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Exhibit 10.3    
  

 
 

List of Omitted Registration Rights Agreements    
  

	1.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Russ Lyon.

	2.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Lynch Limited Partnership.

	3.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Auther Family Trust.

	4.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Roy A. Brown.

	5.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and L.M. Warner.

	6.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Gilbert W. Chester.

	7.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and John F. Rasor.

	8.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Robert L. Ward.

	9.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Dayton W. Adams.

	10.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Westcor Limited Partnership.

	11.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Lyon Children's Trust.

	12.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Juszczak Family Trust.

	13.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Frederick O. Cox.

	14.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Scott B. Lyon.

	15.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and David M. Beckham.

	16.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Robert B. Williams.

	17.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and William P. Whiteside.

	18.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Darrell E. Beach.

	19.
	Registration
Rights Agreement dated July 26, 2002 among The Macerich Partnership, L.P., The Macerich Company and Frederick W. Collings. 

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Exhibit 10.3

List of Omitted Registration Rights AgreementsQuickLinks
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Exhibit 10.1    
  

 
 

LOAN AND SECURITY AGREEMENT    
  

        THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of July 30,
2002, between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each
individually as a "Lender" and collectively as the "Lenders"), and FOOTHILL CAPITAL CORPORATION, a
California corporation, as the arranger and administrative agent for the Lenders ("Agent"), and, on the other hand, Holley Performance Products Inc., a Delaware corporation
("Parent"), and each of Parent's Subsidiaries identified on the signature pages hereof (such Subsidiaries, together with Parent, are referred to
hereinafter each individually as a "Borrower", and individually and collectively, jointly and severally, as the
"Borrowers"). 

        The
parties agree as follows: 

1.    DEFINITIONS AND CONSTRUCTION.  

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

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

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

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

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

        "Administrative Borrower" has the meaning set forth in Section 17.9. 

        "Advances" has the meaning set forth in Section 2.1(a). 

        "Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the
ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of the definition
of Eligible Accounts and Section 7.14 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a
limited partner of such Person) shall be deemed to control such Person; (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person; and
(c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person. 

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

        "Agent's Account" means the account identified on Schedule A-1. 

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

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

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

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

        "Applicable Prepayment Premium" means, as of any date of determination, an amount equal to (a) during the period of time from and
after the date of the execution and delivery of this Agreement up to the date that is the first anniversary of the Closing Date, 5.00% times the Maximum
Revolver Amount, (b) during the period of time from and including the date that is the first anniversary of the Closing Date up to the date that is the second anniversary of the Closing Date,
4.00% times the Maximum Revolver Amount, (c) during the period of time from and including the date that is the second anniversary of the Closing
Date up to the date that is the third anniversary of the Closing Date, 3.00% times the Maximum Revolver Amount, (d) during the period of time
from and including the date that is the third anniversary of the Closing Date up to the date that is the fourth anniversary of the Closing Date, 2.00%  times the Maximum Revolver Amount, and
(e) during the period of time from and including the date that is the fourth anniversary of the Closing
Date up to the Maturity Date, 1.00% times the Maximum Revolver Amount; provided,  however, that if the Loan
Agreement is terminated as a result of Borrowers entering into a new financing arrangement with Wells Fargo, then the
Applicable Prepayment Premium shall be deemed to be zero (0). 

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

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

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

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

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

        "Bank Product Obligations" means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by
Administrative Borrower or its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that a Borrower is obligated to reimburse to Agent or any member of
the Lender Group as a result of Agent or such member of the Lender Group purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to
Administrative Borrower or its Subsidiaries pursuant to the Bank Product Agreements; provided, however,
that the maximum amount of such Bank Product Obligations shall not exceed $1,000,000. 

        "Bank Products" means any service or facility extended to Administrative Borrower or its Subsidiaries by Wells Fargo or any Affiliate of
Wells Fargo including: (a) credit cards, (b) credit 

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card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including controlled disbursement, accounts or services, or
(g) Hedge Agreements. 

        "Bank Product Reserves" means, as of any date of determination, the amount of reserves that Agent has established (based upon Wells
Fargo's or its Affiliate's reasonable determination of the credit exposure in respect of then extant Bank Products) for Bank Products then provided or outstanding;  provided, however, that the maximum amount of such reserves that Agent may establish shall not exceed
$500,000. 

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

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

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

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

        "Base Rate Margin" means 0.50 percentage points. 

        "Base Rate Subline A Margin" means 1.50 percentage points. 

        "Base Rate Subline B Margin" means 8.25 percentage points. 

        "Base Rate Subline C Margin" means 1.50 percentage points. 

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

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

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

        "Borrower" and "Borrowers" have the respective meanings set forth in the preamble to this
Agreement. 

        "Borrower Intellectual Property Right" means any Intellectual Property Right owned, held, licensed, used or held for use by any Borrower. 

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

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

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

        "Capital Expenditures" means, with respect to any Person, all expenditures by such Person that should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets (including expenditures for maintenance and repairs that should be capitalized in accordance with GAAP) and, without
duplication, the amount of all Capital Leases incurred by such Person. 

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

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

        "Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by
any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year from the date of acquisition thereof, (b) marketable direct
obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one (1) year from the date of
acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody's, (c) commercial paper maturing no more than 270 days from the date of
acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within one (1) year from the date of acquisition thereof that are either (i) issued by any bank organized under the laws of the United States or any state thereof
which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii) in an amount less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit
Insurance Corporation. 

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

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

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

        "Cash Management Side Letter Agreement" means a letter agreement executed and delivered by the Existing Lender and Agent with respect to
one or more of the Cash Management Accounts, the form and substance of which is satisfactory to Agent. 

        "Change of Control" means (a) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other
than Guarantor, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the Stock of Parent having the right to
vote for the election of members of Parent's Board of Directors, or (b) a majority of the members of Parent's Board of Directors do not constitute Continuing Directors. 

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

        "Closing Date Business Plan" means the set of Projections of Borrowers for the 3 year period following the Closing Date (on a year
by year basis, and for the 1 year period following the Closing Date, on a month by month basis), in form and substance (including as to scope and underlying assumptions) satisfactory to Agent. 

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

        "Collateral" means all of each Borrower's now owned or hereafter acquired right, title, and interest in and to each of the following: 

        (a)
Accounts, 

        (b)
Books, 

        (c)
Equipment, 

        (d)
General Intangibles, 

        (e)
Inventory, 

        (f)
Investment Property, 

        (g)
Negotiable Collateral, 

        (h)
Real Property Collateral, 

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

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

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

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

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

5

 

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

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

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

        "Copyrights" means all unregistered and registered copyrights owned or licensed by Borrowers in any and all schematics, technology,
know-how, computer software programs or applications (in both source code and object form code), documents, items, materials and all other works that are protectable under copyright law,
and all registrations, applications for registrations, renewals and extensions thereof, whether now existing or acquired in the future. 

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

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

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

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

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

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

        "Designated Account" means that certain DDA of Administrative Borrower identified on Schedule D-1. 

        "Dilution" means, as of any date of determination, a percentage, based upon the experience of the immediately prior 12 months, 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 the Accounts during such period, by
(b) Borrowers' billings with respect to Accounts during such period (excluding extraordinary items). 

        "Dilution Reserve" means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess of 5.0%. 

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

        "Distribution" has the meaning set forth in Section 7.11. 

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

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

        "EBITDA" means, with respect to any fiscal period, Parent's and its Subsidiaries' consolidated net earnings (or loss), minus extraordinary
gains, plus non-cash restructuring charges, interest expense, income taxes, and depreciation and amortization for such period, as determined in accordance with GAAP. For purposes of
calculating EBITDA, "non-cash restructuring charges" shall include, without limitation, charges to expense recorded to Borrowers' profit and loss statement that arise from the
reorganization and restructuring of Borrowers' business assets and operations; provided, however, that
(a) such charges shall not include cash payments to vendors, customers, employees, landlords and any other creditors and (b) any such charges that constitute write-downs of Inventory
shall not exceed $2,500,000 in the aggregate. 

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

        (a)    Accounts
that the Account Debtor has failed to pay within 30 days after the due date, 

        (b)    Accounts
that are not within 90 days of the due date; provided,  however, that (i) with respect to Accounts for which Autozone is the Account Debtor in an
amount not to exceed $3,000,000 outstanding at any one
time, such Accounts may be within between 90 days and 120 days of the due date and (ii) with respect to Accounts for which Autozone is not the Account Debtor in an amount not to
exceed $1,000,000 outstanding at any one time, such Accounts may be within between 90 days and 120 days of the due date, 

        (c)    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, 

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

        (e)    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, 

        (f)    Accounts
that are not payable in Dollars, 

        (g)    Accounts
with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States (other than the Eligible Canadian
Accounts and the 

7

 

Eligible Puerto Rican Accounts), or (ii) is not organized under the laws of the United States or any state thereof (other than the Eligible Canadian Accounts and the Eligible Puerto Rican
Accounts), or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency,
public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Agent (as to form, substance, and issuer or domestic
confirming bank) that has been delivered to Agent and is directly drawable by Agent, or (z) the Account is covered by credit insurance in form, substance, and amount, and by an insurer,
satisfactory to Agent, 

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

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

        (j)    Accounts
with respect to an Account Debtor whose total obligations owing to Borrowers exceed 10% (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, subject to Agent's ability to adjust such
percentage limitations in its Permitted Discretion, as to the following Account Debtors, the following percentage limitations (in lieu of 10%) shall apply for purposes hereof: (i) Advanced Auto
Parts, Inc., 20%; (ii) Auto Sales, Inc., 15%; provided, however, that with respect
to Accounts for which Auto Sales, Inc. is the Account Debtor, (x) such Accounts shall not be Eligible Accounts if Auto Sales, Inc. has not paid such Accounts within 60 days
after the original invoice date and (y) no such Accounts shall be Eligible Accounts if 25% or more of all Accounts owed by Auto Sales, Inc. (or its Affiliates) are deemed ineligible
under clause (x) above; (iii) CSK Auto, Inc., 15%, and (iv) Autozone, 15%, 

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

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

8

  

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

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

        (o)  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, or 

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

        "Eligible Canadian Accounts" means those Accounts created by Borrowers, in an aggregate amount not to exceed $2,000,000 at any time, with
respect to which the Account Debtor either (i) maintains its chief executive office in Canada, or (ii) is organized under the laws of Canada or any political subdivision thereof,
provided that such Accounts (x) are not otherwise ineligible in accordance with the definition of "Eligible Accounts" and (y) are otherwise acceptable to Agent in all respects. 

        "Eligible Capital Equipment Cost" means the cost of eligible capital equipment (the determination of which Equipment is eligible capital
equipment to be made by Agent, in its sole discretion), net of expenses for taxes, freight, installation, engineering and related soft costs. 

        "Eligible Finished Goods Inventory" means Inventory of Borrowers consisting of first quality finished goods held for sale in the ordinary
course of Borrowers' business located at one of the business locations of Borrowers set forth on Schedule E-1 (or
in-transit between any such locations), that complies with each of the representations and warranties respecting Eligible Finished Goods Inventory made by Borrowers in the Loan Documents,
and that is not excluded as ineligible by virtue of one or more of the criteria set forth below; provided,  however, that such criteria may be fixed and
revised from time to time by Agent in Agent's Permitted Discretion to address the results of any audit or
appraisal performed (or caused to be 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 Borrowers' historical accounting practices. An item of Inventory shall not be included in Eligible Finished Goods Inventory if: 

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

        (b)  it
is not located at one of the locations in the 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 a Borrower or in a contract warehouse, in each case, unless it is subject to a Collateral Access Agreement executed by the
lessor, warehouseman, or other third party, as the case may be, 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 security Agent's Lien, 

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

        (f)    it
consists of goods that are obsolete or slow moving, restrictive or custom items, work-in-process, raw materials, or goods that constitute
spare parts, packaging and shipping materials, supplies used or consumed in a Borrower's business, bill and hold goods, defective goods (when identified and reported through Borrowers' normal and
ordinary manufacturing reporting process), "seconds" (it being understood and agreed that "seconds" do not include 

9

 

inventory which has been returned and subsequently reworked into first quality finished goods, as determined by Agent in its Permitted Discretion), or Inventory acquired on consignment. 

        "Eligible Inventory" means, collectively, Eligible Finished Goods Inventory, Eligible Raw Materials Inventory and Eligible
Work-in-Process Inventory. 

        "Eligible Puerto Rican Accounts" means those Accounts created by Borrowers, in an aggregate amount not to exceed $300,000 at any time,
with respect to which the Account Debtor either (i) maintains its chief executive office in Puerto Rico, or (ii) is organized under the laws of Puerto Rico or any political subdivision
thereof, provided that such Accounts (x) are not otherwise ineligible in accordance with the definition of "Eligible Accounts" and (y) are otherwise acceptable to Agent in all respects. 

        "Eligible Raw Materials Inventory" means Inventory of Borrowers consisting of raw materials to be used in Borrowers' production process
located at one of the business locations of Borrowers set forth on Schedule E-1 (or in-transit between any such
locations), that complies with each of the representations and warranties respecting Eligible Raw Materials Inventory made by Borrowers in the Loan Documents, and that is not excluded as ineligible by
virtue of one or more of the criteria set forth below; provided, however, that such criteria may be
fixed and revised from time to time by Agent in Agent's Permitted Discretion to address the results of any audit or appraisal performed (or caused to be 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 Borrowers' historical accounting practices. An item of
Inventory shall not be included in Eligible Raw Materials Inventory if: 

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

        (b)  it
is not located at one of the locations in the 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 a Borrower or in a contract warehouse, in each case, unless it is subject to a Collateral Access Agreement executed by the
lessor, warehouseman, or other third party, as the case may be, 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 security Agent's Lien, or 

        (e)  it
consists of goods that are obsolete or slow moving, restrictive or custom items, work-in-process, finished goods, or goods that constitute
spare parts, packaging and shipping materials, supplies used or consumed in a Borrower's business, bill and hold goods, defective goods (when identified and reported through Borrowers' normal and
ordinary manufacturing reporting process), "seconds" (it being understood and agreed that "seconds" do not include inventory which has been returned and subsequently reworked into first quality
finished goods, as determined by Agent in its Permitted Discretion), or Inventory acquired on consignment. 

        "Eligible Real Property" means the parcels of Real Property located at (a) 1801 Russellville Road, Bowling Green, Kentucky and
(b) 509 Industrial Avenue, Springfield, Tennessee. 

        "Eligible Transferee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having
total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a
political subdivision of any such country and which has total assets in excess of
$250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in 

10

 

excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date or any Qualified Lender Account, (e) so long as no Event of
Default has occurred and is continuing, any other Person approved by Agent and Administrative Borrower, and (f) during the continuation of an Event of Default, any other Person approved by
Agent. 

        "Eligible Work-in-Process Inventory" means Inventory of Borrowers consisting of
work-in-process to be sold in the ordinary course of Borrowers' business that have not yet been completed as finished goods, located at one of the business locations of
Borrowers set forth on Schedule E-1, that complies with each of the representations and warranties respecting Eligible
Work-in-Process Inventory made by Borrowers in the Loan Documents, and that are not included in Eligible Finished Goods Inventory but would qualify as Eligible Finished Goods
Inventory if such work-in-process were completed as finished goods. 

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

        "Environmental Law" means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Borrowers, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC § 1251 et seq; the Toxic Substances Control Act, 15 USC
§ 2601 et seq. the Clean Air Act, 42 USC § 7401 et seq.; the Safe Drinking Water
Act, 42 USC § 3803 et seq.; the Oil Pollution Act of 1990, 33 USC § 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC § 11001 et
seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et seq.; and the Occupational Safety and Health Act,
29 USC §651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any state and local or foreign counterparts
or equivalents, in each case as amended from time to time. 

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

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

        "Environmental Reserve" means, as of the date of determination, the amount of reserves that Agent has established (based upon its
environment consultants' reasonable determination of the dollar amount required to take Remedial Action in respect of the Eligible Real Property) for the Eligible Real Property. 

        "Equipment" means all of Borrowers' now owned or hereafter acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than consumer goods, farm 

11

 

products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. 

