercial reasonableness of such action) as to the best manner
in which to offer the Pledged Interest or any portion thereof for sale and 

 

14

 

as to the best price reasonably obtainable at the
private sale thereof; and (b) such reliance shall be conclusive evidence
that Agent has handled the disposition in a commercially reasonable manner.

 

15.           Voting Rights.

 

(a)           Upon the
occurrence and during the continuation of an Event of Default, (i) Agent
may, at its option, and with 2 Business Days prior notice to any Grantor, and
in addition to all rights and remedies available to Agent under any other agreement,
at law, in equity, or otherwise, exercise all voting rights, and all other
ownership or consensual rights in respect of the Pledged Interests owned by
such Grantor, but under no circumstances is Agent obligated by the terms of
this Agreement to exercise such rights, and (ii) if Agent duly exercises
its right to vote any of such Pledged Interests, each Grantor hereby appoints
Agent, such Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to
vote such Pledged Interests in any manner Agent deems advisable for or against
all matters submitted or which may be submitted to a vote of shareholders,
partners or members, as the case may be. The power-of-attorney granted hereby
is coupled with an interest and shall be irrevocable.

 

(b)           For so long as
any Grantor shall have the right to vote the Pledged Interests owned by it,
such Grantor covenants and agrees that it will not, without the prior written
consent of Agent, vote or take any consensual action with respect to such
Pledged Interests which would materially adversely affect the rights of Agent
and the other members of the Lender Group or the value of the Pledged
Interests.

 

16.           Remedies. Upon the occurrence and during the continuance of an Event of
Default:

 

(a)           Agent may, and,
at the instruction of the Required Lenders, shall exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein, in
the other Loan Documents, or otherwise available to it, all the rights and
remedies of a secured party on default under the Code or any other applicable
law. Without limiting the generality of the foregoing, each Grantor expressly
agrees that, in any such event, Agent without demand of performance or other
demand, advertisement or notice of any kind (except a notice specified below of
time and place of public or private sale) to or upon any of Grantors or any
other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code or any
other applicable law), may take immediate possession of all or any portion of
the Collateral and (i) require Grantors to, and each Grantor hereby agrees
that it will at its own expense and upon request of Agent forthwith, assemble
all or part of the Collateral as directed by Agent and make it available to
Agent at one or more locations where such Grantor regularly maintains
Inventory, and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Agent’s offices or elsewhere, for cash, on credit, and upon such
other terms as Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least 10 days
notice to any of Grantors of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification and specifically such notice shall constitute a reasonable “authenticated
notification of disposition” within the meaning of Section 9-611 of the
Code. Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which
it was so adjourned.

 

(b)           Agent is hereby
granted a license or other right to use, without liability for royalties or any
other charge, each Grantor’s labels, Patents, Copyrights, rights of use of any
name, trade secrets, trade names, Trademarks, service marks and advertising
matter, URLs, domain names, industrial designs, other industrial or
intellectual property or any property of a similar nature, whether owned by any
of Grantors or with respect to which any of the Grantors have rights under
license, sublicense, or other agreements, as it pertains to the Collateral, in
preparing for sale, advertising for sale and selling any Collateral, and each
Grantor’s rights under all licenses and all franchise agreements shall inure to
the benefit of Agent.

 

15

 

(c)           Agent may, in
addition to other rights and remedies provided for herein, in the other Loan
Documents, or otherwise available to it under applicable law and without the
requirement of notice to or upon any of Grantors or any other Person (which
notice is hereby expressly waived to the maximum extent permitted by the Code
or any other applicable law), (i) with respect to any of Grantors’ Deposit
Accounts in which Agent’s Liens are perfected by control under Section 9-104
of the Code, instruct the bank maintaining such Deposit Account for the
applicable Grantor to pay the balance of such Deposit Account to or for the
benefit of Agent, and (ii) with respect to any of Grantors’ Securities
Accounts in which the Agent’s Liens are perfected by control under Section 9-106
of the Code, instruct the securities intermediary maintaining such Securities
Account for the applicable Grantor to (A) transfer any cash in such
Securities Account to or for the benefit of Agent, or (B) liquidate any
financial assets in such Securities Account that are customarily sold on a
recognized market and transfer the cash proceeds thereof to or for the benefit
of Agent.

 

(d)           Any cash held
by Agent as Collateral and all cash proceeds received by Agent in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral shall be applied against the Secured Obligations in the order set
forth in the Credit Agreement. In the event the proceeds of Collateral are
insufficient to satisfy all of the Secured Obligations in full, each Grantor
shall remain jointly and severally liable for any such deficiency.

 

(e)           Each Grantor
hereby acknowledges that the Secured Obligations arose out of a commercial
transaction, and 

agrees
that if an Event of Default shall occur and be continuing Agent shall have the
right to an immediate writ of possession without notice of a hearing. Agent
shall have the right to the appointment of a receiver for the properties and
assets of each of Grantors, and each Grantor hereby consents to such rights and
such appointment and hereby waives any objection such Grantors may have thereto
or the right to have a bond or other security posted by Agent.

