Document:

Exhibit 10.123

 

LOAN
AND SECURITY AGREEMENT –

 

FACTOR
SUB ACCOUNTS

 

Date:  February 9, 2009

 

Name of Borrower (“Borrower”):   MEADE INSTRUMENTS CORP.

 

Borrower and FCC, LLC, a Florida limited liability
company doing business as First Capital Western Region, LLC (“Lender”), hereby
agree to the terms and conditions set forth in this Loan and Security Agreement
- Factor Sub Accounts (“Agreement”).

 

Section 1.                                          Definitions.

 

1.1                                 Definitions. 
For the purposes of this Agreement and unless defined otherwise herein,
all terms used shall have the meanings assigned to them on Exhibit A.

 

1.2                                 Other Referential Provisions.

 

(a)                                                                                  All terms in this
Agreement, the Exhibits and Schedules hereto shall have the same defined
meanings when used in any other document, instrument or agreement executed in
connection herewith, unless the context shall require otherwise.

 

(b)                                                                                 Except as otherwise
expressly provided herein, all accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under GAAP, including, without limitation, applicable statements and
interpretations issued by the Financial Accounting Standards Board and
bulletins, opinions, interpretations and statements issued by the American
Institute of Certified Public Accountants or its committees.

 

(c)                                                                                  All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include the plural,
and the plural shall include the singular.

 

(d)                                                                                 The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provisions of this
Agreement.

 

(e)                                                                                  Titles of Articles and
Sections in this Agreement are for convenience only, do not constitute part of
this Agreement and neither limit nor amplify the provisions of this Agreement,
and all references in this Agreement to Articles, Sections, subsections,
paragraphs, clauses, sub clauses, Schedules or Exhibits shall refer to the
corresponding Article, Section, Subsection, paragraph, clause or sub clause of,
or Schedule or Exhibit attached to, this Agreement, unless specific
reference is made to the articles, sections or other subdivisions or divisions
of, or to schedules or exhibits to, another document or instrument.

 

(f)                                                                                    Each definition of a
document in this Agreement shall include such document as amended, modified,
supplemented or restated from time to time in accordance with the terms of this
Agreement.

 

(g)                                                                                 Except where
specifically restricted, reference to a party to this Agreement includes that
party and its successors and assigns.

 

1

 

(h)                                                                                 Unless otherwise
defined herein, all capitalized terms in this Agreement shall have the meanings
given those terms in the UCC.

 

1.3                                 Exhibits and Schedules. 
All Exhibits and Schedules attached hereto are by reference made a part
hereof.

 

Section 2.                                          Loans.

 

2.1                                 Schedule of Factor Sub Accounts. 
If required by Lender from time to time, all Factor Sub Accounts of
Borrower, shall be submitted to Lender on a Schedule of Factor Sub Accounts
listing each Factor Sub Account separately. 
The Schedule of Factor Sub Accounts shall be in the form attached hereto
as Schedule 1 and shall be signed by a person acting or purporting to
act on behalf of Borrower.  At the time
the Schedule of Factor Sub Accounts is presented, if required by Lender,
Borrower shall also deliver to Lender one copy of an invoice for each Factor
Sub Account together with evidence of shipment, and/or delivery of the Goods or
other property or rendition of service(s).

 

2.2                                 Advances.

 

(a)                                                                                  In Lender’s sole
discretion, subject to the terms and conditions of this Agreement, and during
the term of this Agreement and so long as no Default has occurred and is
continuing, Lender may from time to time make advances to Borrower (each, an “Advance”
and collectively, the “Advances”) in an amount up to, but not to exceed, an
amount equal to the lesser of (i) the
Maximum Revolving Credit Limit, less the amount of outstanding advances under
this Section 2.2, or (ii) the Borrowing Base, less the amount
of outstanding advances under this Section 2.2 as follows: For
purposes of this Agreement, “Borrowing Base,” as of any date of determination,
shall mean the result of: up to eighty 
percent (80.0%) of the aggregate unpaid Purchase Price of all Factor Sub
Accounts outstanding at such time so long as dilution is less than or equal to
ten percent (10.0%), less the sum of: (1) the aggregate unpaid Purchase
Price of any such Factor Sub Accounts with respect to which a Dispute exists, (2) at
Lender’s option, the aggregate unpaid Purchase Price of Factor Sub Accounts
that are not Approved Accounts, (3) any interest, expenses or fees, actual
or estimated, that are chargeable to the Reserve Account pursuant to the terms
hereof, and (4) the amount of the Reserve. 
The Advances shall be reduced by a minimum of two percent (2%) for every
one percent (1%) of dilution in excess of ten percent (10%).

 

(b)                                                                                 Notwithstanding the
forgoing, the aggregate amount of all outstanding Obligations (including the
face amount of all letters of credit, banker’s acceptances or other financial
accommodations issued or guaranteed by Lender for or on behalf of Borrower) shall
in no event exceed the Maximum Revolving Credit Limit.

 

(c)                                                                                  Any Advances shall
bear interest at the rate set forth in Section 2.5 from the date such
Advance is made until the date such Advance is paid in full in cash.  Borrower will cause all Factor Sub Accounts
Proceeds to be forwarded directly to a lockbox designated by Lender.  Borrower will also cause Factor Sub to make
all payments of the Purchase Price of each Factor Sub Account into a lockbox
designated by Lender.  All payments
received in such lockbox shall be deposited in a bank account as directed by
Lender for application to payment of the Obligations.  All Advances, Interest, fees and other
Obligations outstanding from Borrower shall be deducted from collections and
other proceeds of Collateral received by Lender.

 

(d)                                                                                 Borrower shall make
each payment required under this Agreement, and/or under any instrument
delivered hereunder, without setoff, deduction or counterclaim.

 

2.3                                 Overadvance. 
All of the Advances made pursuant to Section 2.2 shall be added to
and deemed part of the Obligations when made. 
If, at any time and for any reason, the aggregate amount of Advances
made pursuant to Section 2.2 exceeds the above percentage or dollar
limitations, or if all of Borrower’s Obligations, at any time and for any
reason, exceed the Maximum Revolving Credit Limit (an “Overadvance”), then
Borrower, upon Lender’s election and demand, shall immediately pay to Lender,
in cash, the amount of such Overadvance.