        "Equipment Reserve" means a reserve established by Agent in the amount of $450,000, which reserve shall be reduced by the Agent as
follows: (a) such Equipment Reserve shall be reduced to $35,000 if and when the liens on Borrowers' Equipment currently held by The CIT Group/Equipment Financing, Inc. and First
Bank & Trust are terminated and released to Agent's satisfaction and (b) such Equipment Reserve shall be reduced to $0 if and when the liens on Borrowers' Equipment currently held by the
CIT Group/Equipment Financing, Inc., First Bank and Trust, Brauer Material Systems Inc., Mellon Leasing and Raco Industrial Corporation are terminated and released to Agent's
satisfaction. 

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

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

        "Excess Availability" means the amount, as of the date any determination thereof is to be made, equal to Availability  minus the aggregate amount, if any, of all trade
payables and other liabilities of Borrowers not reasonably within terms or aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of their historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion. 

        "Excess Cash Flow" means, as of the date any determination thereof is to be made, (a) EBITDA for the immediately preceding
12-month period, less (b)(i) total interest payments (to the extent paid in cash) on any Indebtedness of Borrowers permitted
hereunder during such period, determined in accordance with GAAP, (ii) principal payments on any Indebtedness of Borrowers permitted hereunder (but, in the case of Advances and Subline
Advances, only to the extent that the Maximum Revolver Amount is permanently reduced by the amount of such payments) paid in cash during such period, (iii) all Lender Group Expenses paid during
such period and (iv) all Capital Expenditures made during such period, (v) payments of Taxes made in cash during such period. 

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

        "Existing Lender" means Fleet Capital Corporation. 

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

        "FEIN" means Federal Employer Identification Number. 

        "Fixed Charge Coverage Ratio" means, with respect to any period of determination, the ratio of (i)(a) EBITDA for such period  less (b) non-financed Capital
Expenditures (i.e., excluding expenditures for assets purchased with the proceeds of
long-term debt financing or subject to a Capital Lease) made within such period less (c) income taxes paid in cash within such period
to 

12

 

(ii)(a) interest paid in cash within such period plus (b) all principal payments scheduled to be made within such period in respect of
Indebtedness of the Borrowers. 

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

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

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

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

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

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

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

        "Guarantor" means KHPP Holdings, Inc. 

        "Guaranty" means that certain general continuing guaranty executed and delivered by Guarantor in favor of Agent, for the benefit of the
Lender Group, in form and substance 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 transactions, agreements, or documents now existing or hereafter entered into between Administrative
Borrower or its Subsidiaries and Wells Fargo or its Affiliates, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency
swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Administrative Borrower's or its
Subsidiaries' exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices. 

        "Highbridge" means Highbridge/Zwirn Special Opportunities Fund, L.P., a Delaware limited partnership. 

13

  

        "Holdout Lender" has the meaning set forth in Section 15.2. 

        "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, interest rate swaps, or other financial products, (c) all obligations
under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of Administrative Borrower or its Subsidiaries, irrespective of whether such obligation or
liability is assumed, (e) all obligations for the deferred purchase price of assets (other than trade debt incurred in the ordinary course of business and repayable in accordance with customary
trade practices), and (f) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any
obligation of any other Person. 

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

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

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

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

        "Intellectual Property Right" means any trademark, copyright, service mark, trade name, patent (including any registrations or
applications for registration of any of the foregoing), license, or trade secret including, but not limited to, any such legal rights included in any schematics, technology, know-how,
computer software programs or applications (in both source code and object code form) or in other tangible or intangible information or material. 

        "Intercompany Subordination Agreement" means a subordination agreement executed and delivered by Borrowers and Agent, the form and
substance of which is satisfactory to Agent. 

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

        "Inventory" means all Borrowers' now owned or hereafter acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods that are leased by a Borrower as lessor, goods that are furnished by a 

14

 

Borrower under a contract of service, and raw materials, work in process, or materials used or consumed in a Borrower's business. 

        "Inventory Reserve" means a reserve established by Agent in the amount of $500,000, which reserve shall be reduced to $0 by Agent on the
earlier to occur of (i) such time that Agent and Borrowers mutually agree to reduce such Inventory Reserve and (ii) receipt by Agent of audited year-end financial statements
of Borrowers as of December 31, 2002, which audited financial statements shall include a physical inventory of all of Borrowers' locations and shall be acceptable to Agent in its Permitted
Discretion. 

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

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

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

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

        "Kohlberg" means Kohlberg & Co., L.L.C., a Delaware limited liability company. 

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

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

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

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

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

        "Lender Group Expenses" means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by the Lender Group, (b) fees or charges paid or incurred by Agent in connection with the Lender Group's transactions with Borrowers,
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, appraisals (including periodic Collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement), real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the disbursement of funds to or for the account of Borrowers (by wire transfer or otherwise), (d) charges paid or
incurred by Agent
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any 

15

 

default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or the Lender Group's relationship with any Borrower or any guarantor of the
Obligations, (h) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the Loan
Documents, and (i) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning any Borrower or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents,
irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral. 

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

        "Lender Side Letter Agreement" means a certain letter agreement, dated as of the date hereof, by and among Agent, Foothill and Highbridge,
as amended, modified, supplemented or restated from time to time in accordance with the terms thereof. 

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

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

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

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

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

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

        "LIBOR Rate Margin" means 2.75 percentage points. 

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

16

  

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

        "Loan Documents" means this Agreement, the Bank Product Agreements, the Cash Management Agreements, the Control Agreements, the Copyright
Security Agreement, the Disbursement Letter, the Due Diligence Letter, the Fee Letter, the Guaranty, the Intercompany Subordination Agreement, the Letters of Credit, the Mortgages, the Officers'
Certificate, the Patent Security Agreement, the Stock Pledge Agreement, the Trademark Security Agreement, any note or notes executed by a Borrower in connection with this Agreement and payable to a
member of the Lender Group, and any other agreement entered into, now or in the future, by any Borrower and the Lender Group in connection with this Agreement. 

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

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

        "Maximum Revolver Amount" means $50,000,000. 

        "Monthly Period" means a four (4) or five (5) week period of which there are twelve (12) such periods during the
fiscal year of Borrowers, determined based upon a 52-53 week accounting period. 

        "Mortgages" means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered
by a Borrower in favor of Agent, for the benefit of the Lender Group, in form and substance satisfactory to Agent, that encumber the Real Property Collateral and the related improvements thereto. 

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

        "Net Equipment Liquidation Value" means the appraised value of Borrowers' Equipment that is estimated to be recoverable in an orderly
liquidation of such Equipment, such value to be as determined from time to time by a qualified appraisal company selected by Agent, net of all related costs and expenses. 

        "Net Liquidation Percentage" means the percentage of the book value of Borrowers' Eligible Inventory that is estimated to be recoverable
in an orderly liquidation of such Inventory, such percentage to be as determined from time to time by a qualified appraisal company selected by Agent. 

        "Obligations" means (a) all loans, Advances, Subline Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent reimbursement obligations with respect to outstanding Letters of Credit, premiums, liabilities (including all amounts charged to
Borrowers' Loan Account pursuant hereto), obligations, fees (including the fees provided for in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description owing by Borrowers 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 

17

 

contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Borrowers are required to pay or reimburse by the
Loan Documents, by law, or otherwise, (b) all Bank Product Obligations and (c) all obligations, expenses, liabilities, losses and indemnities incurred, and any other amount otherwise
payable, by Agent under the Pay-Off Letter. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. 

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

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

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

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

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

        "Patent Security Agreement" means a patent security agreement executed and delivered by Borrowers and Agent, the form and substance of
which is satisfactory to Agent. 

        "Pay-Off Letter" means a letter, in form and substance satisfactory to Agent, from Existing Lender to Agent respecting the
amount necessary to repay in full all of the obligations of Borrowers owing to Existing Lender and obtain a release of all of the Liens existing in favor of Existing Lender in and to the assets of
Borrowers. 

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

        "Permitted Dispositions" means (a) sales or other dispositions by Administrative Borrower or its Subsidiaries of Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales by Administrative Borrower or its Subsidiaries of Inventory to buyers in the ordinary course of business,
(c) the use or transfer of money or Cash Equivalents by Administrative Borrower or its Subsidiaries in a manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, (d) the licensing by Administrative Borrower or its Subsidiaries, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in
the ordinary course of business and (e) sales or dispositions of Equipment in an aggregate amount during the term of this Agreement (based upon fair market value) of $1,500,000 or less;  provided,
however, that if any Equipment listed on  Schedule F-1 is sold or disposed of, Borrowers shall immediately pay to Agent an amount (and the Subline A
Amount shall be deemed to
be prepaid in a principal amount equal to such amount) equal to the appraised value ascribed to such Equipment (irrespective of whether previously sold or disposed of) on  Schedule F-1 less an
amount equal to the product of (i) the appraised value ascribed to such Equipment (irrespective of
whether previously sold or disposed of) on Schedule F-1 divided by the appraised value of all Equipment (irrespective of whether
previously sold or disposed of) listed on Schedule F-1 times (ii) the aggregate amount of all principal payments of Subline A
Advances repaid by Borrowers prior to such sale or disposition. 

        "Permitted Investments" means (a) investments in Cash Equivalents, (b) investments in negotiable instruments for
collection, (c) advances made in connection with purchases of goods or services in the ordinary course of business, and (d) investments by any Borrower in any other Borrower provided
that if any such investment is in the form of Indebtedness, such Indebtedness 

18

 

investment shall be subject to the terms and conditions of the Intercompany Subordination Agreement. 

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

        "Permitted Protest" means the right of Administrative Borrower or any of its Subsidiaries, as applicable) to protest any Lien (other than
any such Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve
with respect to such obligation is established on the Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Administrative
Borrower or any of its Subsidiaries, 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 amount outstanding at any one time not in excess of $5,000,000. 

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

        "Personal Property Collateral" means all Collateral other than Real Property. 

        "PIK Interest" means as of any date of determination, the amount of all interest accrued with respect to the Subline B Advances that has
been paid-in-kind by being added to the balance thereof in accordance with Section 2.6(a)(iii). 

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

19

 

        "Pro Rata Share" means: 

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

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

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

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

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

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

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

        "Qualified Lender Account" means any fund, money market account, investment account, or other account managed by a Lender or an Affiliate
of such Lender that is set forth on Schedule Q-1 hereto (or any other such fund or account consented to in writing by Agent, such
consent not to be unreasonably withheld). 

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

        "Real Property Collateral" means the parcel or parcels of Real Property identified on  Schedule R-1 and any Real Property hereafter acquired by a Borrower.

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

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

20

 

operation and maintenance activities, or (d) conduct any other actions authorized by 42 USC § 9601. 

        "Rent Reserve" means $108,000, which reserve shall be reduced by Agent as follows: (a) the Rent Reserve shall be reduced by $75,000
if and when Borrowers deliver to Agent a Collateral Access Agreement with respect to 189 W. Victoria Street, Long Beach, California 90805; (b) the Rent Reserve shall be reduced by $30,000 if
and when Borrowers deliver to Agent a Collateral Access Agreement with respect to 1357 East Grand Avenue, Pomona, California 91766; and (c) the Rent Reserve shall be reduced by $3,000 if and
when Borrowers deliver to Agent a Collateral Access Agreement with respect to 15236 Gravillea Avenue, Lawndale, California 90260. 

        "Replacement Lender" has the meaning set forth in Section 15.2. 

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

        "Required Availability" means Excess Availability and unrestricted cash and Cash Equivalents in an amount of not less than $5,000,000. 

        "Required Lenders" means, at any time, (a) Agent, and (b) Lenders whose Pro Rata Shares aggregate 51% of the Total
Commitments, or if the Commitments have been terminated irrevocably, 51% of the Obligations (other than Bank Product Obligations) then outstanding. 

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

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

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

        "Risk Participation Liability" means, as to each Letter of Credit, all reimbursement obligations of Borrowers 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 Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with
respect thereto. 

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

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

        "Senior Note Indenture" means that certain indenture dated as of September 20, 1999, by and between Parent and the Trustee, as such
indenture has been amended from time to time. 

        "Senior Note Indenture Documents" means the Senior Notes, the Senior Note Indenture and all other documents, agreements and exhibits and
schedules in connection therewith. 

21

 

        "Senior Notes" means those certain 121/4 Senior Notes issued by Parent pursuant to the Senior Note Indenture. 

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

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

        "Solvency Certificate" means a certificate substantially in the form of  Exhibit S-1. 

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

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

        "Stock Pledge Agreement" means a stock pledge agreement, in form and substance satisfactory to Agent, executed and delivered by Guarantor
(with respect to the Stock of Parent) and each Borrower that owns Stock of a Subsidiary of Parent. 

        "Subline A Advances" has the meaning set forth in Section 2.2(a). 

        "Subline A Amount" means the lesser of (i) $10,000,000 and (ii) the sum of (a) 80% times the Net Equipment
Liquidation Value, plus (b) (I) 50% times the net fair market value (as determined by Agent in its Permitted Discretion) of Borrowers' Eligible
Real Property, minus (II) the Environmental Reserve, plus (c) the lesser of
(I) $5,000,000 and (II) 25% times the fair market value (as determined by Agent in its Permitted Discretion) of Borrowers' trade names and trademarks. 

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

        "Subline Advances" means, collectively, the Subline A Advances, the Subline B Advances and the Subline C Advances. 

        "Subline B Advances" has the meaning set forth in Section 2.2(b). 

        "Subline B Amount" means $10,000,000. 

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

        "Subline B Maturity Date" means the date that is the earlier to occur of (x) the third anniversary of the Closing Date and
(y) the date of termination of this Agreement, whether by its terms, by prepayment, or by acceleration. 

        "Subline C Advances" has the meaning set forth in Section 2.2(c). 

        "Subline C Amount" means the least of (i) $5,000,000, (ii) when taken together with all other amounts borrowed by Borrowers
in connection with Capital Lease Obligations and Purchase Money
Indebtedness, the amount permitted to be borrowed pursuant to Section 4.09(b)(5) of the Senior Note Indenture and (iii) 80%  times the Eligible
Capital Equipment Cost. 

22

 

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

        "Subline Commitments" means, collectively, the Subline A Commitment, the Subline B Commitment and the Subline C Commitment. 

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

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

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

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

        "Taxes" has the meaning set forth in Section 16.11(e). 

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

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

        "Trustee" means State Street Bank and Trust Company, as Trustee under the Senior Note Indenture. 

        "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 Borrowers. 

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

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

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

        1.2    Accounting Terms.    All accounting terms not specifically defined herein
shall be
construed in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. Whenever the term "Borrowers" or the term "Parent" is used in
respect of a financial covenant or a related definition, it shall be understood to mean Parent 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. 

23

           1.4    Construction.    Unless the context of this
Agreement or any other Loan Document
clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where
otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or any other Loan Document refer
to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement,
instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any
reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by
the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein. 

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

2.    LOAN AND TERMS OF PAYMENT.  

        2.1    Revolver Advances.    

        (a)  Subject
to Section 2.2(d) and the other 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 Borrowers 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 less the aggregate outstanding principal amount of
the Subline Advances, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement,
"Borrowing Base," as of any date of determination, shall mean the result of: 

        (x)  85%
of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve,  plus

        (y)  the lowest of

        (i)    the
sum of the following: 

        (A)  68%
of the value of Eligible Finished Goods Inventory, plus

        (B)  31%
of the value of Eligible Raw Materials Inventory, plus

        (C)  17%
of the value of Eligible Work-in-Process Inventory, 

        (ii)  90%
times the then extant Net Liquidation Percentage times the cost of
Borrowers' Inventory, and 

        (iii)  $16,000,000,
minus

        (z)  the
sum of (i) the Bank Products Reserve, (ii) the Equipment Reserve, (iii) the Inventory Reserve, (iv) the Rent Reserve and (v) the
aggregate amount of reserves, if any, established by Agent under Section 2.1(b). 

24

  

        (b)  Anything
to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in
such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to (i) sums
that Borrowers are required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by Borrowers to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on Schedule P-1 which is specifically identified thereon as entitled to have priority over the
Agent's Liens), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent's Liens (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under
applicable law) in and to such item of the Collateral. In addition to the foregoing, Agent shall have the right to have the Inventory reappraised by a qualified appraisal company selected by Agent
from time to time after the Closing Date for the purpose of redetermining the Net Liquidation Percentage of the Eligible Inventory portion of the Collateral and, as a result, redetermining the
Borrowing Base. 