 

17.           Remedies Cumulative. Each right, power, and remedy of Agent as
provided for in this Agreement or in the other Loan Documents or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Loan Documents or now
or hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Agent, of any one or more of such
rights, powers, or remedies shall not preclude the simultaneous or later
exercise by Agent of any or all such other rights, powers, or remedies.

 

18.           Marshaling. Agent  shall not be required to
marshal any present or future collateral security (including but not limited to
the Collateral) for, or other assurances of payment of, the Secured Obligations
or any of them or to resort to such collateral security or other assurances of
payment in any particular order, and all of its rights and remedies hereunder
and in respect of such collateral security and other assurances of payment
shall be cumulative and in addition to all other rights and remedies, however
existing or arising. To the extent that it lawfully may, each Grantor hereby
agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of Agent’s rights and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured
Obligations is outstanding or by which any of the Secured Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, each Grantor hereby irrevocably waives the benefits of all such
laws.

 

19.           Indemnity and Expenses.

 

(a)           Each Grantor
agrees to indemnify Agent and the other members of the Lender Group from and
against all claims, lawsuits and liabilities (including reasonable attorneys
fees) growing out of or resulting from this Agreement (including enforcement of
this Agreement) or any other Loan Document to which such Grantor is a party,
except claims, losses or liabilities resulting from the gross negligence or
willful misconduct of the party seeking indemnification as determined by a
final non-appealable order of a court of 

 

16

 

competent jurisdiction. This provision shall survive
the termination of this Agreement and the Credit Agreement and the repayment of
the Secured Obligations.

 

(b)           Grantors,
jointly and severally, shall, upon demand, pay to Agent (or Agent, may charge
to the Loan Account) all the Lender Group Expenses which Agent may incur in
connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or, upon an Event of Default, the
sale of, collection from, or other realization upon, any of the Collateral in
accordance with this Agreement and the other Loan Documents, (iii) the
exercise or enforcement of any of the rights of Agent hereunder or (iv) the
failure by any of Grantors to perform or observe any of the provisions hereof.

 

20.           Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES. No waiver of any provision of this Agreement, and no consent to any departure
by any of Grantors herefrom, shall in any event be effective unless the same
shall be in writing and signed by Agent, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given. No amendment of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by Agent and each of Grantors to
which such amendment applies.

 

21.           Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered to
Agent at its address specified in the Credit Agreement, and to any of the
Grantors at their respective addresses specified in the Credit Agreement or
Guaranty, as applicable, or, as to any party, at such other address as shall be
designated by such party in a written notice to the other party.

 

22.           Continuing Security Interest: Assignments
under Credit Agreement. This
Agreement shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until the Obligations have been paid
in full in cash in accordance with the provisions of the Credit Agreement and
the Commitments have expired or have been terminated, (b) be binding upon
each of Grantors, and their respective successors and assigns, and (c) inure
to the benefit of, and be enforceable by, Agent, and its successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (c), any the Lender may, in accordance with the provisions of the Credit
Agreement, assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to such the Lender herein or otherwise. Upon payment in full in cash of
the Obligations in accordance with the provisions of the Credit Agreement and
the expiration or termination of the Commitments, the Security Interest granted
hereby shall terminate and all rights to the Collateral shall revert to
Grantors or any other Person entitled thereto. At such time, Agent will
authorize the filing of appropriate termination statements to terminate such
Security Interests. No transfer or renewal, extension, assignment, or
termination of this Agreement or of the Credit Agreement, any other Loan
Document, or any other instrument or document executed and delivered by any
Grantor to Agent nor any additional Advances or other loans made by any the
Lender to Borrower, nor the taking of further security, nor the retaking or
re-delivery of the Collateral to Grantors, or any of them, by Agent, nor any
other act of the Lender Group or the Bank Product Providers, or any of them,
shall release any of Grantors from any obligation, except a release or
discharge executed in writing by Agent in accordance with the provisions of the
Credit Agreement. Agent shall not by any act, delay, omission or otherwise, be
deemed to have waived any of its rights or remedies hereunder, unless such waiver
is in writing and signed by Agent and then only to the extent therein set forth.
A waiver by Agent of any right or remedy on any occasion shall not be construed
as a bar to the exercise of any such right or remedy which Agent would
otherwise have had on any other occasion.

 

17

 

23.           Governing Law.

 

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

GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b)           THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM  NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT
IN ACCORDANCE WITH THIS SECTION 23(b).