 

2.4                                 Reserve Account. 
Without limiting any other provision hereof, Lender shall be entitled to
withhold a Required Reserve Amount from the cash proceeds of the Factor Sub
Accounts and other Collateral, and 

 

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may revise the
Required Reserve Amount or Reserve Percentage at any time and from time to time
if Lender deems it necessary to do so in order to protect Lender’s
interests.  Lender may charge against the
Reserve Account any amount for which Borrower may be obligated to Lender at any
time hereunder, whether under the terms of this Agreement, or otherwise,
including but not limited to the repayment of any Overadvance, any damages
suffered by Lender as a result of Borrower’s breach of any provision of Section 5(b) (whether
intentional or unintentional), any adjustments due and any attorneys’ fees,
costs and disbursements due.  Borrower
recognizes that the Reserve Account represents bookkeeping entries only and not
cash funds.  It is further agreed that
Lender is authorized to withhold, without giving prior notice to Borrower, any
credit balance in the Reserve Account due to Borrower under the terms of this
Agreement for reasonably anticipated claims or to adequately satisfy reasonably
anticipated Obligation(s) Borrower may owe Lender.  If a Default has occurred and is continuing,
Lender shall be under no obligation to pay the amount in the Reserve Account
until all Factor Sub Accounts listed on all Schedules of Factor Sub Accounts
have been collected and applied to repay all Obligations hereunder or Lender
has determined, in its sole discretion, that it will make no further efforts to
collect any Factor Sub Accounts and all sums due Lender hereunder have been
paid in full in cash.

 

2.5                                 Interest.  (a)  Borrower will pay Lender or, at Lender’s option, Lender
may charge Borrower’s loan account with, interest on the average daily net
principal amount of Obligations outstanding hereunder, calculated monthly and
payable on the first day of each calendar month, at a rate (computed on the
basis of the actual number of days elapsed over a year of 360 days) (the “Interest
Rate”) equal to the sum of (i) LIBOR (as defined below), plus (ii) five
and one-half percent (5.5%) (the “Interest Margin”), but in no event less than
7.75%.  The Interest Rate may not be the
lowest or best rate at which Lender calculates interest or extends credit.  The Interest Rate for each calendar month
shall be adjusted (if necessary) on the first day of such calendar month and
shall be equal to the Interest Rate in effect as of the close of business on
the last Business Day of the immediately preceding calendar month.

 

  As used herein, the following terms shall
have the following meanings:

 

 “LIBOR” means, at any time, an interest
rate per annum equal to the interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) as published in the “Money Rates”
section of The Wall Street Journal (or another national publication
selected by the Lender) as the one month London Interbank Offered Rate for
United States dollar deposits or such other language (or, if such page shall
cease to be publicly available or, if the information/description contained on
such page, in Lender’s sole judgment, shall cease to accurately reflect such
London Interbank Offered Rate, then such rate as reported by any publicly
available recognized source of similar market data selected by Lender that, in
Lender’s reasonable judgment, accurately reflects such London Interbank Offered
Rate).

 

(b) Market
Disruption Event. If, at any time, Lender determines (which determination
shall be conclusive and binding) that (a) by reason of circumstances
affecting the London interbank market generally, adequate and fair means do not
exist for ascertaining LIBOR for the following month as provided in subsection (a) hereof,
or (b) disruptions in the short term money markets have materially and
adversely affected Lender’s cost of funds such that the interest rate hereunder
does not adequately or fairly reflect Lender’s cost of making, funding or
maintaining the loan hereunder, a “Market Disruption Event” will be deemed to
have occurred and the Lender shall promptly notify the Borrower thereof. The
rate of interest hereunder (the “Adjusted Rate of Interest”) shall be adjusted
and shall thereafter be a rate equal to the sum of (x) the rate that
Lender determines (which determination shall be conclusive and binding),
expressed as a percentage rate per annum, to be the cost to Lender of funding
the loan from whatever source it may reasonably elect, plus (y) the
Interest Margin. Lender shall give prompt notice to Borrower of the Adjusted
Rate of Interest.

 

Borrower shall begin to
be charged interest at the Adjusted Rate of Interest effective as of the first
day of the month following the month in which Lender provides notice thereof to
Borrower, provided, however, that if Borrower is unwilling to accept the
Adjusted Rate of Interest, it may terminate this Agreement and prepay all
amounts due hereunder within thirty (30) days of the effective date of the
Adjusted Rate of Interest without paying a prepayment fee.

 

 (c)    
Lender shall be entitled to charge Borrower for five (5) days of “clearance”
or “float” at the interest rate then applicable on all collections that are
received.  This across-the-board five (5) day
clearance or float charge on all 

 

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collections of Borrower is
acknowledged by the parties to constitute an integral aspect of the pricing of
this financing of Borrower and shall apply irrespective of whether or not there
are any outstanding Obligations; the effect of such clearance or float charge
being the equivalent of charging interest on such collections through the
completion of a period ending five (5) days after the receipt
thereof.  The parties acknowledge and
agree that the economic benefit of the foregoing provisions shall be for the
exclusive benefit of Lender.

 

 (d)                              To the extent permitted by law and
without limiting any other right or remedy of Lender hereunder, whenever there
is a Default under this Agreement, the rate of interest on the Obligations
shall, at the option of Lender, be increased to a default interest rate by
adding five percent (5%) to the highest interest rate otherwise in effect
hereunder.  Lender may charge such
default interest rate retroactively beginning on the date the applicable
Default first occurred or existed. 
Borrower acknowledges that: (i) such additional rate is a material
inducement to Lender to purchase Accounts and consider requests for Advances
hereunder; (ii) Lender would not have made the Advances in the absence of
the agreement of Lender to pay such additional rate; (iii) such additional
rate represents compensation for increased risk to Lender that Lender will not
be repaid; and (iv) such rate is not a penalty and represents a reasonable
estimate of (A) the cost to Lender in allocating its resources (both
personnel and financial) to the ongoing review, monitoring, administration and
collection of the Advances and Obligations, and (B) compensation to Lender
for losses that are difficult to ascertain. 
In the event of termination of this Agreement by either party hereto,
Lender’s entitlement to this charge will continue until all Obligations are
paid in full.

 