        (c)  The
Lenders with Revolver Commitments shall have no obligation to make additional Advances hereunder to the extent such additional Advances would cause the Revolver
Usage to exceed the Maximum Revolver Amount. 

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

        2.2    Subline Advances.    

        (a)  Subline A Advances.    Subject to Section 2.2(d) and the
other terms and conditions of this Agreement, on the Closing Date, each Lender with a Subline A Commitment agrees (severally, not jointly or jointly and severally) to make advances (collectively,
"Subline A Advances") to Borrowers in an aggregate amount equal to such Lender's Pro Rata Share of the Subline A Amount. Each Subline A Advance shall be
repaid in monthly installments, each in an amount equal to one-sixtieth (1/60th) of such Subline A Advance, plus accrued and unpaid interest on such amounts, such installments to be due
and payable on the first day of each month commencing on the first day of the fourth month following the month in which the first Subline A Advance is made and continuing until and including the date
of termination of this Agreement, whether by its terms, by prepayment, or by acceleration, on which date the unpaid balance of all outstanding Subline A Advances shall be due and payable in full,
together
with all accrued and unpaid interest on such amount. If, at any time, the principal amount of all outstanding Subline A Advances exceeds the Subline A Amount, Borrowers immediately shall pay to Agent,
in cash, an amount equal to 100% of such excess, plus all accrued and unpaid interest on such amounts. Borrowers may prepay all or any portion of the outstanding principal amounts of Subline A
Advances at any time, at their option, provided that upon such prepayment, Borrowers shall also pay accrued interest on the principal so prepaid to the
date of such prepayment. With the prior written consent of Agent and Highbridge (which consent may be withheld for any reason in Agent's or Highbridge's sole and absolute discretion), amounts borrowed
pursuant to this Section 2.2(a) may be reborrowed at any time during the term of this Agreement; otherwise, upon any repayment or prepayment by
the Borrowers of Subline A Advances, each Lender's Subline A Commitment will be reduced in an amount equal to such Lender's Pro Rata Share of such repayment or prepayment. All Subline A Advances shall
constitute Obligations. 

        (b)  Subline B Advances.    Subject to Section 2.2(d) and the
other terms and conditions of this Agreement, on the Closing Date, each Lender with a Subline B Commitment agrees (severally, not 

25

 

jointly or jointly and severally) to make advances (collectively, "Subline B Advances") to Borrowers in an aggregate amount equal to such Lender's Pro
Rata Share of the Subline B Amount. To the extent not paid in accordance with the last sentence of this Section 2.2(b), all outstanding Subline B
Advances shall be repaid on the Subline B Maturity Date, on which date the unpaid balance of all Subline B Advances shall be due and payable in full, together with all accrued and unpaid interest on
such amount. If, at any time, the principal amount of all outstanding Subline B Advances exceeds the Subline B Amount, Borrowers immediately shall pay to Agent, in cash, an amount equal to 100% of
such excess, plus all accrued and unpaid interest on such amounts. Subject to the last two sentences of this Section 2.2(b), Borrowers may prepay
all or any portion of the outstanding principal amounts of Subline B Advances at any time, at their option, provided that upon such prepayment,
Borrowers shall also pay accrued interest on the principal so prepaid to the date of such prepayment. With the prior written consent of Agent and Highbridge (which consent may be withheld for any
reason in Agent's or Highbridge's sole and absolute discretion), amounts borrowed pursuant to this Section 2.2(b) may be reborrowed at any time
during the term of this Agreement; otherwise, upon any repayment or prepayment by the Borrowers of Subline B Advances, each Lender's Subline B Commitment will be reduced in an amount equal to such
Lender's Pro Rata Share of such repayment or prepayment. All Subline B Advances shall constitute Obligations. Notwithstanding anything to the contrary contained in this Agreement or any other Loan
Document, Borrowers shall not prepay, retire, redeem, purchase, repay, defease or exchange, or make any deposits or segregation of funds in respect of, any principal in respect of Subline B Advances
at any time unless (A) no Default or Event of Default shall have occurred and be continuing on the date of such prepayment, retirement, redemption, purchase, repayment, defeasement, exchange,
deposit or segregation, nor shall a Default or Event of Default result therefrom, and (B) after giving effect to such prepayment, retirement, redemption, purchase, repayment, defeasement,
exchange, deposit or segregation, Borrower shall have Excess Availability in an amount that equals or exceeds $5,000,000. Subject to the preceding sentence, on or prior to the date that is ninety
(90) days after the end of each fiscal year of Parent, Borrowers shall prepay the principal of all outstanding Subline B Advances in an amount equal to the lesser of (i) the outstanding
principal amount of all Subline B Advances and (ii) 75% of Excess Cash Flow of Borrowers for the fiscal year then ended. 

        (c)  Subline C Advances.    Subject to the terms and conditions of this Agreement, each Lender with a Subline C
Commitment agrees (severally, not jointly or jointly and severally) to make advances
(collectively, "Subline C Advances") to Borrowers in an aggregate amount equal to such Lender's Pro Rata Share of the Subline C Amount. Each Subline C
Advance shall be repaid in monthly installments, each in an amount equal to one-sixtieth (1/60th) of such Subline C Advance, plus accrued and unpaid interest on such amounts, such
installments to be due and payable on the first day of each month commencing on the first day of the first month following the month in which the first Subline C Advance is made and continuing until
and including the date of termination of this Agreement, whether by its terms, by prepayment, or by acceleration, on which date the unpaid balance of all Subline C Advances shall be due and payable in
full, together with all accrued and unpaid interest on such amount. If, at any time, the principal amount of all outstanding Subline C Advances exceeds the Subline C Amount, Borrowers immediately
shall pay to Agent, in cash, an amount equal to 100% of such excess, plus all accrued and unpaid interest on such amounts. Borrowers may prepay all or any portion of the outstanding principal amounts
of Subline C Advances at any time, at their option, provided that upon such prepayment, Borrowers shall also pay accrued interest on the principal so
prepaid to the date of such prepayment. With the prior written consent of Agent and Highbridge (which consent may be withheld for any reason in Agent's or Highbridge's sole and absolute discretion),
amounts borrowed pursuant to this Section 2.2(c) may be reborrowed at any time during the term of this Agreement; otherwise, upon any repayment
or prepayment by the Borrowers of Subline C Advances, each Lender's Subline C 

26

 

Commitment will be reduced in an amount equal to such Lender's Pro Rata Share of such repayment or prepayment. In no event shall any Lender be obligated to make any advances to any Borrower under
this Section 2.2(c) at any time after the third anniversary of the Closing Date. All Subline C Advances shall constitute Obligations. 

        (d)  Notwithstanding
any provision of Section 2.1 or this  Section 2.2 to the contrary, in no event shall any Lender be obligated to make any advances to any Borrower
under  Section 2.1(a), 2.2(a) or 2.2(b) if, after giving
effect to such advances, the aggregate amount of all outstanding Advances, Subline A Advances and Subline B Advances made to the Borrowers under Sections
2.1(a), 2.2(a) and 2.2(b) would exceed the amount permitted under  Section 4.09(b)(2) of the Senior Note Indenture. 

        2.3    Borrowing Procedures and Settlements.    

        (a)  Procedure for Borrowing.    Each Borrowing shall be made by an irrevocable written request by an Authorized
Person delivered to Agent (which notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day prior to the date that is the requested Funding Date in the case
of a request for an Advance specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided,
however, that in the case of a request for Swing Loan in an amount of $5,000,000, or less, such notice will be timely received if it is received by Agent no later than
10:00 a.m. (California time) on the Business Day that is the requested Funding Date) specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall
be a Business Day. At Agent's election, in lieu of delivering the above-described written request, any Authorized Person may give Agent telephonic notice of such request by the required time, with
such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice. 

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

        (c)  Making of Advances and Subline Advances.

        (i)    In
the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested Borrowing as
described in Section 2.3(b), then promptly after receipt of a request for a Borrowing pursuant to  Section 2.3(a), Agent shall notify the Lenders,
not later than 1:00 p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable thereto, by telecopy, telephone, or other similar form of transmission, of the requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of the
requested Borrowing available to Agent in immediately available funds, to Agent's Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent's
receipt of the proceeds of such Advances (or Subline Advances, as applicable), upon satisfaction of the applicable conditions precedent set forth in  Section 3 hereof, Agent shall make the proceeds
thereof available to Administrative Borrower on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent to Administrative Borrower's Designated Account; provided, however, that, subject
to the provisions of Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance (or
its portion of a Subline Advance) if Agent shall have actual knowledge that (1) one or more of the applicable conditions precedent set forth in  Section 3 will not be satisfied on the requested
Funding Date for the applicable 

27

 

Borrowing unless such condition has been waived (in accordance with Section 15.1 hereof), or (2) the requested Borrowing would exceed the
Availability on such Funding Date. 

        (ii)  Unless
Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior to
the date of such Borrowing, that such Lender will not make available as and when required hereunder to Agent for the account of Borrowers 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 Borrowers on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in immediately available funds
and Agent in such circumstances has made available to Borrowers 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 Administrative Borrower of such failure to fund and, upon demand by Agent, Borrowers 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 or Subline Advance on any Funding Date shall not
relieve any other Lender of any obligation hereunder to make an Advance or Subline Advance on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the
Advance or Subline Advance to be made by such other Lender on any Funding Date. 

        (iii)  Agent
shall not be obligated to transfer to a Defaulting Lender any payments made by Borrowers 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 Administrative Borrower and if no Default or Event of Default
had occurred and is continuing (and to the extent such Defaulting Lender's Advance or Subline Advance was not funded by the Lender Group), retain same to be re-advanced to Borrowers as if
such Defaulting Lender had made Advances or Subline Advances to Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the account
of such Defaulting Lender the amount of all such payments received and retained by it for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect
to the Loan Documents, such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be zero. This Section shall remain effective with respect to such
Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and
Administrative 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 or Subline 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 Borrowers of their duties and obligations
hereunder to Agent or to the 

28

 

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
Administrative Borrower at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be acceptable to
Agent. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form
of Assignment and Acceptance Agreement in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (other than Bank Product Obligations) (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty
of any kind whatsoever; provided further, however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to
constitute a waiver of any of the Lender Groups' or Borrowers' rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund. 

        (d)  Making of Swing Loans.

        (i)    In
the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this  Section 2.3(d) apply to a requested Borrowing as described in Section 2.3(b), Swing Lender
as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as a Lender pursuant to this  Section 2.3(d) being referred to as a "Swing Loan" and such Advances being referred to
collectively as "Swing Loans") available to Borrowers on the Funding Date applicable thereto by transferring immediately available funds to
Administrative Borrower's Designated Account. Each Swing Loan is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Swing Loan
shall be eligible for the LIBOR Option and all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account (and for the account of the holder of any
participation interest with respect to such Swing Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a
Lender to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge that (i) one or more of the applicable conditions precedent set forth in  Section 3
will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or
(ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions
precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making, in its sole discretion, any Swing
Loan. 

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

        (e)  Agent Advances.

        (i)    Agent
hereby is authorized by Borrowers and the Lenders, from time to time in Agent's sole discretion, (1) after the occurrence and during the continuance of a
Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in Section 3 have not
been satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of repayment of the Obligations (other than the Bank Product Obligations), or (C) to pay any other amount chargeable to Borrowers pursuant
to the terms of this Agreement, including Lender Group 

29

 

Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this  Section 2.3(e) shall be referred to as
"Agent Advances"); provided,
however, that, after giving effect to such Agent Advances, the Revolver Usage does not exceed the Borrowing Base by more than $2,500,000. Each Agent Advance is an Advance
hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Agent Advance shall be eligible for the LIBOR Option and all payments thereon shall be
payable to Agent solely for its own account (and for the account of the holder of any participation interest with respect to such Agent Advance). 

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

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

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

30

  

        (ii)  In
determining whether a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than, equal to, or greater than such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by
Agent with respect to principal, interest and fees payable by Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Lender
after such application, such net amount shall be distributed by Agent to that Lender as part of such next Settlement. 

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

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

        (h)  Lenders' Failure to Perform.    All Advances (other than Swing Loans and Agent Advances) and Subline 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 Subline Advance (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations
hereunder. 

        (i)    Optional Overadvances.

        (i)    Any
contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as applicable,
may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be created, so
long as (i) after giving effect to such Advances (including a Swing Loan), the Revolver Usage does not exceed the Borrowing Base by more than $2,500,000, (ii) after giving effect to such
Advances (including a Swing Loan) the outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum
Revolver Amount, and (iii) at the time of 

31

 

the making of any such Advance (including a Swing Loan), Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 90 days. The
foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrowers in any way. The Advances and Swing Loans, as applicable, that are
made pursuant to this Section 2.3(i) shall be subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except
that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto shall be the rate applicable to Advances that are Base Rate Loans under  Section 2.6(c) hereof
without regard to the presence or absence of a Default or Event of Default. 

        (ii)  In
the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason
for, such excess, Agent shall notify Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account
for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Lenders with Revolver Commitments
thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers and intended to reduce, within a reasonable time, the outstanding principal
amount of the Advances to Borrowers to an amount permitted by the preceding paragraph. In the event Agent or any Lender disagrees over the terms of reduction or repayment of any Overadvance, the terms
of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders. 

        (iii)  Each
Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(f) for
the amount of such Lender's Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this  Section 2.3(i), and any
Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses. 

        2.4    Payments.    

        (a)  Payments by Borrowers.

        (i)    Except
as otherwise expressly provided herein, all payments by Borrowers 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 Administrative Borrower prior to the date on which any payment is due to the Lenders that Borrowers will not make such payment in full
as and when required, Agent may assume that Borrowers have 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 Borrowers do 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)    Except
as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the Loan Documents (including the Lender Side Letter Agreement and 

32

 

any other letter agreements between Agent and individual Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance
of the Obligations to which such payments relate held by each Lender) and payments of fees and expenses (other than fees or expenses that are for Agent's separate account, after giving effect to the
Lender Side Letter Agreement and any other letter agreements between Agent and individual Lenders) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee relates. All payments shall be remitted to Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is
continuing and which relate to the payment of principal or interest of specific Obligations or which relate to the payment of specific fees), and all proceeds of Accounts or other Collateral received
by Agent, shall be applied as follows: 

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

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

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

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

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

        F.    sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances), the Swing Loans, the Subline A
Advances, the Subline B Advances (other than PIK Interest) and the Subline C Advances, until paid in full, 

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

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

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

        J.    tenth, so long as no Event of Default has occurred and is continuing, ratably (i) to pay the principal of all
Advances, until paid in full, (ii) to pay all principal amounts then due and payable (other than as a result of an acceleration thereof) with respect to Subline A Advances, until paid in full,
(iii) to pay all principal amounts then due and payable (other than as a result of an acceleration thereof) with respect to Subline B Advances (including PIK Interest), until paid in full and
(iv) to pay all principal amounts then due and payable (other than as a result of an acceleration thereof) with respect to Subline C Advances, until paid in full, 

        K.    eleventh, if an Event of Default has occurred and is continuing, ratably (i) to pay the principal of all Advances,
until paid in full, (ii) to pay the outstanding principal balance of Subline A Advances, in the inverse order of the maturity of the installments due thereunder, until paid in full,
(iii) to pay the outstanding principal balance of Subline B Advances (including PIK Interest), in the inverse order of the maturity of the 

33

 

installments due thereunder, until paid in full, (iv) to pay the outstanding principal balance of Subline C Advances, in the inverse order of the maturity of the installments due thereunder,
until paid in full and (v) to Agent, to be held by Agent, for the benefit of Wells Fargo or its Affiliates, as applicable, as cash collateral in an amount up to the amount of the Bank Products
Reserve established prior to the occurrence of, and not in contemplation of, the subject Event of Default until Administrative Borrower's and its Subsidiaries' obligations in respect of the then
extant Bank Products have been paid in full or the cash collateral amount has been exhausted, 

        L.    twelfth, if an Event of Default has occurred and is continuing, to Agent, to be held by Agent, for the ratable benefit of
Issuing Lender and those Lenders having a Revolver Commitment, as cash collateral in an amount up to 105% of the then extant Letter of Credit Usage, until paid in full, 

        M.  thirteenth, ratably to pay any other Obligations (including Bank Product Obligations), until paid in full, and 

        N.    fourteenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable
law. 

        (ii)  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(f). 