 

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

 

24.           New Subsidiaries. Pursuant to Section 5.11 of the
Credit Agreement, any new direct or indirect U.S. Subsidiary (whether by
acquisition or creation) of Grantor is required to enter into this Agreement by
executing and delivering in favor of Agent a supplement to this Agreement in
the form of Annex 1 attached hereto. Upon the execution and delivery of Annex
1 by such new U.S. Subsidiary, such U.S. Subsidiary shall become a Grantor
hereunder with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any instrument adding an additional
Grantor as a party to this Agreement shall not require the consent of any
Grantor hereunder. The rights and obligations of each Grantor hereunder shall
remain in full force and effect notwithstanding the addition of any new Grantor
hereunder.

 

25.           Agent. Each reference herein to any right granted to, benefit conferred upon
or power exercisable by the “Agent” shall be a reference to Agent, for the
benefit of the Lender Group and the Bank Product Providers.

 

26.           Miscellaneous.

 

(a)           This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile or other electronic method of transmission
shall be equally as effective as delivery of an original executed counterpart of
this Agreement. Any party delivering an 

 

18

 

executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. The foregoing shall apply to each other
Loan Document mutatis mutandis.

 

(b)           Any provision
of this Agreement which is prohibited or unenforceable shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

(c)           Headings used
in this Agreement are for convenience only and shall not be used in connection
with the interpretation of any provision hereof.

 

(d)           The pronouns
used herein shall include, when appropriate, either gender and both singular
and plural, and the grammatical construction of sentences shall conform
thereto.

 

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

 

19

 

IN WITNESS WHEREOF, the undersigned parties hereto
have executed this Agreement by and through their duly authorized officers, as
of the day and year first above written.

 

 

	
  GRANTORS:

  	
  UTSTARCOM PERSONAL COMMUNICATIONS LLC
  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ KEITH SAN FELIPE

  
	
   

  	
  Name:

  	
  Keith San Felipe

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  
	
   

  
	
  AGENT:

  	
  WELLS FARGO FOOTHILL, LLC, as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ ERIK R. SAWYER

  
	
   

  	
  Name:

  	
  Erik R. Sawyer

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

 

SCHEDULE 1

 

COMMERCIAL TORT CLAIMS

 

[include specific case caption or
descriptions per Official Code Comment 5 to Section 9-108 of the Code]

 

 

SCHEDULE 2

 

COPYRIGHTS

 

 

SCHEDULE 3

 

INTELLECTUAL
PROPERTY LICENSES

 

 

SCHEDULE
4

 

PATENTS

 

 

SCHEDULE 5

 

PLEDGED
COMPANIES

 

	
  Name of Pledgor

  	
   

  	
  Name
  of Pledged

  Company

  	
   

  	
  Number
  of 

  Shares/Units

  	
   

  	
  Class of

  Interests

  	
   

  	
  Percentage
  of 

  Class Owned

  	
   

  	
  Certificate

  Nos.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE
6

 

TRADEMARKS

 

 

SCHEDULE
6(l)

 

CONTROLLED
ACCOUNT BANKS

 

 

SCHEDULE 7

 

OWNED
REAL PROPERTY

 

 

SCHEDULE 8

 

LIST
OF UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

 

	
  Grantor

  	
  Jurisdictions

  

 

 

ANNEX
1 TO SECURITY AGREEMENT

FORM OF SUPPLEMENT

 

Supplement No.         
(this “Supplement”) dated as of
                              ,
to the Security Agreement dated March 21, 2008 (as amended, restated,
supplemented or otherwise modified from time to time, the “Security
Agreement”) by each of the parties listed on the signature pages thereto
and those additional entities that thereafter become parties thereto
(collectively, jointly and severally, “Grantors” and each individually “Grantor”)
and WELLS FARGO FOOTHILL, LLC in its capacity as Agent for the Lender Group and
the Bank Product Providers (together with the successors, “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit Agreement
dated March 21, 2008 (as amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”) among UTStarcom
Personal Communications LLC, as borrower (“Borrower”), the lenders party
thereto as “Lenders” (“Lenders”), and Agent, the Lender Group is willing
to make certain financial accommodations available to Borrower from time to
time pursuant to the terms and conditions thereof; and

 

WHEREAS, capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Credit Agreement; and

 

WHEREAS, Grantors have entered into the Security
Agreement in order to induce the Lender Group to make certain financial
accommodations to Borrower; and

 

WHEREAS, pursuant to Section 5.11 of the
Credit Agreement, new direct or indirect U.S. Subsidiaries of Borrower, must
execute and deliver certain Loan Documents, including the Security Agreement,
and the execution of the Security Agreement by the undersigned new Grantor or
Grantors (collectively, the “New Grantors”) may be accomplished by the
execution of this Supplement in favor of Agent, for the benefit of the Lender
Group and the Bank Product Providers;

 

NOW, THEREFORE, for and in consideration of the
foregoing and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each New Grantor hereby agrees as
follows:

 