(e)                                  THE PARTIES HERETO INTEND TO CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE
USURY LAW FROM TIME TO TIME IN EFFECT. 
IN FURTHERANCE THEREOF, SUCH PARTIES STIPULATE AND AGREE THAT NONE OF
THE TERMS AND PROVISIONS CONTAINED IN THIS AGREEMENT SHALL EVER BE CONSTRUED TO
CREATE A CONTRACT TO PAY, FOR THE USE, FORBEARANCE OR DETENTION OF MONEY,
INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER DEFINED) FROM TIME TO
TIME IN EFFECT.  NEITHER BORROWER, ANY
PRESENT OR FUTURE GUARANTOR OR ANY OTHER PERSON HEREAFTER BECOMING LIABLE FOR
THE PAYMENT OF THE ADVANCES, SHALL EVER BE LIABLE FOR ANY OBLIGATION THAT MAY BE
CHARACTERIZED AS UNEARNED INTEREST THEREON OR SHALL EVER BE REQUIRED TO PAY ANY
OBLIGATION THAT MAY BE CHARACTERIZED AS INTEREST THEREON IN EXCESS OF THE
MAXIMUM AMOUNT THAT MAY BE LAWFULLY CHARGED UNDER APPLICABLE LAW FROM TIME
TO TIME IN EFFECT, AND THE PROVISIONS OF THIS SECTION SHALL CONTROL OVER
ALL OTHER PROVISIONS OF THIS AGREEMENT WHICH MAY BE IN CONFLICT
THEREWITH.  IF ANY INDEBTEDNESS OR
OBLIGATION OWED BY BORROWER HEREUNDER IS DETERMINED TO BE IN EXCESS OF THE LEGAL
MAXIMUM, OR LENDER SHALL OTHERWISE COLLECT MONIES WHICH ARE DETERMINED TO
CONSTITUTE INTEREST WHICH WOULD OTHERWISE INCREASE THE INTEREST ON ALL OR ANY PART OF
SUCH OBLIGATIONS TO AN AMOUNT IN EXCESS OF THAT PERMITTED TO BE CHARGED BY
APPLICABLE LAW THEN IN EFFECT, THEN ALL SUCH SUMS DETERMINED TO CONSTITUTE
INTEREST IN EXCESS OF SUCH LEGAL LIMIT SHALL, WITHOUT PENALTY, BE PROMPTLY
APPLIED TO REDUCE THE THEN OUTSTANDING OBLIGATIONS OR, AT LENDER’S OPTION,
RETURNED TO BORROWER OR THE OTHER PAYOR THEREOF UPON SUCH DETERMINATION.  IF AT ANY TIME THE RATE AT WHICH INTEREST IS
PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT OUTSTANDING HEREUNDER
SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL AMOUNT OF INTEREST
ACCRUED HEREUNDER EQUALS (BUT DOES NOT EXCEED) THE MAXIMUM RATE APPLICABLE
HERETO.   AS USED IN THIS SECTION, THE
TERM “APPLICABLE LAW” MEANS THE LAWS OF THE STATE OF CALIFORNIA OR, IF
DIFFERENT, THE LAWS OF THE STATE OR TERRITORY IN WHICH THE BORROWER RESIDES,
WHICHEVER LAW ALLOWS THE GREATER RATE OF INTEREST, AS SUCH LAWS NOW EXIST OR MAY BE
CHANGED OR AMENDED OR COME INTO EFFECT IN THE FUTURE AND THE TERM “MAXIMUM RATE”
MEANS THE MAXIMUM NONUSURIOUS RATE OF INTEREST THAT LENDER IS PERMITTED UNDER
APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR RECEIVE WITH RESPECT TO THE
ADVANCES.

 

2.6                                 Conditions to Obligation to Make Advances. 
Borrower acknowledges that Lender’s obligation to make Advances to
Borrower is subject to the following terms and conditions:

 

4

 

(a)                                                                                  Lender has no
obligation to make the initial Advance to Borrower unless and until Borrower
delivers to Lender, in form and substance reasonably satisfactory to Lender,
each agreement, instrument, and other document requested by Lender.

 

(b)                                                                                 Lender’s obligation to
consider Borrower’s requests for Advances is subject to the conditions that, as
of the date of any such Advance, no default or Default will have occurred and
be continuing hereunder, there will have occurred no material adverse change in
Borrower’s financial condition or operations or in Borrower’s business
prospects as compared to the state of facts existing on the date of this
Agreement, and Borrower’s representations and warranties set forth in this
Agreement (including any amendment, modification, supplement or extension
hereof) will be true and correct as if made on and as of the date of each
subsequent credit request.  Each request
by Borrower for an Advance will be deemed to be a reaffirmation of each of
Borrower’s warranties and representations hereunder.

 

Section 3.                                          Collections.

 

(a)                                  Borrower shall cause
Factor Sub to forward Factor Sub Accounts Proceeds and payments of the Purchase
Price with respect to any Factor Sub Accounts to such lockbox as Lender may
direct from time to time. Lender shall have the right at any time after the
occurrence of a Default and without notice to Borrower, to notify Factor Sub of
the grant of the Security Interest to Lender and to notify Factor Sub to make
payment of all amounts due or to become due to Borrower, as Lender may
direct.  So long as no Default has
occurred and is continuing and so long as no Obligations are then owing by
Borrower to Lender, Lender shall be deemed to have received any such Factor Sub
Account Proceeds as a pure pass-through for and on account of Borrower.

 

(b)                                 Lender shall have the
sole and exclusive power and authority to collect the Factor Sub Account
Proceeds, through legal action or otherwise, and Lender may, in its sole
discretion, settle, compromise, or assign (in whole or in part) any of such
Factor Sub Account Proceeds, or otherwise exercise, to the maximum extent
permitted by applicable law, any other right now existing or hereafter arising
with respect to any of such Factor Sub Accounts Proceeds.  If Borrower receives payment of all or any
portion of any of such Factor Sub Accounts or any other Factor Sub Account,
Borrower shall notify Lender immediately and shall hold all checks and other
instruments so received in trust for Lender, separate and apart from Borrower’s
other property and shall deliver to Lender such checks and other instruments
without delay.

 

(c)                                  Without limiting
Lender’s right to apply cash proceeds to increase the balance of the Reserve
Account, all amounts collected by Lender on Factor Sub Accounts Proceeds or
other Collateral shall be available (i) to repay outstanding Advances
hereunder (ii) to pay other outstanding Obligations or (iii) if all
Obligations have been paid in full in cash or, otherwise, if Lender in its sole
and absolute discretion so elects, for turnover to Borrower, in each case not
later than the date a check, draft or other item representing payment of such
cash proceeds is received by Lender plus five (5) days.

 

Section 4.                                          Collateral.

 

4.1  Security Interest.  In order to secure the payment of all
indebtedness and other Obligations of Borrower to Lender, Borrower hereby
grants to Lender a security interest in and lien upon and assigns, mortgages
and pledges to Lender all of Borrower’s right, title and interest in and to all
of Borrower’s presently existing or hereafter arising Collateral wherever
located.  Lender and Borrower acknowledge
that all Factor Sub Accounts sold pursuant to the terms of the Factor Sub
Factoring Agreement shall be sold free and clear of any lien or interest of
Lender in such Factor Sub Accounts, but that Lender shall have a Lien on the
Factor Sub Accounts Proceeds.

 

4.2 Perfection/Further
Assurances. Borrower agrees to comply with all appropriate laws in order to
perfect Lender’s security interest in and to the Collateral and to execute such
documents as Lender may require from time to time.  Borrower authorizes Lender to file at such
times and places as Lender may designate such financing statements, continuations
and amendments thereto as are necessary or desirable to perfect Lender’s rights
in and give notice of Lender’s purchase of the Accounts under the UCC in effect
in any applicable jurisdiction and Lender’s security interest in the
Collateral.  Lender may at any time and
from time to time file Financing Statements, continuation statements and
amendments thereto that describe the Collateral as “all assets” of Borrower or
words of similar effect and which contain any other information required by Part 5
of Article 9 of the applicable UCC for the 

 

5

 

sufficiency or filing
office acceptance of any Financing Statement, continuation statement or
amendment, including whether Borrower is an organization, the type of
organization and any organization identification number issued to
Borrower.  Borrower agrees to furnish any
such information to Lender promptly upon request.  Any such Financing Statements, continuation
statements or amendments may be signed by Lender on behalf of Borrower or filed
by Lender without the signature of Borrower and may be filed at any time in any
jurisdiction.  Borrower acknowledges that
it is not authorized to file any Financing Statement or amendment or
termination statement with respect to any Financing Statement naming Borrower
as the debtor and Lender as the secured party without the prior written consent
of Lender, and Borrower agrees that it shall not do so without the prior
written consent of Lender.  Borrower
hereby ratifies any UCC Financing Statements previously filed by Lender.