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

        (iv)  For
purposes of the foregoing, "paid in full" means payment of all amounts owing under the Loan Documents according to the terms thereof, including loan fees, service
fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements,
whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding. 

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

        2.5    Overadvances.    If, at any time or for any reason, the amount of Obligations
(other
than Bank Product Obligations) owed by Borrowers to the Lender Group pursuant to Sections 2.1, 2.2 and  2.12 is greater than either the Dollar or percentage
limitations set forth in Sections 2.1, 2.2 or  2.12 (an "Overadvance"), Borrowers immediately shall pay to
Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b). In addition,
Borrowers hereby promise to pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full to the Lender Group as and when due and payable under the terms of this
Agreement and the other Loan Documents. 

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

        (a)  Interest Rates.    Except as provided in clause (c) below, all Obligations (except for undrawn Letters
of Credit and except for Bank Product Obligations) that have been charged to the 

34

 

Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows: (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum
rate equal to the LIBOR Rate plus the LIBOR Rate Margin, (ii) if the relevant Obligation is a Subline A Advance, at a per annum rate equal to the Base Rate plus the Base Rate Subline A Margin,
(iii) if the relevant Obligation is a Subline B Advance, at a per annum rate equal to the Base Rate plus the Base Rate Subline B Margin; provided,
however, that so long as no Event of Default has occurred and is continuing, interest on the Daily Balance of the Subline B Advances at a per annum rate equal to 3.00% shall,
in the absence of an election by Borrowers to pay such interest in cash, be paid-in-kind, by being added to the principal balance of the Subline B Amount (inclusive of any PIK
Interest theretofore so added), (iv) if the relevant Obligation is a Subline C Advance, at a per annum rate equal to the Base Rate plus the Base Rate Subline C Margin, and (v) otherwise,
at a per annum rate equal to the Base Rate plus the Base Rate Margin. 

        The
foregoing notwithstanding, at no time shall any portion of the Subline B Advances bear interest on the Daily Balance thereof at a per annum rate less than 13.25%. To the extent that
interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased
to the minimum rate. 

        (b)  Letter of Credit Fee.    Borrowers shall pay Agent (for the ratable benefit of the Lenders with a Revolver
Commitment, subject to the Lender Side Letter Agreement and any other letter agreement between Agent and individual Lenders), a Letter of Credit fee (in addition to the charges, commissions, fees, and
costs set forth in Section 2.12(e)) which shall accrue at a rate equal to 2.75% 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
Agent or the Required Lenders), 

        (i)    all
Obligations (except for undrawn Letters of Credit and except for Bank Product Obligations) that have been charged to the Loan Account pursuant to the terms hereof
shall bear interest on the Daily Balance thereof at a per annum rate equal to 3.00 percentage points above the per annum rate otherwise applicable hereunder, and 

        (ii)  the
Letter of Credit fee provided for above shall be increased to 3.00 percentage points above the per annum rate otherwise applicable hereunder. 

        (d)  Payment.    Except as provided in Section 2.13(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.
Borrowers hereby authorize Agent, from time to time, without prior notice to Borrowers, to charge such interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.12(e) (as and when accrued or incurred), the fees and costs provided for in  Section 2.11 (as and when
accrued or incurred), and all other payments as and when due and payable under any Loan Document (including the
installments due and payable with respect to the Subline Advances and including any amounts due and payable to Wells Fargo or its Affiliates in respect of Bank Products up to the amount of the then
extant Bank Products Reserve) to Borrowers' Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder;  provided, that, notwithstanding the foregoing, with respect to interest on a Subline Advance, such amounts thereafter shall constitute the applicable
Subline Advance hereunder and shall accrue interest at the rate then applicable to such Subline Advance hereunder. Any interest not paid when due shall be compounded by being charged to Borrowers'
Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder;  provided, 

35

 

that, notwithstanding the foregoing, with respect to interest on a Subline Advance, such amounts thereafter shall constitute the applicable Subline Advance hereunder and shall accrue interest at the
rate then applicable to such Subline Advance hereunder. 

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

        (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. Borrowers 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, Borrowers are and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess. 

        2.7    Cash Management.    

        (a)  Borrowers
shall (i) establish and maintain cash management services of a type and on terms satisfactory to Agent at one or more of the banks set forth on  Schedule 2.7(a) (each, a "Cash Management Bank"), and shall request in writing and otherwise take
such reasonable steps to ensure that all of its Account Debtors forward payment of the amounts owed by them directly to such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date of receipt thereof, all Collections (including those sent directly by Account Debtors to a Cash Management Bank) into a
bank account in Agent's name (a "Cash Management Account") at one of the Cash Management Banks. 

        (b)  Each
Cash Management Bank shall establish and maintain Cash Management Agreements with Agent and Borrowers, in form and substance acceptable to Agent. Each such Cash
Management Agreement shall provide, among other things, that (i) all items of payment deposited in such Cash Management Account and proceeds thereof are held by such Cash Management Bank as
agent or bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly related to the administration of such Cash Management Account and for returned checks or other items of payment, and
(iii) it immediately will forward by daily sweep all amounts in the applicable Cash Management Account to the Agent's Account. 

        (c)  So
long as no Default or Event of Default has occurred and is continuing, Administrative Borrower may amend  Schedule 2.7(a) to add or replace a Cash Management Account Bank or Cash Management Account;
provided,
however, that (i) such prospective Cash Management Bank shall be satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to the time of the opening of such Cash Management Account, Borrowers and such prospective Cash Management Bank
shall have executed and delivered to Agent a Cash Management Agreement. Borrowers shall close any of their Cash Management Accounts (and establish replacement cash management accounts in accordance
with the foregoing sentence) promptly and in any event within 

36

 

30 days of notice from Agent that the creditworthiness of any Cash Management Bank is no longer acceptable in Agent's reasonable judgment, or as promptly as practicable and in any event within
60 days of notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the Cash Management Bank with respect to Cash Management Accounts or
Agent's
liability under any Cash Management Agreement with such Cash Management Bank is no longer acceptable in Agent's reasonable judgment. 

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

        2.8    Crediting Payments; Float Charge.    The receipt of any payment item by Agent
(whether
from transfers to Agent by the Cash Management Banks pursuant to the Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer
of immediately available federal funds made to the Agent's Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented
for payment, then Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item
shall be deemed received by Agent only if it is received into the Agent's Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent's
Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the
immediately following Business Day. From and after the Closing Date, Agent shall be entitled to charge Borrowers for one (1) Business Day of "clearance" or "float" at the rate applicable to
Base Rate Loans under Section 2.6 on all Collections that are received by Borrowers (regardless of whether forwarded by the Cash Management Banks
to Agent). This across-the-board one (1) Business Day clearance or float charge on all Collections is acknowledged by the parties to constitute an integral aspect of the
pricing of the financing of Borrowers and shall apply irrespective of whether or not there are any outstanding monetary Obligations; the effect of such clearance or float charge being the equivalent
of charging one (1) Business Day of interest on such Collections. The parties acknowledge and agree that the economic benefit of the foregoing provisions of this  Section 2.8 shall be for the
exclusive benefit of Agent. 

        2.9    Designated Account.    Agent is authorized to make the Advances and Subline
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). Administrative Borrower agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances and Subline Advances requested by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and
Administrative Borrower, any Advance, Subline Advance, Agent Advance, or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be made to the Designated Account. 

        2.10    Maintenance of Loan Account; Statements of Obligations.    Agent shall
maintain an
account on its books in the name of Borrowers (the "Loan Account") on which Borrowers will be charged with all Subline Advances and all Advances
(including Agent Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers' account, the Letters of Credit issued by Issuing Lender for Borrowers' account,
and with all other payment Obligations hereunder or under the other Loan Documents (except for Bank Product Obligations), including accrued interest, fees and expenses, and Lender Group Expenses. In
accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Borrowers or for Borrowers' account,
including all amounts received
in the Agent's Account from any Cash Management Bank. Agent shall render statements regarding the Loan Account to Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses owing, 

37

 

and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and the Lender Group unless, within 30 days after receipt
thereof by Administrative Borrower, Administrative Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements. 

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

        (a)  Unused Line Fee.    On the first day of each month during the term of this Agreement, an unused line fee in the
amount equal to 0.375% per annum times the result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the average Daily Balance of Advances and Subline Advances that were
outstanding during the immediately preceding month, plus (ii) the average Daily Balance of the Letter of Credit Usage during the immediately preceding month, 

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

        (c)  Audit, Appraisal, and Valuation Charges.    For the separate account of Agent, audit, appraisal, and valuation
fees and charges as follows: (i) a fee of $850 per day, per auditor, plus out-of-pocket expenses for each financial audit of a Borrower performed by personnel employed
by Agent, (ii) if implemented, a one time charge of $5,000 plus out-of-pocket expenses for expenses for the establishment of electronic collateral reporting systems,
(iii) the actual charges paid or incurred by Agent for each appraisal of the Collateral performed by personnel employed by Agent, and (iv) the actual charges paid or incurred by Agent if
it elects to employ the services of one or more third Persons to perform financial audits of Borrowers, to appraise the Collateral, or any portion thereof, or to assess a Borrower's business
valuation; provided, that, notwithstanding the foregoing, so long as no Event of Default shall have occurred, Borrowers shall not be responsible for the
charges incurred in connection with appraisals of Collateral and assessments of business valuations to the extent that such appraisals or assessments are done more frequently than once each calendar
year (it being understood and agreed that the foregoing shall not prohibit in any way Agent from performing, or causing the performance of, such appraisals or assessments more frequently than once
each calendar year). 

        2.12    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 Borrowers (each, an
"L/C") or to purchase participations or execute indemnities 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 Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or extension of an outstanding L/C or L/C Undertaking), Administrative Borrower shall hand deliver or
telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the requested date
of issuance, amendment, renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of
issuance, amendment, renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or
of the Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing
Lender, Borrowers 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 

38

 

Undertaking. The Issuing Lender shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested Letter of Credit: 

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

        (ii)  the
Letter of Credit Usage would exceed $2,000,000, or 

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

        Borrowers
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, Borrowers immediately shall reimburse such L/C
Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such L/C Disbursement is made, if
Administrative 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
Administrative Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on (i) the Business Day that Administrative Borrower receives such notice, if
such notice is received prior to 10:00 a.m., California time, on the date of receipt, or (ii) the Business Day immediately succeeding the Business Day that Administrative Borrower
receives such notice, if such notice is not received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately
and automatically shall be deemed to be an Advance hereunder and,
thereafter, shall bear interest at the rate then applicable to Advances that are Base Rate Loans under Section 2.6. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrowers' 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 Borrowers pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to  Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interest may appear. 

        (b)  Promptly
following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Lender with a
Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Borrowers had requested such Advance and
Agent shall promptly pay to Issuing Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof)
and without any further action on the part of the Issuing Lender or the Lenders with Revolver Commitment, the Issuing Lender shall be deemed to have granted to each Lender with a Revolver Commitment,
and each Lender with a Revolver Commitment shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of
such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing Lender under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender with a Revolver Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the account of the Issuing
Lender, such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the date due as provided in clause (a) of this Section, or of any
reimbursement payment required to be refunded to Borrowers for any reason. Each 

39

 

Lender with a Revolver Commitment acknowledges and agrees that its obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant to
this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an
Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender fails to make available to
Agent the amount of such Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of such Letter of Credit as provided in this Section, Agent (for the account of the Issuing
Lender) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full. 

        (c)  Each
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 no Borrower shall be obligated hereunder
to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. Each 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 such
Borrower's account, even though this interpretation may be different from such Borrower's own, and each 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 Borrowers' instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto.
Each 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
Borrowers against such Underlying Issuer. Each 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 no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of
the Issuing Lender or any other member of the Lender Group. 

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

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

        (f)    If
by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental
Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental
Authority or 

40

 

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
Administrative Borrower, and Borrowers shall pay on demand such amounts as Agent may specify to be necessary to compensate the Lender Group for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to
this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on
all of the parties hereto. 

        2.13    LIBOR Option.    

        (a)  Interest and Interest Payment Dates.    In lieu of having interest charged at the rate based upon the Base
Rate, Borrowers shall have the option (the "LIBOR Option") to have interest on all or a portion of the Advances be charged 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 occurrence of an Event of
Default in consequence of which the Required Lenders or Agent on behalf thereof elect to accelerate the maturity of all or any portion of the Obligations, or (iii) termination of this Agreement
pursuant to the terms hereof. On the last day of each applicable Interest Period, unless Administrative 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, Borrowers no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding
LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. 

        (b)  LIBOR Election. 

        (i)    Administrative
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 Administrative Borrower's election of the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this Section shall be
made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a
LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day. Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the
Lenders having a Revolver Commitment. 

        (ii)  Each
LIBOR Notice shall be irrevocable and binding on Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold Agent and the 

41

 

Lenders harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an
Interest
Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or
(c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively,
"Funding Losses"). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the amount determined by Agent or such Lender to be the
excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period
at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to Administrative Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section shall be
conclusive absent manifest error. 

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

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

        (d)  Special Provisions Applicable to LIBOR Rate. 

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

42

  

        (ii)  In
the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof,
shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Advances or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Administrative 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) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so. 

        (e)  No Requirement of Matched Funding.    Anything to the contrary contained herein notwithstanding, neither Agent,
nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for
each Interest Period in the amount of the LIBOR Rate Loans. 

        2.14    Capital Requirements.    If, after the date hereof, any Lender determines
that
(i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request or directive of
any such entity regarding capital adequacy (whether or not having the force of law), 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 Administrative Borrower and Agent thereof within a reasonable time after such event has occurred. Following receipt of such notice, Borrowers agree to pay such Lender on demand
the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting
forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In
determining such amount, such Lender may use any reasonable averaging and attribution methods. 

        2.15    Joint and Several Liability of Borrowers.    

        (a)  Each
Borrower is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by
the Agent and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of all Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations. 

        (b)  Each
Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this  Section 2.15), it being
the intention of the parties hereto that all 

43

 

the Obligations shall be the joint and several obligations of each Person composing Borrowers without preferences or distinction among them. 

        (c)  If
and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event the other Persons composing Borrowers will make such payment with respect to, or perform, such Obligation. 

        (d)  The
Obligations of each Person composing Borrowers under the provisions of this Section 2.15 constitute the
absolute and unconditional, full recourse Obligations of each Person composing Borrowers enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other circumstances whatsoever. 

        (e)  Except
as otherwise expressly provided in this Agreement, each Person composing Borrowers hereby waives notice of acceptance of its joint and several liability, notice
of any Advances or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement,
notice of any action at any time taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent
permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Person composing
Borrowers hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or Lenders at any time or times in respect of any default by any Person composing Borrowers in
the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or Lenders in respect of any of the Obligations, and
the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Person composing Borrowers. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or
failure to act on the part of any Agent or Lender with respect to the failure by any Person composing Borrowers to comply with any of its respective Obligations, including, without limitation, any
failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this  Section 2.15 afford grounds for terminating, discharging or relieving any Person composing Borrowers, in whole or in part, from any of its
Obligations under this Section 2.15, it being the intention of each Person composing Borrowers that, so long as any of the Obligations hereunder
remain unsatisfied, the Obligations of such Person composing Borrowers under this Section 2.15 shall not be discharged except by performance and
then only to the extent of such performance. The Obligations of each Person composing Borrowers under this Section 2.15 shall not be diminished
or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Person composing Borrowers or any Agent or Lender. The
joint and several liability of the Persons composing Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in
the name, constitution or place of formation of any of the Persons composing Borrowers or any Agent or Lender. 

        (f)    Each
Person composing Borrowers represents and warrants to Agent and Lenders that such Borrower is currently informed of the financial condition of Borrowers and of all
other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Person composing Borrowers further represents and warrants to Agent 

44

 

and Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents. Each Person composing Borrowers hereby covenants that such Borrower will continue to keep
informed of Borrowers' financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the
Obligations. 