1.             In
accordance with Section 24 of the Security Agreement, each New
Grantor, by its signature below, becomes a “Grantor” under the Security
Agreement with the same force and effect as if originally named therein as a “Grantor”
and each New Grantor hereby (a) agrees to all of the terms and provisions
of the Security Agreement applicable to it as a “Grantor” thereunder and (b) represents
and warrants that the representations and warranties made by it as a “Grantor”
thereunder are true and correct on and as of the date hereof.  In furtherance of the foregoing, each New
Grantor, as security for the payment and performance in full of the Secured
Obligations, does hereby grant and pledge to Agent, for the benefit of the
Lender Group and the Bank Product Providers, a security interest in and
security title to all assets of such New Grantor including, all property of the
type described in Section 2 of the Security Agreement to secure the
full and prompt payment of the Secured Obligations, including, any interest
thereon, plus reasonable attorneys’ fees and expenses if the Secured
Obligations represented by the Security Agreement are collected by law, through
an attorney-at-law, or under advice therefrom. 
Schedule 1,  “Commercial
Tort Claims”, Schedule 2, “Copyrights”, Schedule 3, “Intellectual
Property Licenses”, Schedule 4, “Patents”, Schedule 5, “Pledged
Companies”,  Schedule 6, “Trademarks”,
Schedule 6(1), “Controlled Account Banks”,  Schedule 7, “Owned Real Property,” and
Schedule 8, “List of Uniform Commercial Code Filing Jurisdictions”  attached hereto supplement Schedule 1,
Schedule 2, Schedule 3,  Schedule 4, Schedule 5,  Schedule
6, Schedule 6(1), Schedule 7 and Schedule 8
respectively, to the Security Agreement and shall be deemed a part thereof for
all purposes of the Security Agreement. 
Each reference to a “Grantor” in the Security Agreement shall be deemed
to include each New Grantor.  The
Security Agreement is incorporated herein by reference.

 

2.             Each New Grantor represents and warrants to Agent, the
Lender Group and the Bank Product Providers that this Supplement has been duly
executed and delivered by such New Grantor and 

 

 

constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws affecting
creditors’ rights generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).

 

3.             This Supplement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.  Delivery of a counterpart
hereof by facsimile transmission or by e-mail transmission shall be as
effective as delivery of a manually executed counterpart hereof.

 

4.             Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.

 

5.             This Supplement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles thereof.

 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, each New Grantor and Agent have
duly executed this Supplement to the Security Agreement as of the day and year
first above written.

 

	
  NEW GRANTORS:

  	
  [Name of New Grantor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name of New Grantor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, LLC

  
	
  AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
									

 

 

EXHIBIT A

 

COPYRIGHT SECURITY AGREEMENT

 

This
COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”) is
made this        day of
                  ,

20
             ,
among Grantors listed on the signature pages hereof ( collectively,
jointly and severally, “Grantors” and each individually “Grantor”), and
WELLS FARGO FOOTHILL, LLC, in its capacity as Agent for the Lender Group and
the Bank Product Providers (together with its successors, the “Agent”).

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated March 21, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) among UTStarcom Personal Communications LLC, as borrower ( “Borrower”),
the lenders party thereto as “Lenders” (“Lenders”), and Agent, the
Lender Group is willing to make certain financial accommodations available to
Borrower pursuant to the terms and conditions thereof; and

 

WHEREAS,
the members of the Lender Group are willing to make the financial accommodations
to Borrower as provided for in the Credit Agreement, but only upon the
condition, among others, that Grantors shall have executed and delivered to
Agent, for the benefit of the Lender Group and the Bank Product Providers, that
certain Security Agreement dated March 21, 2008 (including all annexes,
exhibits or schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the “Security Agreement”);

 

WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and
deliver to Agent, for the benefit of the Lender Group and the Bank Product
Providers, this Copyright Security Agreement;

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

 

1.             DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement or the
Credit Agreement.

 

2.             GRANT OF
SECURITY INTEREST IN COPYRIGHT COLLATERAL. 
Each Grantor hereby grants to Agent, for the benefit of the Lender Group
and the Bank Product Providers, a continuing first priority security interest
in all of such Grantor’s right, title and interest in, to and under the
following, whether presently existing or hereafter created or acquired
(collectively, the “Copyright Collateral”):

 

(a)           all of such Grantor’s
Copyrights including those referred to on Schedule I hereto;

 

(b)           all reissues,
continuations or extensions of the foregoing; and

 

(c)           all products and
proceeds of the foregoing, including any claim by such Grantor against third
parties for past, present or future infringement or dilution of any Copyright.