 

4.3  Collateral Representations, Warranties and
Covenants

 

(a)  Borrower is the
sole owner and holder of all Collateral and there is no security interest,
Lien, judgment or other encumbrance in or affecting such Accounts or any of the
other Collateral except for Permitted Liens;

 

(b)  The Collateral
is located at the locations set forth on Schedule 4.3 (b) hereof and at no
other location.  Borrower shall provide
written notice to Lender of any change in the locations at which it keeps its
Collateral at least thirty (30) days prior to any such change. Borrower shall
obtain from any landlord, warehouseman, or other third party operator of
premises on which any Collateral is located an acceptable lien waiver or
subordination agreement in Lender’s favor with respect to such Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall,
immediately endorse and assign such Negotiable Collateral over to Lender and
deliver actual physical possession of the Negotiable Collateral to Lender.  Borrower shall at any time and from time to
time take such steps as Lender may request for Lender (i) to obtain an
acknowledgment, in form and substance satisfactory to Lender, of any bailee
having possession of any of the Collateral that such bailee holds such
Collateral for Lender, (ii) to obtain “control” of any investment
property, deposit accounts, letter-of-credit rights or electronic chattel paper
in accordance with Article 9 of the UCC, with any agreements establishing
control to be in form and substance satisfactory to Lender, and (iii) otherwise
to insure the continued perfection and priority of Lender’s security interest
in the Collateral and of the preservation of its rights therein other than the
Inventory in Mexico.

 

(c)  Factor Sub
Accounts Proceeds.  There is no Lien, encumbrance,
security interest or other claim of any kind or nature on the Factor Sub
Account Proceeds or the Collateral except the liens, encumbrances and security
interests arising under the Factor Sub Factoring Agreement and the Factoring
and Inventory Advance and Security Agreement. 
Borrower will not grant a security interest or execute any Financing
Statement in favor of any other Person with respect to the Collateral during
the Term of this Agreement, without the prior written consent of Lender.  The Purchase Price for the Factor Sub
Accounts is due and owing to Borrower without offset, deduction or counterclaim
except as set forth in the Factor Sub Factoring Agreement.

 

(d) 
Inventory.  Borrower will maintain
Inventory at the locations set forth on Schedule 4.3 (b) hereof subject to
a perfected, first-priority Lien in favor of Lender (other than Inventory
located in Mexico).  Sales of Inventory
will be made in compliance with all material requirements of applicable law.
Until Default, Borrower may use the Inventory in any lawful manner not
inconsistent with this Agreement or with the terms or conditions of any policy
of insurance thereon, may use and consume any raw materials or supplies, the
use and consumption of which is necessary in order to carry on Borrower’s
business, and may also sell the Inventory in the ordinary course of
business.  (A sale in the ordinary course
of business does not include a transfer in partial or total satisfaction of a
debt owing by Borrower to any person other than Lender.)

 

(e)  Equipment.  Borrower will maintain all Equipment used or
useful in Borrower’s business in good and workable condition, ordinary wear and
tear excepted, subject to a perfected, first-priority security interest in
Lender’s favor and free and clear of all other Liens except Permitted Liens at
one of the locations set forth on Schedule 4.3(b).

 

(f)  Defense of
Title.  All Collateral will at all times
be owned by Borrower, and Borrower will defend Borrower’s title to the
Collateral against the claims of third parties. 
Borrower will at all times keep accurate and complete records of the
Collateral.

 

6

 

(g)  Insurance.  Borrower will obtain and maintain in full
force and effect insurance covering the Collateral against all risks to which
the Collateral is exposed, including loss, damage, fire, theft, and all other
such risks, in such amounts, with such companies, under such policies and in
such form as will be satisfactory to Lender, which policies will name Lender as
an additional insured and provide that loss thereunder will be payable to
Lender as Lender’s interests may appear upon a loss payee endorsement
acceptable to Lender.  All proceeds of
any such insurance will be paid over to Lender directly, and Lender may apply
such proceeds to payment of the Obligations, whether or not due, in such order
of application as Lender determines or, in Lender’s sole discretion, apply such
proceeds, in whole or in part, to the replacement, restoration or rebuilding of
the lost or damaged property.  Borrower
will provide to Lender from time to time certificates showing such coverage in
effect and, at Lender’s request, the underlying policies.

 

(h)  Commercial Tort
Claims.  If Borrower shall at any time
acquire a commercial tort claim, Borrower shall immediately notify Lender in a
writing signed by Borrower of the details thereof and grant to Lender in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to Lender.

 

Section 5.   Power
of Attorney.  Borrower grants to Lender an irrevocable
power of attorney authorizing and permitting Lender, at its option, with or
without notice to Borrower to do any or all of the following:  (a) Endorse the name of Borrower on any
checks or other evidences of payment whatsoever that may come into the
possession of Lender regarding Collateral, including checks received by Lender
pursuant to Section 5;  (b) Receive,
open and dispose of any mail addressed to Borrower and put Lender’s address on
any statements mailed to Account Debtors; (c) Pay, settle, compromise,
prosecute or defend any action, claim, conditional waiver and release, or
proceeding relating to Collateral; (d) Upon the occurrence of a Default,
notify in the name of the Borrower, the U.S. Post Office to change the address
for delivery of mail addressed to Borrower to such address as Lender may
designate, provided, however, Lender shall turn over to Borrower all such mail
not relating to Collateral; (e) File any Financing Statement deemed
necessary or appropriate by Lender to protect Lender’s interest in and to the
Collateral, or under any provision of this Agreement; (f) Effect debits to
any Deposit Account that Borrower maintains at any bank for any sums due to or
from the Borrower under this Agreement; and (g) To do all other things
necessary and proper in order to carry out this Agreement.  The authority granted to Lender herein is
irrevocable until this Agreement is terminated and all Obligations are fully
satisfied.

 

Section 6.  Borrower’s
Representations, Warranties and Covenants.

 

6.1  Borrower’s Representations, Warranties and
Covenants.  Borrower represents, warrants
and covenants to Lender that:

 

(a)                                                                                  Borrower is a
corporation or limited liability company, duly organized, validly existing and
in good standing under the laws of the state of Delaware and is qualified and
authorized to do business and is in good standing in all states in which such
qualification and good standing are necessary or desirable.