        (g)  Each
of the Persons composing Borrowers waives all rights and defenses arising out of an election of remedies by the Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the Agent's or such Lender's rights of subrogation and reimbursement against such
Borrower by the operation of Section 580(d) of the California Code of Civil Procedure or otherwise: 

        (h)  Each
of the Persons composing Borrowers waives all rights and defenses that such Borrower may have because the Obligations are secured by Real Property. This means,
among other things: 

        (i)    Agent
and Lenders may collect from such Borrower without first foreclosing on any Real Property Collateral or Personal Property Collateral pledged by Borrowers. 

        (ii)  If
Agent or any Lender forecloses on any Real Property Collateral pledged by Borrowers: 

        A.    The
amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the
sale price. 

Agent
and Lenders may collect from such Borrower even if Agent or Lenders, by foreclosing on the Real Property Collateral, has destroyed any right such Borrower may have to collect from the other
Borrowers. 

This
is an unconditional and irrevocable waiver of any rights and defenses such Borrower may have because the Obligations are secured by Real Property. These rights and defenses include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. 

        (i)    The
provisions of this Section 2.15 are made for the benefit of the Agent, the Lenders and their respective
successors and assigns, and may be enforced by it or them from time to time against any or all of the Persons composing Borrowers as often as occasion therefor may arise and without requirement on the
part of any such Agent, Lender, successor or assign first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Persons composing Borrowers or to
exhaust any remedies available to it or them against any of the other Persons composing Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or
to elect any other remedy. The provisions of this Section 2.15 shall remain in effect until all of the Obligations shall have been paid in full
or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by any Agent or Lender
upon the insolvency, bankruptcy or reorganization of any of the Persons composing Borrowers, or otherwise, the provisions of this Section 2.15  will forthwith be reinstated in effect, as though such
payment had not been made. 

        (j)    Each
of the Persons composing Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Persons composing
Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Agent or the Lenders with respect to any of the Obligations or
any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim 

45

 

which any Borrower may have against any other Borrower with respect to any payments to any Agent or Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any
insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or
involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower
therefor. 

        (k)  Each
of the Persons composing Borrowers hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full in cash of the Obligations. Each Borrower hereby agrees
that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any indebtedness of any other Borrower
owing to such Borrower until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of
such indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for the Agent, and the Agent shall deliver any such amounts to the Administrative Agent for
application to the Obligations in accordance with Section 2.4(b). 

3.    CONDITIONS; TERM OF AGREEMENT.  

        3.1    Conditions Precedent to the Initial Extension of Credit.    The obligation of
the
Lender Group (or any member thereof) to make the initial Advance or any Subline Advance (or otherwise to extend any credit provided for hereunder), is subject to the fulfillment, to the satisfaction
of Agent, of each of the conditions precedent set forth below: 

        (a)  the
Closing Date shall occur on or before July 31, 2002; 

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

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

        (i)    the
Cash Management Agreements, 

        (ii)  the
Cash Management Side Letter Agreement, 

        (iii)  the
Control Agreements, 

        (iv)  the
Copyright Security Agreement, 

        (v)  the
Disbursement Letter, 

        (vi)  the
Due Diligence Letter, 

        (vii) the
Fee Letter, 

        (viii)
the Guaranty, 

        the
Intercompany Subordination Agreement, 

        (ix)  the
Lender Side Letter Agreement, 

        (x)  the
Mortgages, 

46

 

        (xi)  the
Officers' Certificate, 

        (xii) the
Patent Security Agreement, 

        (xiii)
the Pay-Off Letter, together with UCC termination statements and other documentation evidencing the termination by Existing Lender of its Liens in and to
the properties and assets of Borrower, 

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

        (xv) the
Trademark Security Agreement; 

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

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

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

        (g)  Agent
shall have received certificates of status with respect to each Borrower, 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 Borrower) in which its failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that such Borrower is in good standing in such jurisdictions; 

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

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

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

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

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

        (m)  Agent
shall have received Collateral Access Agreements with respect to the following locations: (i) 200 Mitch McConnell Road, Bowling Green, Kentucky 42101;
(ii) 4770 Amer Avenue, Memphis, Tennessee 38118 and (iii) 704 Highway 25S Street, Aberdeen, Mississippi 39730; 

47

  

        (n)  Agent
shall have received opinions of Borrowers' counsel in form and substance satisfactory to Agent; 

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

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

        (q)  Agent
shall have completed its legal due diligence, the results of which shall be satisfactory to Agent; 

        (r)  Agent
shall have received completed reference checks with respect to Borrowers' senior management, the results of which are satisfactory to Agent in its sole discretion; 

        (s)  Agent
shall have received satisfactory appraisals of Borrowers' Inventory and Equipment; 

        (t)    Agent
shall have received Borrowers' Closing Date Business Plan; 

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

        (v)  Agent
shall have received (i) appraisals of the Real Property Collateral satisfactory to Agent, and (ii) mortgagee title insurance policies (or marked
commitments to issue the same) for the Real Property Collateral issued by a title insurance company satisfactory to Agent (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Agent assuring Agent that the Mortgages on such Real Property Collateral are valid and
enforceable first priority mortgage Liens on such Real Property Collateral free and clear of all defects and encumbrances except Permitted Liens, and the Mortgage Policies otherwise shall be in form
and substance satisfactory to Agent. In addition, Borrowers shall have paid to said title insurance company all expenses and premiums of said title insurance company in connection with the issuance of
the Mortgage Policies and in addition shall have paid to said title insurance company an amount equal to the recording, stamp, mortgage and/or intangibles taxes payable in connection with the
recording of the Mortgages in the appropriate county recording offices; 

        (w)  Agent
shall have received an as-built real estate survey of recent date with respect to each parcel composing the Real Property Collateral; the surveyors
retained for such surveys, the scope of the surveys, and the results thereof shall be acceptable to Agent; 

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

        (y)  Agent
shall be satisfied with its legal review of the Senior Note Indenture Documents to ensure that (i) all Obligations to be incurred pursuant to this Agreement
are permitted by the terms of the Senior Note Indenture Documents and (ii) Lenders' lien status could not be compromised or challenged in any way if Parent were to breach the terms of the
Senior Note Indenture Documents; 

        (z)  Agent
shall have reconciled to its satisfaction the appraised Equipment with Borrowers' debt schedules and UCC financing statement filings; 

48

 

        (aa) Agent
shall have verified to its satisfaction the payment history of Auto Sales, Inc. in order to support the increased concentration request with respect to
Auto Sales, Inc.; 

        (bb) Agent
shall be satisfied with its visitation of Earl's Supply Company's Long Beach facility and its review of the Inventory roll forward at such location; 

        (cc) Agent
shall have verified to its satisfaction that each Borrower has paid all due and owing unemployment taxes imposed by Kentucky and Tennessee; 

        (dd) Agent
shall have received a first priority perfected leasehold mortgage interest with respect to the Real Property located at 200 Mitch McConnell Way, Bowling Green,
Kentucky; 

        (ee) Agent
shall have reconciled to its satisfaction Borrowers' most recent physical inventory to the general ledger; 

        (ff)  Agent
shall be satisfied with the takeover audit, which shall include complete cash testing for the prior 120 days, including a cash diagram and reconciliation
of cash collections to bank statements; 

        (gg) Agent
shall be satisfied that it has a first priority perfected security interest in all vehicles which are part of the Collateral; and 

        (hh) 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. 

        3.2    Conditions Subsequent to the Initial Extension of Credit.    The obligation of
the
Lender Group (or any member thereof) to continue to make Advances or Subline Advances (or otherwise extend credit hereunder) is subject to the fulfillment, on or before the date applicable thereto, of
each of the conditions subsequent set forth below (the failure by Borrowers to so perform or cause to be performed constituting an Event of Default): 

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

        (b)  an
Inventory perpetual system shall be implemented at Earl's Supply Company no later than June 30, 2003; 

        (c)  within
60 days after the Closing Date, Agent shall have received and be satisfied with an appraisal of Borrowers' trade names and trademarks performed by a
valuation firm selected by Agent; 

        (d)  within
60 days after the Closing Date, Agent shall have received a phase-II environmental report with respect to each parcel comprising the Real
Property Collateral, and the environmental consultants, the scope of the report and the results thereof shall be acceptable to Agent; 

        (e)  within
60 days after the Closing Date, Agent shall have received a reconciliation of the variance in the book to physical inventory performed in May, 2002; 

        (f)    within
10 days after the Closing Date, Administrative Borrower shall have delivered to Agent certificates representing all of the shares of common stock of
Parent, Holley Performance Systems, Inc., a Delaware corporation, Weiand Automotive Industries, Inc., a California corporation, Lunati Cams, Inc., a Tennessee corporation, Hooker
Industries, Inc., a California corporation, So-Cal Speed Shops, Inc., a Delaware corporation and EfastParts.com, Inc., a Delaware corporation; and 

49

  

        (g)  within
90 days after the Closing Date, Administrative Borrower shall have delivered to Agent Collateral Access Agreements with respect to the following locations:
(a) 189 W. Victoria Street, Long Beach, California 90805, (b) 15236 Gravillea Avenue, Lawndale, California 90260 and (c) 1357 East Grand Avenue, Pomona, California 91766. 

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

        (a)  the
representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of
such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date); 

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

        (c)  no
injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain
in force by any Governmental Authority against any Borrower, Agent, any Lender, or any of their Affiliates; 

        (d)  no
Material Adverse Change shall have occurred; 

        (e)  Agent
shall have received a Solvency Certificate from the Chief Financial Officer of the applicable Borrower certifying that such Borrower is Solvent and has positive
Tangible Net Worth as of the date of any such Advance, Subline Advance or other extension of credit; 

        (f)    Agent
shall have received satisfactory evidence (including a certificate from Parent) that the making of such Advance or Subline Advance (or other extension of credit
hereunder) does not violate Section 4.09 of the Senior Note Indenture; and 

        (g)  with
respect to each Subline C Advance: 

        (i)    Agent
shall have received satisfactory evidence that (A) such Subline C Advance is to be used by the Borrowers to finance the purchase of Equipment and
(B) the Equipment to be purchased with the proceeds of such Subline C Advance will not be subject to any purchase money Liens; 

        (ii)  Agent
shall have received, and be satisfied with (in its Permitted Discretion), true and complete copies of all documentation relating to the purchase of the Equipment
to be financed with the proceeds of such Subline C Advance; and 

        (iii)  any
documents (including, without limitation, financing statements) required to be filed in order to create, in favor of Agent, a first priority fully perfected
security interest in the Equipment to be purchased with the proceeds of such Subline C Advance shall have been properly filed in each office in each jurisdiction necessary to create in favor of Agent
a first priority fully perfected security interest in such Equipment. 

        3.4    Term.    This Agreement shall continue in full force and effect for a term
ending on
the date that is the fifth anniversary of the Closing Date (the "Maturity Date"). The foregoing notwithstanding, the Lender Group, upon the election of
the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default. 

        3.5    Effect of Termination.    On the date of termination of this Agreement, all
Obligations
(including contingent reimbursement obligations of Borrowers with respect to any outstanding Letters of Credit and including all Bank Products Obligations) immediately shall become due and payable 

50

 

without notice or demand (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105%
of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for
the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations). No termination of this Agreement, however, shall relieve or discharge Borrowers of their
duties, Obligations, or covenants hereunder and the Agent's Liens in the Collateral shall remain in effect until all Obligations have been fully and finally discharged (or, with respect to outstanding
Letters of Credit or Bank Product Obligations, such Obligations have been collateralized as provided in the second parenthetical of the preceding sentence) and the Lender Group's obligations to
provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations have been fully and finally discharged and the Lender Group's obligations
to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers' sole expense, execute and deliver any UCC termination statements, lien releases,
mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent's Liens and
all notices of security interests and liens previously filed by Agent with respect to the Obligations. 

        3.6    Early Termination by Borrowers.    Borrowers have the option, at any time upon
90 days prior written notice by Administrative Borrower to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including
(a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its
Affiliates with respect to the then extant Bank Products Obligations), in full, together with the Applicable Prepayment Premium (to be allocated based upon the Lender Side Letter Agreement and any
other letter agreements between Agent and individual Lenders). If Administrative Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall
terminate and Borrowers shall be obligated to repay the Obligations (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a
Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and
(b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations), in full, together with the
Applicable Prepayment Premium, on the date set forth as the date of termination of this Agreement in such notice. In the event of the termination of this Agreement and repayment of the Obligations at
any time prior to the Maturity Date, for any other reason, including (a) termination upon the election of the Required Lenders to terminate after the occurrence of an Event of Default,
(b) foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise of the Obligations by the
confirmation of a plan of reorganization, or any other plan of compromise, restructure, or arrangement in any Insolvency Proceeding, then, in view of the impracticability and extreme difficulty of
ascertaining the actual amount of damages to the Lender Group or profits lost by the Lender Group as a result of such early termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of the Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to be allocated based upon the Lender Side Letter
Agreement and any other letter agreements between Agent and individual Lenders), measured as of the date of such termination. 

4.    CREATION OF SECURITY INTEREST.  

        4.1    Grant of Security Interest.    Each Borrower hereby grants to Agent, for the
benefit of
the Lender Group and (with respect to Bank Product Obligations) Wells Fargo and its Affiliates, a 

51

 

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

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

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

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

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

52

 

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

        4.6    Right to Inspect.    Agent and each Lender (through any of their respective
officers,
employees, or agents) shall have the right, from time to time hereafter (during normal business hours or, after the occurrence and continuance of an Event of Default, at any time) to inspect the Books
and to check, test, and appraise the Collateral in order to verify Borrowers' financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral. 

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

5.    REPRESENTATIONS AND WARRANTIES.  

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

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

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

        5.3    Eligible Inventory.    (a)    All Eligible Finished Goods
Inventory is of
good and merchantable quality, free from defects (the determination of defects to be made when identified and reported through Borrowers' normal and ordinary manufacturing process). As to each item of
Inventory that is identified by Administrative Borrower as Eligible Finished Goods Inventory in a borrowing base report 

53

 

submitted to Agent, at the time such report is delivered to Agent, such Inventory is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of
Eligible Finished Goods Inventory. 

        (b)  As
of the date of each borrowing base report submitted to Agent, all Eligible Raw Materials Inventory described therein is of good and merchantable quality and, to
Borrowers' knowledge, free from defects (the determination of defects to be made when identified and reported through Borrowers' normal and ordinary manufacturing process). As to each item of
Inventory that is identified by Administrative Borrower as Eligible Raw Materials Inventory in a borrowing base report submitted to Agent, at the time such report is delivered to Agent, such Inventory
is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Raw Materials Inventory. 

        (c)  As
of the date of each borrowing base report submitted to Agent, all Eligible Work-in-Process Inventory described therein is of good and
merchantable quality and, to Borrowers' knowledge, free from defects (the determination of defects to be made when identified and reported through Borrowers' normal and ordinary manufacturing
process). As to each item of Inventory that is identified by Administrative Borrower as Eligible Work-in-Process Inventory in a borrowing base report submitted to Agent, at the
time such report is delivered to Agent, such Inventory is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible
Work-in-Process Inventory. 

        5.4    Equipment.    All of the Equipment (other than obsolete or worn out Equipment)
is used
or held for use in Borrowers' business and is fit for such purposes. 

        5.5    Location of Inventory and Equipment.    Except as set forth on  Schedule 5.5(a), the Inventory and Equipment are not stored with a bailee, warehouseman, or similar party, and such Inventory and Equipment are
located only at the locations identified on Schedule 5.5(b) (as may be amended in accordance with  Section 6.9). Borrowers have no Collateral
(including Real Property Collateral) or any other assets or properties having a fair market value (as
determined by Agent) in excess of $22,000,000 in the aggregate at any one time in the State of Tennessee; provided,  however, that Borrowers may keep
Collateral or any other assets or properties having a fair market value (as determined by Agent) in excess of
$22,000,000 in the aggregate at any one time in the State of Tennessee if (i) Borrowers execute any necessary financing statements and pay any necessary filing fees to the State of Tennessee or
any county within the State of Tennessee in connection with the perfection of security interests granted to Agent hereunder or under any of the other Loan Documents, for the benefit of the Lender
Group, and (ii) from time to time at and after the Closing Date, Borrowers will execute all such instruments and take all such actions as the Agent or any Lender shall reasonably request, in
connection with the carrying out, protection of and effectuating of the security interests granted to Agent hereunder or under any of the other Loan Documents. 