 

Notwithstanding
the foregoing or anything contained herein to the contrary, the term “Copyright
Collateral” shall not include any rights or interest in any contract, lease,
permit, license, charter or license agreement covering real or personal
property of any Grantor if under the terms of such contract, lease, permit,
license, charter or license agreement, or applicable law with respect thereto,
the grant of a security interest or lien therein is prohibited as a matter of
law or under the terms of such contract, lease, permit, license, charter 

 

 

or
license agreement and such prohibition has not been waived or the consent of
the other party to such contract, lease, permit, license, charter or license
agreement has not been obtained (provided, that, the foregoing exclusions of this
clause shall in no way be construed (A) to apply to the extent that any
described prohibition is unenforceable under Section 9-406, 9-407, 9-408,
or 9-409 of the Code or other applicable law, (B) to limit, impair, or
otherwise affect the Lender Group’s continuing security interests in and liens
upon any rights or interests of any Grantor in or to (x) monies due or to
become due under any described contract, lease, permit, license, charter or
license agreement (including any Accounts), or (y) any proceeds from the
sale, license, lease, or other dispositions of any such contract, lease,
permit, license, charter, license agreement, or Stock, or (C) apply to the
extent that any consent or waiver has been obtained that would permit the
security interest of lien notwithstanding the prohibition).

 

3.             SECURITY FOR
OBLIGATIONS.  This Copyright Security
Agreement and the Security Interest created hereby secures the payment and
performance of all the Secured Obligations, whether now existing or arising
hereafter.  Without limiting the
generality of the foregoing, this Copyright Security Agreement secures the
payment of all amounts which constitute part of the Obligations and would be
owed by Grantors, or any of them, to Agent, the Lender Group, the Bank Product
Providers or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

 

4.             SECURITY
AGREEMENT.  The security interests
granted pursuant to this Copyright Security Agreement are granted in
conjunction with the security interests granted to Agent, for the benefit of
the Lender Group and the Bank Product Providers, pursuant to the Security
Agreement.  Each Grantor hereby
acknowledges and affirms that the rights and remedies of Agent with respect to
the security interest in the Copyright Collateral made and granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.

 

5.             AUTHORIZATION
TO SUPPLEMENT.  Grantors shall give Agent notice in writing of
any additional United States copyright registrations or applications therefor
after the date hereof pursuant to the terms of the Security Agreement.  Grantors hereby authorize Agent unilaterally
to modify this Agreement by amending Schedule I to include any future
United States registered copyrights or applications therefor of Grantors.  Notwithstanding the foregoing, no failure to
so modify this Copyright Security Agreement or amend Schedule I shall in
any way affect, invalidate or detract from Agent’s continuing security interest
in all Collateral, whether or not listed on Schedule I.

 

6.             COUNTERPARTS.  This Copyright Security Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all such separate counterparts shall together constitute but one
and the same instrument.  In proving this
Copyright Security Agreement or any other Loan Document in any judicial
proceedings, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is
sought.  Any signatures delivered by a
party by facsimile transmission or by e-mail transmission shall be deemed an
original signature hereto.

 

7.             CONSTRUCTION.  Unless the context of this Copyright Security
Agreement or any other Loan Document clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
the terms “includes” and  “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”
and similar terms in this Copyright Security Agreement or any other Loan
Document refer to this Copyright Security Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision of
this Copyright Security Agreement or such other Loan Document, as the case may
be.  Section, subsection, clause,
schedule, and exhibit references herein are to this Copyright Security
Agreement unless otherwise specified. 
Any reference in this Copyright Security Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, 

 

2

 

modifications,
renewals, replacements, substitutions, joinders, and supplements set forth
herein).  Any reference herein or in any
other Loan Document to the satisfaction or repayment in full of the Obligations
shall mean the repayment in full in cash (or cash collateralization in
accordance with the terms of the Credit Agreement) of all Obligations other
than unasserted contingent indemnification Obligations and other than any Bank
Product Obligations that, at such time, are allowed by the applicable Bank
Product Providers to remain outstanding and that are not required by the
provisions of the Credit Agreement to be repaid or cash collateralized.  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein
or in any other Loan Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and warranty
as to the accuracy and completeness of the information contained therein.

 

[SIGNATURE PAGE FOLLOWS]

 

3

 

IN
WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACCEPTED AND ACKNOWLEDGED BY:

  
	
   

  	
   

  
	
   

  	
  WELLS
  FARGO FOOTHILL, LLC, as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
									

 

 

SCHEDULE
I

TO

COPYRIGHT SECURITY AGREEMENT

 

COPYRIGHT REGISTRATIONS

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT B

 

PATENT SECURITY AGREEMENT

 

This
PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is made
this        day of
           , 20        ,
among the Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each individually “Grantor”), and
WELLS FARGO FOOTHILL, LLC, in its capacity as administrative agent for the
Lender Group and the Bank Product Providers (together with its successors,  “Agent”).