 

(b)                                                                                 The execution,
delivery and performance by Borrower of this Agreement does not and will not
constitute a violation of any applicable law, violation of Borrower’s articles
of organization, operating agreement or other organizational documents, or a
material breach of any other document, agreement or instrument to which
Borrower is a party or by which Borrower is bound.  The Agreement is a legal, valid and binding
obligation of Borrower enforceable against it in accordance with its terms.

 

(c)                                                                                  Borrower’s address, as
set forth below its signature line hereto, is Borrower’s mailing address, its
state of organization, its chief executive office, principal place of business
and the office where all of the books and records concerning the Factor Sub
Accounts and Inventory are maintained which shall not be changed without giving
thirty (30) days prior written notice to Lender.

 

(d)                                                                                 Borrower shall
maintain its books and records in accordance with GAAP.  Borrower shall furnish Lender, upon request,
such information and statements, as Lender shall require from time to time
regarding Borrower’s business affairs, financial condition and results of its
operations.  Without limiting the
generality of the foregoing, Borrower shall provide Lender, (i) on or
prior to the 30th day of each month,
unaudited financial statements with respect to the prior month, (ii) within
forty-five (45) days after the end of each of Borrower’s quarters, unaudited 

 

7

 

financial statements (on a fiscal year-to-date basis) prepared by a CPA
acceptable to Lender, (iii) within ninety (90) days after the end of each
of Borrower’s fiscal years, audited financial statements prepared by a CPA
acceptable to Lender, (iv) a certificate from the president or chief
financial officer of Borrower stating whether any Default has occurred and
stating the nature of the Default, and (v) such other information as
Lender may request.  Borrower will
furnish to Lender upon request a current listing of all open and unpaid
accounts payable. All financial statements and reports furnished to Lender
hereunder shall be prepared and all financial computations and determinations
pursuant hereto shall be made in accordance with GAAP, consistently
applied.  Lender shall have the right at
any time, at Borrower’s expense, to visit and inspect Borrower’s books and
records, and to make and take away copies of Borrower’s books and records.

 

(e)                                                                                  Borrower has paid and
will pay all taxes and governmental charges imposed with respect to sale of
Goods or other property and furnish to Lender upon request satisfactory proof
of payment and compliance with all federal, state and local tax requirements.

 

(f)                                                                                    Borrower will promptly
notify Lender of (i) the filing of any lawsuit against Borrower involving
amounts greater than $50,000.

 

(g)                                                                                 The Application made
or delivered by or on behalf of Borrower in connection with this Agreement, and
the statements made therein, are true and correct at the time that this
Agreement is executed.  There is no fact
which Borrower has not disclosed to Lender in writing which could materially
adversely affect the properties, business or financial condition of Borrower,
or any of the Approved Accounts or other Collateral, or which is necessary to
disclose in order to keep the foregoing representations and warranties from
being misleading.

 

(h)                                                                                 In no event shall the
funds paid to Borrower hereunder be used directly or indirectly for personal,
family, household or agricultural purposes.

 

(i)                                                                                     Borrower does business
under no trade or assumed names except as indicated below.  These names are a trade name and/or
tradestyle by which Borrower will or may identify and sell certain of its
products and under which Borrower will or may conduct a portion of its
business, and are not an independent corporation or other legal entity.  Lender is hereby authorized to receive, endorse
and deposit any and all checks sent to it in payment of such Accounts including
such checks as are payable to any of the trade styles or tradenames.  Accounts invoiced in the name of any
tradename or tradestyle are subject to all of the terms and conditions of this
Agreement with the same force and effect as if they were in Borrower’s
corporate name.

 

Meade

Meade.com

Coronado

 

(j)                                                                                     Any invoice or written
communication that is issued by Borrower to Lender by facsimile transmission is
a duplicate of the original.

 

(k)                                                                                  Any electronic
communication of data, whether by e-mail, tape, disk, or otherwise, Borrower
remits or causes to be remitted to Lender shall be authentic and genuine.

 

(l)                                                                                     Borrower does not own, control or
exercise dominion over, in any way whatsoever, the business of any Account or
Customer.

 

(m)                                                                               Borrower represents
and warrants to Lender that: (i) Borrower is not engaged as one of
Borrower’s principal activities in owning, carrying or financing the purchase
or ownership by others of “margin stock” (as defined in Regulation U of the
Board of Governors of the Federal Reserve System); (ii) Borrower owns no
real property and leases no real property other than as listed on Schedule 6.1
(m); (iii) a true, correct and complete list of any warehousemen,
processors, consignees or other bailees with possession or control of any
Inventory is set forth on Schedule 4.3 (b); and (iv) a list and brief
description of all bank accounts maintained by Borrower with any bank or
financial institution is set forth on Schedule 8.1 (m)

 

8

 

(n)                                                                                 In the event any such
attempted return occurs after the occurrence of a Default hereunder, Borrower
shall segregate all returned Inventory from all other property of Borrower or
in Borrower’s possession and shall conspicuously label said returned Inventory
as the property of Lender.  With respect
to any return or attempted return of Inventory, Borrower shall notify Lender of
the same immediately, specifying the reason for such return and the location
and condition of the returned Inventory.

 

(o)                                 (i) The Factor
Sub Accounts shall have been sold only to Factor Sub and Borrower has not and
will not factor, sell, transfer, pledge or give a security interest in any
Factor Sub Accounts to anyone other than Factor Sub.  There is no lien, encumbrance, security
interest or other claim of any kind or nature on the Factor Sub Account
Proceeds or the Collateral except the liens, encumbrances and security
interests arising under the Factor Sub Factoring Agreement and the Factoring
and Inventory Loan and Security Agreement, or Permitted Liens.  Borrower will not grant a security interest
or execute any Financing Statement in favor of any other Person during the Term
of this Agreement, without the prior written consent of Lender.

 

(ii) The amount of each Factor Sub Account is due
according to its terms and owing to Borrower and represents an accurate
statement of a bona fide sale, delivery and acceptance of Goods or other
property or performance of service by Borrower to or for an Account Debtor.  The payment of such Factor Sub Accounts is
not contingent upon the fulfillment by Borrower of any further performance of
any nature whatsoever.  Each Factor Sub
Account Debtor’s business is solvent to the best of Borrower’s knowledge.

 

(iii) There are and shall be no set-offs, allowances,
discounts, deductions, counterclaims, or Disputes with respect to any Factor
Sub Account in excess of $10,000, prior to the date it is to be paid.  Borrower shall submit to Lender on a separate
Schedule of Accounts for each Account Debtor that is indebted on a Factor Sub
Account, credit memos itemizing all such returns and allowances made during the
previous week with respect to such Factor Sub Accounts and at Lender’s option a
check (or wire transfer) payable to Lender for the amount thereof, or in Lender’s
sole and exclusive discretion, Lender may agree to accept the Schedule of
Factor Sub Accounts and apply same to Borrower’s Reserve Account.  Borrower agrees to give Lender notice of all
set-offs, allowances, discounts, deductions, counterclaims or Disputes in
excess of $100,000.