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

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

        5.8    Due Organization and Qualification; Subsidiaries    

        (a)  Each
Borrower is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where
the failure to be so qualified reasonably could be expected to have a Material Adverse Change. 

54

  

        (b)  Set
forth on Schedule 5.8(b) is a complete and accurate description of the authorized capital Stock of each
Borrower, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on  Schedule 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of each Borrower's capital Stock, including any
right of conversion or exchange under any outstanding security or other instrument. No Borrower is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable for any of its capital Stock. 

        (c)  Set
forth on Schedule 5.8(c) is a complete and accurate list of each Borrower's direct and indirect Subsidiaries,
showing: (i) the jurisdiction of their organization; (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries; and (iii) the
number and the percentage of the outstanding shares of each such class owned directly or indirectly by the applicable Borrower. All of the outstanding capital Stock of each such Subsidiary has been
validly issued and is fully paid and non-assessable. 

        (d)  Except
as set forth on Schedule 5.8(c), there are no subscriptions, options, warrants, or calls relating to any
shares of any Borrower's Subsidiaries' capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Borrower or any of its respective
Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of any Borrower's Subsidiaries' capital Stock or any security convertible
into or exchangeable for any such capital Stock. 

        5.9    Due Authorization; No Conflict.    

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

        (b)  As
to each Borrower, the execution, delivery, and performance by such Borrower of this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation applicable to any Borrower, the Governing Documents of any Borrower, or any order, judgment, or decree of any court or
other Governmental Authority binding on any Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation of any Borrower, including Section 4.09 of the Senior Note Indenture,
(iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of any Borrower, other than Permitted Liens, or (iv) require any
approval of any Borrower's stockholders or any approval or consent of any Person under any material contractual obligation of any Borrower. 

        (c)  Other
than the filing of financing statements, fixture filings, Mortgages and filings with the U.S. Patent and Trademark Office, the execution, delivery, and performance
by each Borrower of this Agreement and the Loan Documents to which such Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person. 

        (d)  As
to each Borrower, this Agreement and the other Loan Documents to which such Borrower is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Borrower will be the legally valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. 

55

 

        (e)  The
Agent's Liens are validly created and will, upon perfection and termination of Liens described in the Pay-Off Letter, constitute first priority Liens,
subject only to Permitted Liens. 

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

        (g)  The
execution, delivery, and performance by Guarantor of the Loan Documents to which it is a party do not and will not (i) violate any provision of federal,
state, or local law or regulation applicable to Guarantor, the Governing Documents of Guarantor, or any order, judgment, or decree of any court or other Governmental Authority binding on Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of Guarantor, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Guarantor, other than Permitted Liens, or (iv) require any approval of Guarantor's
stockholders or any approval or consent of any Person under any material contractual obligation of Guarantor. 

        (h)  The
execution, delivery, and performance by Guarantor of the Loan Documents to which Guarantor is a party do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any Governmental Authority or other Person. 

        (i)    The
Loan Documents to which Guarantor is a party, and all other documents contemplated hereby and thereby, when executed and delivered by Guarantor will be legally valid
and binding obligations of Guarantor, enforceable against Guarantor in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. 

        5.10    Litigation.    Other than those matters disclosed on  Schedule 5.10, there are no actions, suits, or proceedings pending or, to the best knowledge of Borrowers, threatened against Borrowers, or any
of their Subsidiaries, as applicable, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries, as applicable, reasonably could not be expected to result in a Material Adverse Change. 

        5.10    No Material Adverse Change.    All financial statements relating to Borrowers
or
Guarantor that have been delivered by Borrowers or Guarantor to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Borrowers' (or Guarantor's, as applicable) financial condition as of the date
thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrowers (or Guarantor, as applicable) since the date of the latest financial
statements submitted to the Lender Group on or before the Closing Date. 

        5.12    Fraudulent Transfer.    

        (a)  Each
Borrower and Guarantor is Solvent. 

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

        5.13    Employee Benefits.    Except as set forth on  Schedule 5.13, none of Borrowers, any of their Subsidiaries, or any of their ERISA Affiliates has maintained or contributed, or currently
maintains or contributes, to any Benefit Plan. 

56

 

        5.14    Environmental Condition.    Except as set forth on  Schedule 5.14 (which Borrowers may amend from time to time so long as the environmental conditions scheduled on
Schedule 5.14, individually or in the aggregate, would not result in, and reasonably could not be expected to result in, a Material Adverse
Change), (a) to Borrowers' knowledge, none of Borrowers' properties or assets has ever been used by Borrowers or by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, where such production, storage, handling, treatment, release or transport was in violation, in any material respect, of applicable
Environmental Law, (b) to Borrowers' knowledge, none of Borrowers' 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) none of Borrowers have received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or
operated by Borrowers, and (d) none of Borrowers have received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the releasing or disposing of Hazardous Materials into the environment. 

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

        5.16    Intellectual Property    

        (a)  Each
Borrower owns, or holds licenses in, all Intellectual Property Rights that are necessary to the conduct of its business as currently conducted. Attached hereto as  Schedule 5.16(a) (which Borrowers
may amend from time to time provided that notice and copies thereof are promptly provided to Agent) is a true,
correct, and complete listing of all material patents, patent applications, trademarks, trademark applications and copyrights (including copyright registrations and applications) as to which each
Borrower is the owner or is an exclusive licensee. 

        (b)  Each
Borrower represents and warrants that it has taken all actions reasonably necessary to protect Intellectual Property Rights, including, without limitation,
(i) protecting the secrecy and confidentiality of such Borrower's confidential information and trade secrets by having and enforcing a policy requiring all current and former employees,
consultants, licensees, vendors and contractors to execute appropriate confidentiality and invention assignment agreements; (ii) taking all actions reasonably necessary to ensure that no trade
secret of such Borrower falls or has fallen into the public domain; and (iii) protecting the secrecy and confidentiality of the source code of all computer software programs and applications of
which such Borrower is the owner or licensee by having and enforcing a policy requiring any licensees of such source code to enter into license agreements with appropriate use and
non-disclosure restrictions. Each Borrower has only entered into such source code licenses as set forth in Schedule 5.16(b). 

        (c)  No
past or present employee or contractor of any Borrower has any ownership interest, license, permission or other Intellectual Property Right in or to any material
Intellectual Property Rights. 

        (d)  Each
Borrower has made all necessary payments, filings and recordations to protect and maintain its interest in material Intellectual Property Rights in the United
States or any other jurisdiction, including, without limitation, (i) making all necessary registration, maintenance, and renewal fee payments; and (ii) filing all necessary documents,
including, without limitation, all applications for registration of copyrights, trademarks, and patents. 

        (e)  No
claim has been made and is continuing or threatened that the use by any Borrower of any item of General Intangibles is invalid or unenforceable or that the use by
such Borrower of 

57

 

any General Intangibles does or may violate the rights of any Person, other than any such claim which would not cause a Material Adverse Change. To the best of each Borrower's knowledge, there is
currently no infringement or unauthorized use of any item of Intellectual Property Rights contained on Schedule 5.16(a). 

        (f)    Each
Borrower has filed applications and taken any and all other actions reasonably necessary to register all material Copyrights, in good faith in accordance with the
procedures and regulations of the U.S. Copyright Office. 

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

        5.18    DDAs.    Set forth on Schedule 5.18
(as such schedule may be amended from time to time so long as Administrative Borrower provides Agent with notice and copies thereof upon any such amendments) are all of the
DDAs of each Borrower, including, with respect to each depository, (i) the name and address of that depository, and (ii) the account numbers of the accounts maintained with such
depository. 

        5.19    Complete Disclosure.    All factual information (taken as a whole) furnished
by or on
behalf of Borrowers 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 Borrowers in writing to
the 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 Borrowers' good faith reasonable estimate of its future
performance for the periods covered thereby. 

        5.20    Indebtedness.    Set forth on Schedule 5.20
is a true and complete list of all Indebtedness of each Borrower outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principal economic terms thereof (including the Persons to whom the Indebtedness is owed, the interest rate and
the maturity date). 

        5.21    Senior Note Indenture Documents.    Parent has delivered to Agent true and
correct
copies of the Senior Note Indenture Documents. All of the representations and warranties of Parent and any Borrower in the Senior Note Indenture Documents were at the time made or deemed made true and
correct in all respects. 

        5.22    Real Property Collateral.    Set forth on  Schedule R-1 is a true and complete list of all Real Property Collateral of the Borrowers as of the Closing Date, including, with
respect to each property, (i) whether such Real Property Collateral is owned or leased, (ii) the identity of the owner or lessee and (iii) the location of such Real Property
Collateral. 

58

 

6.    AFFIRMATIVE COVENANTS.  

        Each Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrowers shall
and shall cause each of their respective Subsidiaries to do all of the following: 

        6.1    Accounting System.    Maintain a system of accounting that enables Borrowers
to produce
financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time reasonably may be requested by Agent. Borrowers also shall
keep an inventory reporting system that shows all additions, sales, claims, returns, and allowances with respect to the Inventory. 

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

	

	

Daily	
 	

(a) a sales journal, collection journal, and credit register since the last such schedule and a calculation of the Borrowing Base as of such date, and

(b) notice of all returns, disputes, or claims.
	

	

Weekly	
 	

(c) Inventory reports specifying each Borrower's cost and the wholesale market value of its Inventory, by mix (raw material, work in process and finished goods) and category, with additional detail showing additions to and deletions from the
Inventory.
	

	

Monthly Period (not later than the 10th day of each Monthly Period)	
 	

(d) a detailed calculation of the Borrowing Base (including detail regarding those Accounts that are not Eligible Accounts),

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

(f) a summary aging, by vendor, of Borrowers' accounts payable and any book overdraft, and

(g) a calculation of Dilution for the prior month.
	

	

Quarterly	
 	

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

(i) a report regarding each Borrower's accrued, but unpaid, ad valorem taxes,
	

	

Upon request by Agent	
 	

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

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

        In
addition, each Borrower agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each
of the items set forth above. 

59

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

        (a)  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 the first 3 fiscal quarters in a fiscal
year) after the end of each month during each of Parent's fiscal years, 

        (i)    a
company prepared consolidated balance sheet, income statement, and statement of cash flow covering Parent's and its Subsidiaries' operations during such period, 

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

        A.    the
financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects the financial condition of Parent and its Subsidiaries, 

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

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

        (iii)  for
each month that is the date on which a financial covenant in Section 7.20 is to be tested, a Compliance
Certificate demonstrating, in reasonable detail, compliance at the end of such period with the applicable financial covenants contained in  Section 7.20, and 

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

        (i)    financial
statements of Parent and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and
certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement
of cash flow and, if prepared, such accountants' letter to management), 

        (ii)  a
certificate of such accountants addressed to Agent and the Lenders stating that such accountants do not have knowledge of the existence of any Default or Event of
Default under Section 7.20, 

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

        (i)    copies
of Borrowers' Projections, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year, month by month, certified by the chief financial officer of Parent as being such officer's good faith reasonable estimate
of the financial performance of Parent and its Subsidiaries during the period covered thereby, 

        (d)  if
and when filed by any Borrower, 

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

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

60

 

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

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

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

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

        (g)  upon
the request of Agent, any other report reasonably requested, in Agent's Permitted Discretion, relating to the financial condition of Borrowers. 

        In
addition to the financial statements referred to above, Borrowers agree to deliver financial statements prepared on both a consolidated and consolidating basis and that no Borrower,
or any Subsidiary of a Borrower, will have a fiscal year different from that of Parent. Borrowers agree that their independent certified public accountants are authorized to communicate with Agent and
to release to Agent whatever financial information concerning Borrowers that Agent reasonably may request. Each Borrower waives, solely for the benefit of Agent and the Lender Group, the right to
assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this
Agreement (but only to the extent that such waiver does not cause any Borrower to waive such right as to any Person other than the Agent and the Lender Group), and each Borrower agrees that Agent may
contact directly any such accounting firm or service bureau in order to obtain such information. 

        6.4    Guarantor Reports.    Cause Guarantor to deliver its annual financial
statements at the
time when Parent provides its audited financial statements to Agent and copies of all federal income tax returns as soon as the same are available and in any event no later than 30 days after
the same are required to be filed by law. 

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

        6.6    Maintenance of Properties.    Maintain and preserve all of its properties
which are
necessary or useful in the proper conduct to its business in good working order and condition, ordinary wear and 

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tear excepted, and comply at all times with the provisions of all leases to which it is a party as lessee, except to the extent it would not result in a Material Adverse Change. 

        6.7    Taxes.    Cause all assessments and taxes, whether real, personal, or
otherwise, due or
payable by, or imposed, levied, or assessed against Borrowers or any of their assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that
the validity of such assessment or tax shall be the subject of a Permitted Protest. Borrowers will make timely payment or deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Agent with proof satisfactory to Agent
indicating that the applicable Borrower has made such payments or deposits. Borrowers shall, upon request by Agent, deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdiction in which any Borrower is required to pay any such excise tax. 

        6.8    Insurance.    

        (a)  At
Borrowers' expense, maintain insurance respecting its property and assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards
and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Borrowers also shall maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent. Borrowers shall deliver copies of all such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent as sole loss payee or additional
insured, as appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever. 

        (b)  Administrative
Borrower shall give Agent prompt notice of any loss covered by such insurance. Agent shall have the exclusive right to adjust any losses payable under any
such insurance policies (but, with respect to business interruption insurance policies, subject to the last sentence of this Section 6.8(b)) in
excess of $500,000, without any liability to Borrowers whatsoever in respect of such adjustments. Any monies received as payment for any loss under any insurance policy mentioned above (other than
liability insurance policies and business interruption insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be
applied at the option of the Required Lenders either to the prepayment of the Obligations or shall be disbursed to Administrative Borrower under staged payment terms reasonably satisfactory to the
Required Lenders for application to the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to such damage or destruction. All proceeds of Borrowers' business interruption insurance shall be paid over to Agent to
be applied at the option of the Required Lenders either to the prepayment of the Obligations or shall be disbursed to Administrative Borrower under staged payment terms reasonably satisfactory to the
Required Lenders for application to the cost of repairs, replacements, or restorations (under the conditions described in the preceding sentence);  provided, that, unless a Default or Event of Default
shall have occurred and be continuing, Borrowers may settle or adjust any such claim with respect
to such insurance and Agent shall remit such proceeds to Borrowers for use in the ordinary course of their business. 

        (c)  Borrowers
shall not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this  Section 6.8, unless Agent is included thereon as named
insured with the loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Agent whenever 

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such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent. 

        6.9    Location of Inventory and Equipment.    Keep the Inventory and Equipment only
at the
locations identified on Schedule 5.5; provided, however, that Administrative Borrower may amend  Schedule 5.5 so long as such amendment occurs by
written notice to Agent not less than 30 days prior to the date on which the Inventory or
Equipment is moved to such new location, so long as such new location is within the continental United States, and so long as, at the time of such written notification, the applicable Borrower
provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens on such assets and also provides to Agent a Collateral Access Agreement. 

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

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

        6.12    Brokerage Commissions.    Pay any and all brokerage commission or finders
fees
incurred in connection with or as a result of Borrowers' obtaining financing from the Lender Group under this Agreement. Borrowers agree and acknowledge that payment of all such brokerage commissions
or finders fees shall be the sole responsibility of Borrowers, and each Borrower agrees to indemnify, defend, and hold Agent and the Lender Group harmless from and against any claim of any broker or
finder arising out of Borrowers' obtaining financing from the Lender Group under this Agreement. 

        6.13    Existence.    At all times preserve and keep in full force and effect each
Borrower's
valid existence and good standing and any rights and franchises material to Borrowers' businesses. 

        6.14    Environmental.    

        (a)  Keep
any property either owned or operated by any Borrower free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the
obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material of any reportable quantity from or onto property owned or operated by any Borrower and take any Remedial
Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Agent with written notice within 10 days of the
receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of any Borrower, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against any Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to
result in a Material Adverse Change. 