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated March 21, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) among UTStarcom Personal Communications LLC, as borrower (the “Borrower”),
the lenders party thereto as “Lenders” (“Lenders”), and Agent, the
Lender Group is willing to make certain financial accommodations available to
the Borrower pursuant to the terms and conditions thereof; and

 

WHEREAS,
the members of Lender Group are willing to make the financial accommodations to
Borrower as provided for in the Credit Agreement, but only upon the condition,
among others, that the Grantors shall have executed and delivered to Agent, for
the benefit of the Lender Group and the Bank Product Providers, that certain
Security Agreement dated March 21, 2008 (including all annexes, exhibits
or schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”);

 

WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and
deliver to Agent, for the benefit of the Lender Group and the Bank Product
Providers, this Patent Security Agreement;

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
follows:

 

1.             DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement or the
Credit Agreement.

 

2.             GRANT OF
SECURITY INTEREST IN PATENT COLLATERAL. 
Each Grantor hereby grants to Agent, for the benefit of the Lender Group
and the Bank Product Providers, a continuing first priority security interest
in all of such Grantor’s right, title and interest in, to and under the
following, whether presently existing or hereafter created or acquired
(collectively, the “Patent Collateral”):

 

(a)           all of its Patents
including those referred to on Schedule I hereto;

 

(b)           all reissues,
continuations or extensions of the foregoing; and

 

(c)           all products and
proceeds of the foregoing, including any claim by such Grantor against third
parties for past, present or future infringement or dilution of any Patent.

 

Notwithstanding
the foregoing or anything contained herein to the contrary, the term “Patent
Collateral” shall not include any rights or interest in any contract, lease,
permit, license, charter or license agreement covering real or personal
property of any Grantor if under the terms of such contract, lease, permit, 

 

 

license,
charter or license agreement, or applicable law with respect thereto, the grant
of a security interest or lien therein is prohibited as a matter of law or
under the terms of such contract, lease, permit, license, charter or license
agreement and such prohibition has not been waived or the consent of the other
party to such contract, lease, permit, license, charter or license agreement
has not been obtained (provided, that, the foregoing exclusions of this clause
shall in no way be construed (A) to apply to the extent that any described
prohibition is unenforceable under Section 9-406, 9-407, 9-408, or 9-409
of the Code or other applicable law, (B) to limit, impair, or otherwise
affect the Lender Group’s continuing security interests in and liens upon any
rights or interests of any Grantor in or to (x) monies due or to become
due under any described contract, lease, permit, license, charter or license
agreement (including any Accounts), or (y) any proceeds from the sale,
license, lease, or other dispositions of any such contract, lease, permit,
license, charter, license agreement, or Stock, or (C) apply to the extent
that any consent or waiver has been obtained that would permit the security
interest of lien notwithstanding the prohibition).

 

3.             SECURITY FOR OBLIGATIONS.  This
Patent Security Agreement and the Security Interest created hereby
secures the payment and performance of all the Secured Obligations, whether now
existing or arising hereafter.  Without
limiting the generality of the foregoing, this Patent Security Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by Grantors, or any of them, to Agent, the Lender Group, the Bank
Product Providers or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

 

4.             SECURITY
AGREEMENT.  The security interests
granted pursuant to this Patent Security Agreement are granted in conjunction
with the security interests granted to Agent, for the benefit of the Lender
Group and the Bank Product Providers, pursuant to the Security Agreement.  Each Grantor hereby acknowledges and affirms
that the rights and remedies of Agent with respect to the security interest in
the Patent Collateral made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.

 

5.             AUTHORIZATION
TO SUPPLEMENT.  If any Grantor shall obtain rights to any new
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any
patent, the provisions of this Patent Security Agreement shall automatically
apply thereto. Grantors shall give notice in writing to Agent with respect to any
such new patent rights pursuant to the terms of the Security Agreement.  Without limiting Grantors’ obligations under
this Section, Grantors hereby authorize Agent unilaterally to modify this
Agreement by amending Schedule I to include any such new patent rights
of Grantors.  Notwithstanding the
foregoing, no failure to so modify this Patent Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from Agent’s continuing
security interest in all Collateral, whether or not listed on Schedule I.

 

6.             COUNTERPARTS.  This Patent Security Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all such separate counterparts shall together constitute but one
and the same instrument.  In proving this
Patent Security Agreement or any other Loan Document in any judicial
proceedings, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is
sought.  Any signatures delivered by a
party by facsimile transmission or by e-mail transmission shall be deemed an
original signature hereto.

 

7.             CONSTRUCTION.  Unless the context of this Patent Security
Agreement or any other Loan Document clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
the terms “includes” and  “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”
and similar terms in this Patent Security Agreement or any other Loan Document
refer to this Patent Security Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Patent
Security Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Patent Security Agreement unless otherwise
specified.  Any reference in this Patent
Security Agreement or in any other Loan Document to 

 

2

 

any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein).  Any reference herein
or in any other Loan Document to the satisfaction or repayment in full of the
Obligations shall mean the repayment in full in cash (or cash collateralization
in accordance with the terms of the Credit Agreement) of all Obligations other
than unasserted contingent indemnification Obligations and other than any Bank
Product Obligations that, at such time, are allowed by the applicable Bank
Product Providers to remain outstanding and that are not required by the
provisions of the Credit Agreement to be repaid or cash collateralized.  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein
or in any other Loan Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.