 

6.2                                 Negative Covenants.

 

(a)                                  No Merger. 
Borrower will not merge or consolidate with any other Person or sell,
transfer, lease, abandon, or otherwise dispose of a substantial portion of Borrower’s
assets or any of the Collateral or any interest therein, except that, so long
as no Default has occurred and is continuing, Borrower may sell Inventory in
the ordinary course of Borrower’s business.

 

(b)                                 No Debt or Liens; Taxes. 
Borrower will not obtain or attempt to obtain from any Person other than
Lender any loans, advances, or other financial accommodations or indebtedness
of any kind, nor will Borrower enter into any direct or indirect guaranty of
any obligation of another Person. 
Borrower will not permit any of Borrower’s assets or any part of the
Collateral to be subject to any Lien. 
Borrower shall pay when due (or before the expiration of any extension
period) any tax or other assessment (including all required payments or deposits
with respect to withholding taxes), and Borrower will, upon request by Lender,
promptly furnish Lender with proof satisfactory to Lender that Borrower has
made such payments and deposits.

 

(c)                                  No Distributions. 
Borrower will not retire, repurchase or redeem any of Borrower’s capital
stock or other ownership interest in Borrower, nor declare or pay any dividend
in cash or other property (other than additional shares of capital stock or
additional ownership interests) to any owner or holder of Borrower’s shares or
other ownership interest.

 

(d)                                 No ERISA Liabilities. 
Borrower will make timely payments of all contributions required to meet
the minimum funding standards for Borrower’s employee benefit plans subject to
the Employee Retirement Income Security Act of 1974 (as amended, “ERISA”)
and will promptly report to Lender the occurrence of any reportable event (as
defined in ERISA) and any giving or receipt by Borrower of any governmental
notice (other than routine requests for information) in respect of any such plan.

 

9

 

(e)                                  Transactions with
Affiliates.  Borrower will not engage in any transaction
with any of Borrower’s officers, directors, employees, owners or other
Affiliates, except for an “arms-length” transaction on terms no less favorable
to Borrower than would be granted to Borrower in a transaction with a Person
who is not an Affiliate, which transaction shall be approved by Borrower’s
disinterested directors and shall be disclosed in a timely manner to Borrower
prior to the consummation of the transaction.

 

(f)                                    Loans/Investments. 
Borrower will not make any loans or advances to or extend any credit to
any Person except (i) the extension of trade credit in the ordinary course
of business; and (ii) advances to employees not to exceed an aggregate
outstanding amount of $10,000 at any one time outstanding for all
employees.  Borrower shall not purchase,
acquire or otherwise invest in any Person except: (A) existing investments
in Borrower’s subsidiaries described on Schedule 6.2 (f); (B) direct
obligations of the United States of America maturing within one year from the
acquisition thereof; (C) certificates of deposit issued by, or investment
accounts in, banks or financial institutions having a net worth of not less
than $50,000,000; and (D) commercial paper rated A-1 by Standard &
Poor’s Ratings Group or P-1 by Moody’s Investors Service, Inc.  Without limiting the generality of the
foregoing, Borrower shall not create any new subsidiary.

 

(g)                                 Capital Expenditures. 
Borrower shall give Lender notice of any capital expenditures in excess
of $450,000  during any fiscal year.

 

Section 7.
Administration.

 

7.1 Expenses.  Borrower shall pay all costs incurred by
Lender pursuant to this Agreement, including search and filing fees, wire and
ACH transfer fees, audit and field examination fees, legal fees (including the
allocated cost of internal counsel) for preparation of this Agreement and any
other agreements related hereto and the perfection, preservation and enforcement
of any of Lender’s rights hereunder.

 

7.2 Credit
Inquiries.  Borrower authorizes
Lender to disclose such information as Lender deems appropriate to persons
making credit inquiries about Borrower.

 

7.3 Field
Examinations.  During the term of
this Agreement and so long as there exists or has existed no Default, Lender
may conduct up to four (4) field examinations per Contract Year; provided,
however, that upon the occurrence of a Default and so long as it continues,
Lender may conduct additional field examinations.  Borrower agrees to pay to Lender an audit fee
equal to $900 per auditor, per day (including partial days), plus all of Lender’s
out-of-pocket travel and living expenses incurred while performing each field
examination.

 

7.4 Persons
Authorized to Request Advances. 
Borrower hereby authorizes and directs Lender to make Advances to or for
the benefit of Borrower upon receipt of instructions from any of the persons
listed on Schedule 7.4.  Lender shall
have no liability whatsoever to Borrower or any other Person for acting upon
any such instructions which Lender, in good faith, believes were given by any
such person, and Lender shall have no duty to inquire as to the propriety of
any disbursement.  Lender is hereby
authorized to make the loans provided for herein based on instructions received
by facsimile, electronic mail, telephone or other method of communication from
any of such persons.  Although Lender
shall make a reasonable effort to determine the person’s identity, Lender shall
not be responsible for determining the authenticity of any such instructions,
and Lender may act on the instructions of anyone it perceives to be one of the
persons authorized to request loans hereunder. 
Lender shall have the right to accept the instructions of any of the
foregoing persons unless and until Lender actually receives from Borrower (in
accordance with the notice provisions of this Agreement) written notice of
termination of the authority of that person. 
Borrower may change persons designated to give Lender borrowing
instructions only by delivering to Lender written notice of such change.  Borrower will ensure that each telephone
instruction from any person designated in or pursuant to this paragraph shall
be followed by written confirmation of the request for disbursement in such
form as Lender makes available to Borrower from time to time for such purpose; provided,
however, that Borrower’s failure to provide written confirmation of any
telephonic instruction shall not invalidate such telephonic instruction.

 

Section 8.
Accounting Information.

 

8.1  Accounting Statements.  Lender shall provide Borrower with
information on the Advances and a monthly reconciliation of the lending
relationship relating to collections, Advances and account maintenance 

 

10

 

such as aging, posting,
error resolution and e-mailing or mailing of statements.  All of the foregoing shall be in a format and
in such detail, as Lender, in its sole discretion, deems appropriate.  Lender’s books and records shall be
admissible in evidence without objection as prima facie evidence of the status
of the Advances and Reserve between Lender and Borrower.  Each statement, report, or accounting
rendered or issued by Lender to Borrower shall be deemed conclusively accurate
and binding on Borrower unless within thirty (30) days after the date of
issuance Borrower notifies Lender to the contrary pursuant to Section 10
hereof, setting forth with specificity the reasons why Borrower believes such
statement, report, or accounting is inaccurate, as well as what Borrower
believes to be correct amount(s) therefore.  If the Borrower gives notice of its
disagreement with Lender’s statement, all matters in such statement that are
not objected to in Borrower’s notice, shall be deemed conclusively accurate and
binding on Borrower.  Borrower’s failure
to receive any monthly statement shall not relieve it of the responsibility to
request such statement and Borrower’s failure to do so shall nonetheless bind
Borrower to whatever Lender’s records would have reported.