        6.15    Disclosure Updates.    Promptly and in no event later than 5 Business Days
after
obtaining knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof. 

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           6.16    Intellectual Property Rights.    

        (a)  Each
Borrower agrees that, should it obtain an ownership interest in any Intellectual Property Right which is not now a part of the Collateral, (i) any such
Intellectual Property Right shall automatically become Collateral and (ii) with respect to any ownership interest in any Intellectual Property Right that Borrower should obtain, it shall give
prompt written notice thereof to Agent in accordance with Section 12 hereof. Each Borrower authorizes Agent to modify this Agreement by amending  Schedule 5.16(a)
 (and will cooperate reasonably with Agent in effecting any such amendment) to include any Intellectual Property Right which
becomes part of the Collateral under this Section. 

        (b)  With
respect to material Borrower Intellectual Property Rights, each Borrower agrees, subject to the last sentence of this subsection, to take all necessary steps,
including, without limitation, making all necessary payments and filings in connection with registration, maintenance, and renewal of copyrights, trademarks, and patents in the U.S. Copyright Office,
the U.S. Patent and Trademark Office, any other appropriate government agencies in foreign jurisdictions or in any court, to maintain each such Borrower Intellectual Property Right. Each Borrower
agrees to take corresponding steps with respect to each new or acquired material Intellectual Property Right to which it is now or later becomes entitled. Any expenses incurred in connection with such
activities shall be borne solely by Borrower. Each Borrower shall not discontinue use of or otherwise abandon any Intellectual Property Right without the written consent of Agent, unless such Borrower
shall have previously determined that such use or the pursuit or maintenance of such registration is no longer desirable in the conduct of Borrower's business and that the loss thereof will not cause
a Material Adverse Change, in which case, such Borrower will give notice of any such abandonment to Agent pursuant to the terms of Section 12
hereof. 

        (c)  Each
Borrower will continue to take all actions reasonably necessary to protect such Borrower's Intellectual Property Rights, including, without limitation, such steps
as are set forth in Sections 5.16(a) and (b) above. Each Borrower further agrees to give Agent
prompt written notice in accordance with Section 12 hereof if such Borrower enters into any agreements after the Closing Date pursuant to which
it grants any right to a third party to use or access the source code of any computer software programs or applications of which such Borrower is the owner or licensee. Each Borrower authorizes Agent
to modify this Agreement by amending Schedule 5.16(b) (and will cooperate reasonably with Agent in effecting any such amendment) to include any
such additional license grant(s). 

        (d)  Each
Borrower agrees to notify Agent promptly and in writing if it learns (i) that any item of the Intellectual Property Rights contained on  Schedule 5.16(a) may be determined to have become
abandoned or dedicated or (ii) of any adverse determination or the institution of any
proceeding (including, without limitation, the institution of any proceeding in the U.S. Copyright Office, U.S.
Patent and Trademark Office and any other appropriate government agencies in foreign jurisdictions, or any court) regarding any item of the Intellectual Property Rights that would cause a Material
Adverse Change. 

        (e)  In
the event that any Borrower becomes aware that any item of the General Intangibles is infringed or misappropriated by a third party, such Borrower shall promptly
notify Agent and shall take such actions as Borrowers or Agent deems appropriate under the circumstances to protect such General Intangibles, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or misappropriation, unless any such infringement or misappropriation would not cause a Material Adverse Change. Any expense incurred
in connection with such activities shall be borne solely by Borrowers. 

        (f)    Each
Borrower agrees that, should it obtain an ownership interest in, or license of, material Copyrights after the Closing Date, it shall, promptly after such
acquisition, file 

64

 

applications and take any and all other actions reasonably necessary to register all such Copyrights in good faith in accordance with the procedures and regulations of the U.S. Copyright Office. 

        6.17    Senior Note Indenture Documents.    Parent promptly will provide Agent with
true and
complete copies of any and all documents and other information delivered to any Person pursuant to, or in connection with, the Senior Note Indenture Documents. 

7.    NEGATIVE COVENANTS.  

        Each Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrowers will
not and will not permit any of their respective Subsidiaries to do any of the following: 

        7.1    Indebtedness.    Create, incur, assume, permit, guarantee, or otherwise become
or
remain, directly or indirectly, liable with respect to any Indebtedness, except: 

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

        (b)  Indebtedness
set forth on Schedule 5.20, including Indebtedness outstanding in respect of the Senior Notes; 

        (c)  Permitted
Purchase Money Indebtedness; 

        (d)  refinancings,
renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this  Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such
refinancings, renewals, or extensions do not, in Agent's Permitted Discretion, materially impair the prospects of repayment of the Obligations by Borrowers or materially impair Borrowers'
creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced,
renewed, or extended (provided, that, notwithstanding the foregoing, such refinancings, renewals, or extensions may result in an increase in the
interest rate (I) to the extent that such increased interest rate is not materially above the market rate at such time and (II) so long as Agent, in its Permitted Discretion, determines
that such increased interest rate would not materially impair the prospects of repayment of the Obligations by Borrowers or materially impair Borrowers' creditworthiness), (iii) such
refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions, that,
taken as a whole, are materially more burdensome or restrictive to the applicable Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of
payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must be 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; 

        (e)  Indebtedness
owed to any other Borrower so long as such Indebtedness is (i) not secured by any of the assets or properties of any Borrower and (ii) subject
to the terms and provisions of the Intercompany Subordination Agreement; and 

        (f)    Indebtedness
not included in paragraphs (a) through (e) above which does not exceed at any time, in the aggregate, the sum of $500,000. 

        7.2    Liens.    Create, incur, assume, or permit to exist, directly or indirectly,
any Lien
on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d)

65

 

and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness). 

        7.3    Restrictions on Fundamental Changes.    

        (a)  Enter
into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock, except that a Borrower may merge with and into another Borrower. 

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

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

        7.4    Disposal of Assets.    Other than Permitted Dispositions, convey, sell, lease,
license,
assign, transfer, or otherwise dispose of any of the assets of any Borrower. 

        7.5    Change Name.    Change any Borrower's name, FEIN, corporate structure or
identity, or
add any new fictitious name; provided, however, that a Borrower may change its name upon at least 30 days' prior written notice by Administrative
Borrower to Agent of such change and so long as, at the time of such written notification, such Borrower provides any financing statements or fixture filings necessary to perfect and continue
perfected Agent's Liens. 

        7.6    Guarantee.    Guarantee or otherwise become in any way liable with respect to
the
obligations of any third Person except by endorsement of instruments or items of payment for deposit to the account of Borrowers or which are transmitted or turned over to Agent. 

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

        7.8    Prepayments and Amendments.    

        (a)  Except
in connection with a refinancing permitted by Section 7.1(d), prepay, redeem, defease, purchase, or
otherwise acquire any Indebtedness of any Borrower prior to its scheduled maturity, other than the Obligations in accordance with this Agreement, and 

        (b)  Except
in connection with a refinancing permitted by Section 7.1(d), directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under  Sections 7.1(b)
or (c), except that Borrowers may amend, modify, alter, increase or change
any of the terms or conditions of any agreement, instrument, document, indenture or other writing evidencing or concerning Indebtedness permitted under  Section 7.1(b) or (c) in order to (i) cure ambiguities, (ii) correct
inconsistencies, (iii) extend maturities, (iv) change conversion features or (v) waive or amend covenants or other provisions, which waivers or amendments would not adversely
affect the Lender Group (provided,
however, that Borrowers shall immediately following the execution of any such amendment, modification, alteration or change, provide Agent with a true and complete copy
thereof). 

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

        7.10    Consignments.    Except as set forth on  Schedule 7.10, consign any Inventory or sell any Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of
sale. 

        7.11    Distributions.    Other than distributions or declaration and payment of
dividends by
a Borrower to another Borrower, 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 any
Borrower's Stock, of any class, whether now or hereafter outstanding (collectively, a "Distribution"), other than to Guarantor for all accrued and
unpaid management fees and expenses owed by Guarantor to Kohlberg on the Closing Date (in an aggregate amount not to exceed $913,000) and such annual management fees in an aggregate amount not to
exceed $500,000 per annum, payable quarterly, and operating expenses of Guarantor not to exceed $50,000 during any fiscal year so long as (x) no Default or Event 

66

 

of Default has occurred and is continuing at the time of such Distribution and (y) Borrowers' Excess Availability will equal at least $5,000,000, in each case both before and immediately after
giving effect to any such Distribution. 

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

        7.13    Investments.    Except for Permitted Investments, directly or indirectly,
make or
acquire any Investment, or incur any liabilities (including contingent obligations) for or in connection with any Investment; provided, however, that
Administrative Borrower and its Subsidiaries shall not have Permitted Investments (other than in the Cash Management Accounts) in deposit accounts or Securities Accounts in excess of $100,000
outstanding at any one time unless the Administrative Borrower or any of its Subsidiaries, as applicable, and the applicable securities intermediary or bank have entered into Control Agreements or
similar arrangements governing such Permitted Investments, as Agent shall determine in its Permitted Discretion, to perfect (and further establish) the Agent's Liens in such Permitted Investments. 

        7.14    Transactions with Affiliates.    Except as expressly permitted by 
Section 7.11, directly or indirectly enter into or permit to exist any transaction with any Affiliate of any Borrower except for transactions
that are in the ordinary course of Borrowers' business, upon fair and reasonable terms, that are fully
disclosed to Agent, and that are no less favorable to Borrowers than would be obtained in an arm's length transaction with a non-Affiliate. 

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

        7.16    Compensation.    Increase the annual fee or per-meeting fees paid to the
members of its Board of Directors during any year by more than 15% over the prior year; pay or accrue total cash compensation, during any year, to its officers and senior management employees in an
aggregate amount in excess of 115% of that paid or accrued in the prior year. 

        7.17    Use of Proceeds.    

        (a)  Use
the proceeds of the Advances, the Subline A Advances and the Subline B Advances for any purpose other than (a) on the Closing Date, (i) to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses owing to Existing Lender, 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. 

        (b)  Use
the proceeds of the Subline C Advances for any purpose other than to finance the purchase of Equipment in a manner permitted by  Section 4.09(b)(5) of the Senior Note Indenture and consistent with
the terms and conditions hereof. 

        7.18    Change in Location of Chief Executive Office; Inventory and Equipment with
Bailees.    Relocate its chief executive office to a new location without Administrative Borrower providing 30 days prior written notification thereof to Agent
and so long as, at the time of such written notification, the applicable Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens and
also provides to Agent a Collateral Access Agreement with respect to such new location. The Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party (other than as set forth on Schedule 5.5(a)) without Agent's prior written consent;  provided, that such Agent's consent shall not be
required if a Collateral Access Agreement is entered into with respect thereto. 

67

 

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

        7.19    Financial Covenants.    

        (a)  Fail
to maintain: 

        (i)    Fixed Charge Coverage Ratio.    A Fixed Charge Coverage Ratio, measured on a fiscal quarter-end
basis, of not less than the applicable Fixed Charge Coverage Ratio set forth in the following table for the applicable period set forth opposite thereto: 

	 
	 	Applicable Fixed Charge Coverage Ratio
	 	Applicable Period

	 	 	0.7:1	 	For the 6 month period ending December 31, 2002
	

 	
 	

0.6:1	
 	

For the 9 month period ending March 30, 2003
	

 	
 	

An amount determined by Agent based upon the Projections delivered pursuant to Section 3.2(b); provided that if Agent does not receive such Projections
or Borrowers and Agent cannot agree (for any reason) on covenants acceptable to Borrowers and Agent, then the ratio shall be 0.9:1	
 	

For the 12 month period ending June 30, 2003
	

 	
 	

An amount determined by Agent based upon the Projections delivered pursuant to Section 3.2(b); provided that if Agent does not receive such Projections
or Borrowers and Agent cannot agree (for any reason) on covenants acceptable to Borrowers and Agent, then the ratio shall be 0.9:1	
 	

For the 12 month period ending September 30, 2003
	

 	
 	

0.9:1	
 	

For the 12 month period ending December 31, 2003
	

 	
 	

1:1	
 	

For the 12 month period ending each fiscal quarter thereafter

        (b)  Capital Expenditures.    Make Capital Expenditures in any fiscal year in excess of the amount set forth in the
following table for the applicable period: 

	 
	 	Fiscal Year 2002
	 	Fiscal Year 2003
	 	Fiscal Year 2004
	 	Fiscal Year 2005
	 	Fiscal Year 2006

	 	 	$2,000,000	 	$2,000,000	 	$2,000,000	 	$2,000,000	 	$2,000,000

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           7.20    Senior Note Indenture Documents.    Except
in connection with a refinancing permitted
by Section 7.1(d), amend or modify in any way materially adverse to Borrowers, Agent or Lenders, any term or provision of the Senior Note
Indenture Documents or redeem, repurchase or otherwise prepay any of the Senior Notes. 

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
(a) Borrowers fail to pay when due and payable or when declared due and payable, all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender Group, reimbursement of Lender Group Expenses, or
other amounts constituting Obligations), other than Bank Product Obligations or (b) Borrowers fail to pay when due and payable or when declared due and payable, all or any portion of the Bank
Product Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender
Group with respect thereto, reimbursement of Lender Group Expenses with respect thereto, or other amounts constituting Bank Product Obligations) and such failure or neglect continues for a period of
five (5) days after the date on which such failure or neglect first occurs; 

        8.2  If
(a) Borrowers fail to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in Sections 6.2  or 6.3 and such
failure or neglect continues for a period of five (5) days after the date on which such failure or
neglect first occurs, or (b) Borrowers fail to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in any other section of this Agreement or in any of the
other Loan Documents; provided, however, that, during any period of time that any such failure or
neglect of Borrowers referred to in this Section 8.2 exists, even if such failure or neglect is not yet an Event of Default by virtue of the
existence of a grace period or the pre-condition of the giving of a notice, the Lenders shall be relieved of their obligations to extend any credit under this Agreement; 

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

        8.4  If
an Insolvency Proceeding is commenced by any Borrower or any of its Subsidiaries; 

        8.5  If
an Insolvency Proceeding is commenced against any Borrower, or any of its Subsidiaries, and any of the following events occur: (a) the applicable Borrower or
the Subsidiary consents to the institution of the Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof; provided,  however, that, during the
pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of
their obligations to extend credit hereunder, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, any Borrower or any of its Subsidiaries, or (e) an order for relief shall have been entered therein; 

        8.6  If
any Borrower 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
(a) a notice of Lien, levy, or assessment is filed of record with respect to any Borrower's or any of its Subsidiaries' assets by the United States, or any
department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or (b) if any 

69

 

taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any Borrower's or any of its Subsidiaries' assets, and in each of
cases (a) and (b) the same is not paid on or before the delinquency date thereof unless such nonpayment is the result of a Permitted Protest; 

        8.8  If
a judgment or other claim becomes a Lien or encumbrance upon any material portion of any Borrower's or any of its Subsidiaries' properties or assets, unless
(a) any such judgment or claim is stayed, released or discharged within 30 days or (b) all such judgments and claims, in the aggregate, do not exceed $100,000; 

        8.9  If
there is a default in any material agreement to which any Borrower or any of its Subsidiaries is a party and such default (a) occurs at the final maturity of
the obligations thereunder, or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of the applicable Borrower's or its Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein; provided that
the aggregate amount of all obligations in respect of such agreement equals or exceeds $100,000 at such time; 

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

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

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

        8.13 If
this Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Collateral covered hereby or thereby; or 

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

9.    THE LENDER GROUP'S RIGHTS AND REMEDIES.  

        9.1    Rights and Remedies.    Upon the occurrence, and during the continuation, of
an Event
of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the
Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Borrowers: 

        (a)  Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable; 

70

 

        (b)  Cease
advancing money or extending credit to or for the benefit of Borrowers under this Agreement, under any of the Loan Documents, or under any other agreement between
Borrowers and the Lender Group; 

        (c)  Terminate
this Agreement and any of the other Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent's Liens
in the Collateral and without affecting the Obligations; 

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

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

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

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

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

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

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

71

 

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

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

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

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

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

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

        (o)  Any
deficiency that exists after disposition of the Personal Property Collateral as provided above will be paid immediately by Borrowers. Any excess will be returned,
without interest and subject to the rights of third Persons, by Agent to Administrative Borrower (for the benefit of the applicable 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 other rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No
delay by the Lender Group shall constitute a waiver, election, or acquiescence by it. 