 

[SIGNATURE PAGE FOLLOWS]

 

3

 

IN
WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACCEPTED AND ACKNOWLEDGED BY:

  
	
   

  	
   

  
	
   

  	
  WELLS
  FARGO FOOTHILL, LLC., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
									

 

 

SCHEDULE
I

to

PATENT SECURITY AGREEMENT

 

Patent Registrations/Applications

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Mark

  	
   

  	
  Application/

  Registration No.

  	
   

  	
  App/Reg Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

 

PLEDGED INTERESTS ADDENDUM

 

This Pledged Interests Addendum, dated as of
                                    ,
                      , is delivered
pursuant to Section 6 of the Security Agreement referred to
below.  The undersigned hereby agrees
that this Pledged Interests Addendum may be attached to that certain Security
Agreement, dated as of March 21, 2008, (as amended, restated, supplemented
or otherwise modified from time to time, the “Security Agreement”), made
by the undersigned, together with the other Grantors named therein, to Wells
Fargo Foothill, LLC, as Agent.  Initially
capitalized terms used but not defined herein shall have the meaning ascribed
to such terms in the Security Agreement or the Credit Agreement.  The undersigned hereby agrees that the
additional interests listed on this Pledged Interests Addendum as set forth
below shall be and become part of the Pledged Interests pledged by the
undersigned to the Agent in the Security Agreement and any pledged company set
forth on this Pledged Interests Addendum as set forth below shall be and become
a “Pledged Company” under the Security Agreement, each with the same force and
effect as if originally named therein.

 

The undersigned hereby certifies that the
representations and warranties set forth in Section 5 of the
Security Agreement of the undersigned are true and correct as to the Pledged
Interests listed herein on and as of the date hereof.

 

	
   

  	
  [                                     ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  	
   

  
				

 

 

	
  Name of Pledgor

  	
   

  	
  Name
  of Pledged

  Company

  	
   

  	
  Number
  of

  Shares/Units

  	
   

  	
  Class of
  

  Interests

  	
   

  	
  Percentage
  of

  Class Owned

  	
   

  	
  Certificate

  Nos.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT
D

 

TRADEMARK
SECURITY AGREEMENT

 

This TRADEMARK SECURITY AGREEMENT (this “Trademark
Security Agreement”) is made this        day
of               ,
20            ,
among Grantors listed on the signature pages hereof (collectively, jointly
and severally, “Grantors” and each individually “Grantor”), and WELLS
FARGO FOOTHILL, LLC, in its capacity as Agent for the Lender Group and the Bank
Product Providers (together with its successors, “Agent”).

 

W
I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit Agreement
dated March 21, 2008 (as amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”) among UTStarcom
Personal Communications LLC; as borrower ( “Borrower”), the lenders
party thereto as “Lenders” (“Lenders”) and Agent, the Lender Group is
willing to make certain financial accommodations available to Borrower pursuant
to the terms and conditions thereof; and

 

WHEREAS, the members of the Lender Group are willing
to make the financial accommodations to Borrower as provided for in the Credit
Agreement, but only upon the condition, among others, that Grantors shall have
executed and delivered to Agent, for the benefit of Lender Group and the Bank
Product Providers, that certain Security Agreement dated March 21, 2008
(including all annexes, exhibits or schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the “Security
Agreement”);

 

WHEREAS, pursuant to the Security Agreement,
Grantors are required to execute and deliver to Agent, for the benefit of
Lender Group and the Bank Product Providers, this Trademark Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Grantor hereby agrees as follows:

 

1.             DEFINED
TERMS.  All capitalized terms used
but not otherwise defined herein have the meanings given to them in the
Security Agreement or the Credit Agreement.

 

2.             GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL.  Each Grantor hereby grants to Agent, for the
benefit of the Lender Group and the Bank Product Providers, a continuing first
priority security interest in all of such Grantor’s right, title and interest
in, to and under the following, whether presently existing or hereafter created
or acquired (collectively, the “Trademark Collateral”):

 

(a)           all of its Trademarks including those referred to on
Schedule I hereto;

 

(b)           all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control standards,
designs, operating and training manuals, customer lists, and other General
Intangibles with respect to the foregoing;

 

(c)           all reissues, continuations or extensions of the
foregoing;

 

(d)           all goodwill of the business connected with the use of,
and symbolized by, each Trademark; and

 

(e)           all products and proceeds of the foregoing, including any
claim by such Grantor against third parties for past, present or future (i) infringement
or dilution of any Trademark or (ii) injury to the goodwill associated
with any Trademark.