 

8.2  Inspections.  Lender shall have the right at any time, at
Borrower’s expense, to visit and inspect Borrower’s books and records, and to
make and take away copies of Borrower’s books and records.

 

Section 9.                                          Default and Remedies.

 

9.1 Default.  A Default
shall be deemed to have occurred hereunder upon the happening of one or more of
the following: (a) Borrower shall fail to pay as and when due any amount
owed to Lender; (b) any Obligor shall breach any covenant, warranty or
representation set forth herein or in any Lending Document or same shall be
untrue when made; (c) any Obligor becomes insolvent in that its debts are
greater than the fair value of its assets or is unable to pay its debts as they mature, or admits
in writing that it is insolvent or unable to pay its debts, makes an assignment
for the benefit of creditors, makes a conveyance fraudulent as to creditors
under any state or federal law, or a proceeding is instituted by or against any
Obligor alleging that such Obligor is insolvent or unable to pay debts as they
mature, or a petition under any provision of Title 11 of the United States
Code, as amended, or any state insolvency proceeding is filed by or against any
Obligor; (d) any involuntary lien, garnishment, attachment or the like
shall be issued against or shall attach to the Collateral or any portion
thereof and the same is not released within ten (10) days; (e) any
Obligor suffers the entry against it for a final judgment for the payment of
money in excess of $100,000.00, unless the same is discharged within thirty
(30) days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such periods and a stay of
execution pending such appeal is obtained; (f) any report, certificate,
schedule, financial statement, profit and loss statement or other statement
furnished by Borrower, or by any Obligor or other person on behalf of Borrower, to Lender is not true and
correct in any material respect; (g) Borrower shall have a federal or
state tax lien filed against any of its properties, or shall fail to pay any
federal or state tax when due, or shall fail to file any federal or state tax
form as and when due; (h) a material adverse change shall have occurred in
Borrower’s financial conditions, business or operations; (i) any
suspension of the operation of Borrower’s present business; (j) dissolution,
merger, or consolidation of any Obligor that is a corporation, partnership or
limited liability company, provided, however, that the sale of Meade Germany is
specifically permitted; (k) transfer of a substantial part (determined by
market value) of the property of any Obligor; (l) sale, transfer or
exchange, either directly or indirectly, of a controlling stock or equity
ownership interest of any Obligor; (m) termination, unenforceability or
withdrawal of any guaranty for the Obligations, or failure of any Obligor to
perform any of its obligations under such a guaranty or assertion by any
Obligor that it has no liability or obligation under such a guaranty, (n) 
a default or event of default shall occur under the terms of any agreement
between Borrower and FCC, LLC or between Borrower and FCC Factor Subsidiary II,
LLC, or (o) Borrower shall breach any covenant or fail to perform any
covenant in any agreement between Borrower and FCC, LLC, or between Borrower
and FCC Factor Subsidiary II, LLC.

 

9.2 Remedies.  (a)  Upon a Default, Lender may, without
demand or notice to Borrower, exercise all rights and remedies available to it
under this Agreement, under the UCC or otherwise, including terminating this
Agreement and declaring all Obligations immediately due and payable, provided,
however that in the event of a Default described under clause (c) of Section 9.1,
such termination and acceleration shall automatically occur without any notice,
demand or presentment of any kind.

 

11

 

(b)                                 Without notice to or demand upon Borrower
or any other Person, Lender may make such payments and do such acts as Lender
considers necessary or reasonable to protect its interest in the
Collateral.  Borrower authorizes Lender
to enter each premises where any books and records are located, take and
maintain possession of the books and records, and to pay, purchase, contest or
compromise any lien which in Lender’s opinion appears to be prior or superior
to its interest and to pay all expenses incurred in connection therewith.

 

(c)                                  Lender shall be entitled to any form of
equitable relief that may be appropriate without having to establish that any
remedy at law is inadequate or other grounds. 
Lender shall be entitled to freeze, debit and/or effect a set-off
against any fund or account Borrower may maintain with any bank.  In the event Lender deems it necessary to
seek equitable relief, including, but not limited to, injunctive or
receivership remedies, as a result of a Default, Borrower waives any
requirement that Lender post or otherwise obtain or procure any bond.  Alternatively, in the event Lender, in its
sole and exclusive discretion, desires to procure and post a bond, Lender may
procure and file with the court a bond in an amount up to and not greater than
$100,000.00 notwithstanding any common or statutory law requirement to the
contrary.  Upon Lender’s posting of such
bond it shall be entitled to all benefits as if such bond was posted in
compliance with state law.  Borrower
waives any right it may be entitled to, including an award of attorney’s fees
or costs, in the event any equitable relief sought by and awarded to Lender is
thereafter, for whatever reason(s), vacated, dissolved or reversed.

 

9.3  Cumulative Rights; Waivers.  The occurrence of any Default shall entitle
Lender to all of the default rights and remedies (without limiting the other
rights and remedies exercisable by Lender either prior or subsequent to a
Default) as available to a Secured Party under the UCC in effect in any
applicable jurisdiction.  All rights,
remedies and powers granted to Lender in this Agreement, or in any other
instrument or agreement given by Borrower to Lender or otherwise available to
Lender in equity or at law, are cumulative and may be exercised singularly or
concurrently with such other rights as Lender may have.  These rights may be exercised from time to
time as to all or any part of the Collateral hereunder as Lender in its
discretion may determine.  Lender may not
be held to have waived its rights and remedies unless the waiver is in writing
and signed by Lender.  A waiver by Lender
of a right, remedy or default under this Agreement on one occasion is not a
waiver of any right, remedy or default on any subsequent occasion.  No exercise by Lender of one right or remedy
shall be deemed an election, and no waiver by Lender of any default on Borrower’s
part shall be deemed a continuing waiver. 
No delay by Lender shall constitute a waiver, election or acquiescence
by it.

 

Section 10.
Term.