10.  TAXES AND EXPENSES.  

        If any Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, after notice and
demand by Agent, then, Agent, in its sole discretion and without any further prior notice to any Borrower, may do any or all of the following: (a) make payment of the same or any part thereof,
(b) set up such reserves in Borrowers' Loan Account as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance policies of the type described in Section 6.8  and take any action with respect to
such policies as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or
contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. 

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   11.  WAIVERS; INDEMNIFICATION.  

        11.1    Demand; Protest; etc.    Each 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 any such Borrower may in any way be liable. 

        11.2    The Lender Group's Liability for Collateral.    Each Borrower hereby agrees
that:
(a) so long as the Lender Group complies with its obligations, if any, under the Code, Agent 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 Borrowers. 

        11.3    Indemnification.    Each Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons with respect to each Lender, each Participant, and each of their respective officers, directors, employees, agents, and
attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith
(as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby, and
(b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). The foregoing to the contrary notwithstanding, Borrowers shall have no obligation to any Indemnified Person under this  Section 11.3
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. 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 Borrowers were required to indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers 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.

12.  NOTICES.  

        Unless otherwise provided in this Agreement, all notices or demands by Borrowers or Agent to the other relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or
certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Administrative Borrower or Agent, as applicable, may designate to each other
in accordance herewith), or telefacsimile 

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to Borrowers in care of Administrative Borrower or to Agent, as the case may be, at its address set forth below: 

	 	 	If to Administrative	 	 
	 	 	Borrower:	 	HOLLEY PERFORMANCE PRODUCTS, INC.

1801 Russellville Road

P.O. Box 10360

Bowling Green, KY 42101

Attn: Chief Financial Officer

Fax No. 270-745-9545
	

 	
 	

with copies to:	
 	
HUNTON & WILLIAMS

Bank of America Plaza

600 Peachtree Street, N.E.

Suite 4100

Atlanta, GA 30308

Attn: John B. Miller, Jr., Esq.

Fax No. 404-888-4190
	

 	
 	

If to Agent:	
 	
FOOTHILL CAPITAL CORPORATION

One Boston Place

Boston, MA 02109

Attn: Business Finance Division Manager

Fax No. 617-523-5839
	

 	
 	

with copies to:	
 	
MORRISON & FOERSTER LLP

1290 Avenue of the Americas

New York, NY 10104

Attn: Mark B. Joachim, Esq.

Fax No. 212-468-7900
	

 	
 	

If to Highbridge:	
 	
HIGHBRIDGE/ZWIRN SPECIAL

OPPORTUNITIES FUND, L.P.

9 West 57th Street, 27th Floor

New York, NY 10019

Attn: Daniel Zwirn, Portfolio Manager,

Special Opportunities Group

Fax No. 212-287-4263
	

 	
 	

with copies to:	
 	
BROBECK, PHLEGER & HARRISON LLP

550 South Hope Street, Suite 2100

Los Angeles, California 90071

Attn: John Francis Hilson, Esq.

Fax No. 213-745-3345

        Agent,
Highbridge and Borrowers may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices
or demands sent in accordance with this Section 12, other than notices by Agent in connection with enforcement rights against the Collateral
under the provisions of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Each Borrower acknowledges and agrees
that notices sent by the Lender Group in connection with the exercise of enforcement rights against Collateral under the provisions of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above. 

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

        (a)  THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF 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 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. BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).  

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

14.  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.  

        14.1    Assignments and Participations.    

        (a)  Any
Lender may, with the written consent of Agent (provided that no written consent of Agent shall be required in connection with any assignment and delegation by a
Lender to an Eligible Transferee), assign and delegate to one or more assignees (each, an "Assignee") all, or any ratable part of all, of the
Obligations, the Commitments and the other rights and obligations of such Lender hereunder and under the other Loan Documents, in a minimum amount of $5,000,000 (except such minimum amount shall not
apply to any Affiliate of a Lender or to a Qualified Lender Account, provided that if the minimum amount is not met, Borrowers and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee); provided, however, that Borrowers
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 Administrative Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its
Assignee have delivered to Administrative Borrower and Agent an Assignment and Acceptance in form and substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has paid to
Agent for Agent's separate account a processing fee in the amount of $5,000. Anything contained herein to the 

75

 

contrary notwithstanding, the consent of Agent shall not be required (and payment of any fees shall not be required) if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business or loan portfolio of such Lender or the Assignee is an Affiliate (other than individuals) of a Lender or a Qualified
Lender Account. 

        (b)  From
and after the date that Agent notifies the assignor Lender (with a copy to Administrative Borrower) that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to  Section 11.3 hereof) and be released
from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment
shall affect a novation between Borrowers and the Assignee. 

        (c)  By
executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other
parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of
Borrowers or the performance or observance by Borrowers of any of their obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3) such Assignee confirms that it
has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and
to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it
will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. 

        (d)  Immediately
upon each Assignee's making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully executed
Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto. 

        (e)  Any
Lender may at any time, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such
Lender (a "Participant") participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the
"Originating Lender") hereunder and under the other Loan Documents (provided that no written consent of Agent shall be required in connection with any 

76

 

sale of any such participating interests by a Lender to an Eligible Transferee); provided, however, that (i) the Originating Lender shall remain
a "Lender" for all purposes of this Agreement and the other Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and
interests of the Originating Lender hereunder shall not constitute a "Lender" hereunder or under the other Loan Documents and the Originating Lender's obligations under this Agreement shall remain
unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to, this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or a material portion of
the Collateral or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating,
(D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums; and (v) all amounts payable by Borrowers 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, Borrowers, the Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves. 

        (f)    In
connection with any such assignment or participation or proposed assignment or participation, a Lender may disclose all documents and information which it now or
hereafter may have relating to Borrowers or Borrowers' business. 

        (g)  Any
other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR §203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 

        14.2    Successors.    This Agreement shall bind and inure to the benefit of the
respective
successors and assigns of each of the parties; provided, however, that Borrowers 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 any Borrower from its Obligations. A Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to  Section 14.1 hereof and,
except as expressly required pursuant to Section 14.1 hereof, no
consent or approval by any Borrower is required in connection with any such assignment. 

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15.  AMENDMENTS; WAIVERS.  

        15.1    Amendments and Waivers.    No amendment or waiver of any provision of this
Agreement
or any other Loan Document, and no consent with respect to any departure by Borrowers 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 Administrative Borrower (on behalf of all Borrowers) and then any such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the
Lenders affected thereby and Administrative Borrower (on behalf of all Borrowers) and acknowledged by Agent, do any of the following: 

        (a)  increase
or extend any Commitment of any Lender, 

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

        (c)  reduce
the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any
other Loan Document, 

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

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

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

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

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

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

        (j)    change
the definition of Borrowing Base or the definitions of Eligible Accounts, Eligible Finished Goods Inventory, Eligible Inventory, Eligible Raw Materials Inventory,
Eligible Work-in-Process Inventory, Maximum Revolver Amount, Subline A Amount, Subline B Amount, Subline C Amount or change  Section 2.1(b); or 

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

and,
provided further, however, that no amendment, waiver or consent shall, unless in writing and signed
by Agent, Issuing Lender, or Swing Lender, affect the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable, under this Agreement or any other Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the
relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Borrowers, shall not require consent by or the agreement of Borrowers. 

        Foothill
and Highbridge have executed the Lender Side Letter Agreement pursuant to which they have agreed, among other things, to certain voting arrangements relative to matters
requiring the approval of
the Lenders. The rights and duties of the Lenders, with respect to such matters, are subject to the Lender Side Letter Agreement. 

78

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

        Prior
to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance Agreement, subject only to the
Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance Agreement prior to the effective date of such replacement, the Holdout Lender shall be
deemed to have executed and delivered such Assignment and Acceptance Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of  Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and
obligations of the Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata Share of Advances and Subline 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. 

        15.3    No Waivers; Cumulative Remedies.    No failure by Agent or any Lender to
exercise any
right, remedy, or option under this Agreement or, any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender
will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrowers 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. 

16.  AGENT; THE LENDER GROUP.  

        16.1    Appointment and Authorization of Agent.    Each Lender hereby designates and
appoints
Foothill as its representative under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 16. The
provisions of this Section 16 are solely for the benefit of Agent, and the Lenders, and Borrowers 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 Foothill is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided
in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions
that Agent expressly is entitled to 

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take or assert under or pursuant to this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections, and related matters, (b) execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Advances and
Subline Advances, for itself or on behalf of Lenders as provided in the Loan Documents, (d) exclusively receive, apply, and distribute the Collections as provided in the Loan Documents,
(e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes with respect
to the Collateral and the Collections, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Borrowers, the Obligations, the Collateral,
the Collections, or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan Documents. 

        16.2    Delegation of Duties.    Agent may execute any of its duties under this
Agreement or
any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent
shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or
willful misconduct. 

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

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

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Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 

        16.5    Notice of Default or Event of Default.    Agent shall not be deemed to have
knowledge
or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account
of the Lenders, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Administrative Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default." Agent promptly will notify the Lenders of its receipt of any such notice or of any Event
of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default.
Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 16.4, Agent shall take such action
with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9;  provided, however, that unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. 

        16.6    Credit Decision.    Each Lender acknowledges that none of the Agent-Related
Persons
has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Borrowers and their Subsidiaries or Affiliates, shall be deemed to
constitute any
representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such
documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group) party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and
made its own decision to enter into this Agreement and to extend credit to Borrowers. 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 Borrowers and any other Person (other than the Lender Group) party to a Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to
the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and
other condition or creditworthiness of Borrowers and any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons. 

        16.7    Costs and Expenses; Indemnification.    Agent may incur and pay Lender Group
Expenses
to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs,
reasonable attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and costs of security guards or insurance premiums paid to maintain the Collateral,
whether or not Borrowers are 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 Collections received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses from Collections received by Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender's Pro
Rata Share thereof. 

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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 Borrowers and
without limiting the obligation of Borrowers 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, a Subline Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender's ratable share
of any costs or out-of-pocket expenses (including attorneys fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein or therein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The undertaking in this
Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent. 

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

        16.9    Successor Agent.    Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation
of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law,
the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent
hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term "Agent" shall mean such successor Agent and the retiring Agent's appointment,
powers, and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 16
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is
45 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above. 

        16.10    Lender in Individual Capacity    

        Any
Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind
of banking, trust, financial advisory, underwriting or other business with Borrowers and their Subsidiaries and Affiliates 

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and any other Person (other than the Lender Group) party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Borrowers or their Affiliates and any
other Person (other than the Lender Group) party to any Loan Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person and that prohibit the disclosure of
such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its
reasonable best efforts to obtain), such Lender not shall be under any obligation to provide such information to them. With respect to the Swing Loans and Agent Advances, Swing Lender shall have
the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of the Agent. 

        16.11    Withholding Taxes.    

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

        (i)    if
such Lender claims an exemption from withholding tax pursuant to its portfolio interest exception, (a) a statement of the Lender, signed under penalty of
perjury, that it is not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or
(III) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of
any interest under this Agreement and at any other time reasonably requested by Agent or Administrative Borrower; 

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

        (iii)  if
such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States
trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the first payment of any interest is due under this Agreement and at any other
time reasonably requested by Agent or Administrative Borrower; and 

        (iv)  such
other form or forms as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States
withholding tax. 

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

        (b)  If
any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrowers to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is
no longer the beneficial owner of Obligations of Borrowers to such Lender. To the extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no longer
valid. 

        (c)  If
any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If the forms or other documentation 

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required by subsection (a) of this Section are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an
amount equivalent to the applicable withholding tax. 

        (d)  If
the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to
or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent as
tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent. 

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

        16.12    Collateral Matters.    

        (a)  The
Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrowers of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection
therewith and if Administrative Borrower certifies to Agent that the sale or disposition is permitted under Section 7.4 of this Agreement or the
other Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which no Borrower owned any interest at the time the
security interest was granted or at any time thereafter, or (iv) constituting property leased to a Borrower under a lease that has expired or is terminated in a transaction permitted under this 

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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 Administrative Borrower at any time, the Lenders will confirm in
writing Agent's authority to release any such Liens on particular types or items of Collateral pursuant to this Section 16.12; provided, however,
that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or obligations of Borrowers in respect of) all interests retained by Borrowers, 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 Borrowers or is cared for, protected, or insured or
has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, or to exercise at
all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein. 

        16.13    Restrictions on Actions by Lenders; Sharing of Payments.    

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

        (b)  If,
at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to
the Obligations arising under, or relating to, this Agreement or the other Loan Documents, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender's ratable portion of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the
other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in
whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that 

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such purchasing party is required to pay interest in connection with the recovery of the excess payment. 

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

        16.15    Payments by Agent to the Lenders.    All payments to be made by Agent to the
Lenders
shall be made by bank wire transfer or internal transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest of the Obligations. 

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

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

        (a)  is
deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each, a
"Report" and collectively, "Reports") prepared by Agent, and Agent shall so furnish each Lender with
such Reports, 

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

        (c)  expressly
agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will
inspect only specific information regarding Borrowers and will rely significantly upon the Books, as well as on representations of Borrowers' personnel, 

        (d)  agrees
to keep all Reports and other material, non-public information regarding Borrowers and their Subsidiaries and their operations, assets, and existing
and contemplated business plans in a confidential manner; it being understood and agreed by Borrowers that in any event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona fide potential or actual Assignee or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender's rights hereunder, (c) of information that has become public
by disclosures made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative
agency, pursuant to any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, however, that, unless prohibited
by applicable law, statute, regulation, or court order, such Lender shall notify Administrative Borrower of any request by any court, governmental or administrative agency, or pursuant to any subpoena
or other legal process for disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, and 

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        (e)  without
limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any such other Lender preparing
a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of Borrowers; 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
Borrowers to Agent that has not been contemporaneously provided by Borrowers to such Lender, and, upon receipt of such request, Agent 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 Borrowers, 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 Administrative Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Administrative Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender. 

        16.18    Several Obligations; No Liability.    Notwithstanding that certain of the
Loan
Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent
(if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to
make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any
interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant
of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts or any other member
of the Lender Group. No Lender shall be responsible to any Borrower or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein. 

        16.19    Legal Representation of Agent.    In connection with the negotiation,
drafting, and
execution of this Agreement and the other Loan Documents, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of
remedies, Morrison & Foerster LLP ("Morrison") only has represented and only shall represent Foothill in its capacity as Agent and as a Lender.
Each other Lender hereby acknowledges that Morrison does not represent it in connection with any such matters. 

17.  GENERAL PROVISIONS.  

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

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        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 or resolved against the Lender Group or Borrowers, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto. 

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

        17.5    Amendments in Writing.    This Agreement only can be amended by a writing in
accordance with Section 15.1. 

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

        17.7    Revival and Reinstatement of Obligations.    If the incurrence or payment of
the
Obligations by any 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
(collectively, a "Voidable Transfer"), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or
elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Borrowers or Guarantor automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made. 

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

        17.9    Parent as Agent for Borrowers.    Each Borrower hereby irrevocably appoints
Parent as
the borrowing agent and attorney-in-fact for all Borrowers (the "Administrative Borrower"), which appointment shall remain in
full force and effect unless and until Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed
Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (i) to provide Agent with all notices with respect to Advances, Subline Advances
and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances, Subline Advances and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement.
It is understood that the handling of the Loan Account and Collateral of Borrowers in a 

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combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical
manner and at their request, and that Lender Group shall not incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of
the Loan Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the
Lender Group to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each member of the Lender Group and hold each member of the Lender Group harmless
against any and all liability, expense, loss or claim of damage or injury, made against the Lender Group by any Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the handling of the Loan Account and Collateral of Borrowers as herein provided, (b) the Lender Group's relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Lender Group hereunder or under the other Loan Documents, except that Borrowers will have no liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 17.9 with respect to any liability that has been finally determined by a court of competent jurisdiction to have resulted solely
from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be. 

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QuickLinks

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

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