 

 

Notwithstanding the foregoing or anything contained
herein to the contrary, the term “Trademark Collateral” shall not include any
rights or interest in any contract, lease, permit, license, charter or license
agreement covering real or personal property of any Grantor if under the terms
of such contract, lease, permit, license, charter or license agreement, or
applicable law with respect thereto, the grant of a security interest or lien
therein is prohibited as a matter of law or under the terms of such contract,
lease, permit, license, charter or license agreement and such prohibition has
not been waived or the consent of the other party to such contract, lease,
permit, license, charter or license agreement has not been obtained (provided,
that, the foregoing exclusions of this clause shall in no way be construed (A) to
apply to the extent that any described prohibition is unenforceable under Section 9-406,
9-407, 9-408, or 9-409 of the Code or other applicable law, (B) to limit,
impair, or otherwise affect the Lender Group’s continuing security interests in
and liens upon any rights or interests of any Grantor in or to (x) monies
due or to become due under any described contract, lease, permit, license,
charter or license agreement (including any Accounts), or (y) any proceeds
from the sale, license, lease, or other dispositions of any such contract,
lease, permit, license, charter, license agreement, or Stock, or (C) apply
to the extent that any consent or waiver has been obtained that would permit
the security interest of lien notwithstanding the prohibition).

 

3.             SECURITY FOR OBLIGATIONS.  This Trademark Security Agreement and the
Security Interest created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising hereafter.  Without limiting the generality of the
foregoing, this Trademark Security Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by Grantors, or any
of them, to Agent, the Lender Group, the Bank Product Providers or any of them,
whether or not they are unenforceable or not allowable due to the existence of
an Insolvency Proceeding involving any Grantor.

 

4.             SECURITY AGREEMENT.  The security interests granted pursuant to
this Trademark Security Agreement are granted in conjunction with the security
interests granted to Agent, for the benefit of the Lender Group and the Bank
Product Providers, pursuant to the Security Agreement.  Each Grantor hereby acknowledges and affirms
that the rights and remedies of Agent with respect to the security interest in
the Trademark Collateral made and granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.

 

5.             AUTHORIZATION
TO SUPPLEMENT.  If any Grantor shall obtain rights to any new
trademarks, the provisions of this Trademark Security Agreement shall
automatically apply thereto. Grantors shall give notice in writing to Agent with
respect to any such new trademarks or renewal or extension of any trademark
registration pursuant to the terms of the Security Agreement.   Without limiting Grantors’ obligations under
this Section, Grantors hereby authorize Agent unilaterally to modify this
Agreement by amending Schedule I to include any such new trademark
rights of Grantors.  Notwithstanding the
foregoing, no failure to so modify this Trademark Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from Agent’s continuing
security interest in all Collateral, whether or not listed on Schedule I.

 

6.             COUNTERPARTS. 
This Trademark Security Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument.  In proving this Trademark Security Agreement
or any other Loan Document in any judicial proceedings, it shall not be
necessary to produce or account for more than one such counterpart signed by
the party against whom such enforcement is sought.  Any signatures delivered by a party by
facsimile transmission or by e-mail transmission shall be deemed an original
signature hereto.

 

7.             CONSTRUCTION. 
Unless the context of this Trademark Security Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Trademark Security Agreement or any other Loan 

 

2

 

Document refer to this
Trademark Security Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular provision of this Trademark Security
Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Agreement unless otherwise
specified.  Any reference in this
Trademark Security Agreement or in any other Loan Document to any agreement, instrument,
or document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Loan
Document to the satisfaction or repayment in full of the Obligations shall mean
the repayment in full in cash (or cash collateralization in accordance with the
terms of the Credit Agreement) of all Obligations other than unasserted
contingent indemnification Obligations and other than any Bank Product
Obligations that, at such time, are allowed by the applicable Bank Product Providers
to remain outstanding and that are not required by the provisions of the Credit
Agreement to be repaid or cash collateralized. 
Any reference herein to any Person shall be construed to include such
Person’s successors and assigns.  Any
requirement of a writing contained herein or in any other Loan Document shall
be satisfied by the transmission of a Record and any Record so transmitted
shall constitute a representation and warranty as to the accuracy and
completeness of the information contained therein.

 

[signature page follows]

 

3

 

IN WITNESS WHEREOF, each Grantor has caused this
Trademark Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACCEPTED
  AND ACKNOWLEDGED BY:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, LLC,
  as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
									

 

 

SCHEDULE
I

to

TRADEMARK SECURITY AGREEMENT

 

Trademark Registrations/Applications

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Mark

  	
   

  	
  Application/
  

  Registration No.

  	
   

  	
  App/Reg
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Trade Names

 

Common Law Trademarks

 

Trademarks Not Currently In Use

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]