 

  This Agreement may be terminated upon
forty-five (45) days prior written notice from Lender to Borrower.  Borrower shall have the right to terminate
this Agreement at any time, however, upon payment of the appropriate Prepayment
Penalty as outlined below:

 

	
  Prepayment Penalty

  	
   

  	
  Time Period During

  Which Termination

  Occurs

  
	
  $

  	
  300,000

  	
   

  	
  During the first year

  
	
  $

  	
  200,000

  	
   

  	
  During the second year

  
	
  $

  	
  100,000

  	
   

  	
  During the third year

  

 

12

 

If
termination of the Agreement by the Borrower is a result of the sale of all or
substantially all of Borrower’s stock or assets, the Prepayment Penalty will be
as follows:

 

	
  Prepayment Penalty

  	
   

  	
  If Termination

  Occurs Due To

  Stock Or Asset Sale

  	
   

  
	
  $

  	
  300,000

  	
   

  	
  Within 180 days of the Agreement Date

  	
   

  
	
  $

  	
  150,000

  	
   

  	
  More than 181 days after the Agreement Date
  but prior to 365 days after the Agreement Date

  	
   

  
	
  $

  	
  100,000

  	
   

  	
  During the second Contract Year

  	
   

  
	
  $

  	
  50,000

  	
   

  	
  During the third Contract Year

  	
   

  

 

Notwithstanding
anything herein to the contrary, Lender may terminate this Agreement i) at any
time without notice after the occurrence of a Default, or ii) assuming no
Default by Borrower, Lender may terminate this Agreement at any time by giving
not less than forty-five (45) days notice. 
Notwithstanding payment in full of all Obligations by Borrower, any such
notice of termination is conditioned on Borrower’s delivery, to Lender, of a
general release in a form reasonably satisfactory to Lender.  Borrower understands that this provision
constitutes a waiver of its rights under § 9-513 of the UCC.  Lender shall not be required to record any
terminations or satisfactions of any of Lender’s liens until Borrower has
executed and delivered to Lender said general release and Borrower shall have
no authority to do so without Lender’s express written consent.  Any termination of this Agreement shall not
affect Lender’s security interest in the Collateral, and this Agreement shall
continue to be effective, until all transactions entered into and Obligations
incurred hereunder have been completed and satisfied in full.  The expense reimbursement, repayment and
indemnification provisions of this Agreement shall survive the termination of
this Agreement.  All Obligations shall be
immediately due and payable in full upon termination of this Agreement for any
reason.

 

Section 11. 
Notices.  Any notice or communication with respect to
this Agreement shall be given in writing, sent by (i) personal delivery, or (ii) expedited
delivery service with proof of delivery, or (iii) United States mail,
postage prepaid, registered or certified mail, or (iv) prepaid telegram,
telex or telecopy, addressed to each party hereto at its address set forth
below or to such other address or to the attention of such other person as
hereafter shall be designated in writing by the applicable party sent in
accordance herewith.  Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery service or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or in the
case of telegram, telex or telecopy, upon receipt.

 

Section 12.  Attorney’s Fees.  Borrower agrees to
reimburse Lender upon demand for all reasonable attorney’s fees, court costs
and other expenses incurred by Lender in preparation, negotiation and
enforcement of this Agreement and protecting or enforcing its interest in the
Factor Sub Accounts or the other Collateral, or in the representation of Lender
in connection with any bankruptcy case or insolvency proceeding involving
Borrower, the Collateral, or any Factor Sub Accounts including any defense of
any Avoidance Claims.  Borrower hereby
authorizes Lender, at Lender’s sole discretion, to deduct such fees, costs and
expenses from the Reserve Account or may make demand therefore.  Notwithstanding the existence of any law,
statute or rule, in any jurisdiction which may provide Borrower with a right to
attorney’s fees or costs, Borrower hereby waives any and all rights to
hereafter seek attorney’s fees or costs hereunder and Borrower agrees that
Lender exclusively shall be entitled to indemnification and recovery of any and
all attorney’s fees or costs in respect to any litigation based hereon, arising
out of, or related hereto, whether under, or in connection with, this and/or
any agreement executed in conjunction 

 

13

 

herewith, or any course of conduct, course of dealing,
statements (whether verbal or written) or actions of either party.

 

Section 13.                                   Unused
Line Fee.  In consideration of the
maintenance of Lender’s commitment hereunder, Borrower will pay Lender a fee at
the rate of three-quarters of one percent (0.75%) per annum on the daily average
unused portion of Lender’s commitment to make loans hereunder, payable monthly
in arrears on the first day of each calendar month, beginning on the first such
date following the date of this Agreement.

 

Section 14.                                   Indemnity.  Borrower hereby
indemnifies and agrees to hold harmless and defend Lender from and against any
and all claims, judgments, liabilities, fees and expenses (including attorney’s
fees) which may be imposed upon, threatened or asserted against Lender at any
time and from time to time in any way connected with this Agreement, the Factor
Sub Accounts or the Collateral.  The
foregoing indemnification shall apply whether or not such indemnified claims
are in any way or to any extent owed, in whole or in part, under any claim or
theory of strict liability, or are caused, in whole or in part, by any
negligent act or omission of Lender.

 

Section 15.                                   Severability.  Each and every
provision, condition, covenant and representation contained in this Agreement
is, and shall be construed to be, a separate and independent covenant and
agreement.  If any term or provision of
this Agreement shall to any extent be invalid or unenforceable, the remainder
of the Agreement shall not be affected thereby.

 

Section 16.                                   Parties
in Interest. 
All grants, covenants and agreements contained in this Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that Borrower may not delegate or
assign any of its duties or obligations under this Agreement without the prior
written consent of Lender.  Lender
reserves the right to assign its rights and obligations under this agreement in
whole or in part to any person or entity. 
Notwithstanding anything herein to the contrary, the Lender may,
without consent of the Borrower, grant a security interest in, sell or
assign, grant or sell participations in or otherwise transfer all or any
portion of its rights and obligations hereunder to one or more Persons  and upon notice of such assignment, sale or
grant of participation by Lender, to treat such assignee, transferee or
participant as  “Lender” for all purposes
hereunder

 

Section 17.                                   Governing
Law:  Submission to Process and Venue.  This
agreement shall be deemed a contract made under the laws of the State of
California and shall be construed and enforced in accordance with and governed
by the internal laws of the State of California, without reference to the rules thereof
relating to conflicts of law.  Borrower
hereby irrevocably submits itself to the exclusive jurisdiction of the state
and federal courts located in any county in California in which Lender has a
business location, and agrees and consents that service of process may be made
upon it in any legal proceeding relating to this agreement, the security
interest created hereby or any other relationship between Lender and Borrower
by any means allowed under state or federal law.  Any legal proceeding arising out of or in any
way related to this Agreement, the security interest created hereby or any other
relationship between Lender and Borrower shall be brought and litigated in any
the state or federal courts located in any county in which Lender has a
business location, the selection of which shall be in the exclusive discretion
of Lender.  Borrower hereby waives and
agrees not to assert, by way of motion, as a defense or otherwise, that any
such proceeding, is brought in any inconvenient forum or that the venue thereof
is improper.

 

Section 18.                                   Complete
Agreement.  This Agreement, the written documents
executed pursuant to this Agreement, if any, and the acknowledgment delivered
in connection herewith set forth the entire understanding and agreement of the
parties hereto with respect to the transactions contemplated herein and may not
be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties.  No
modification or amendment of or supplement to this Agreement shall be valid or
effective unless the same is in writing and signed by the party against whom it
is sought to be enforced.

 

Section 19.                                   Miscellaneous.

 

(a)                                  Borrower acknowledges that there is no, and it will
not seek or attempt to establish any, fiduciary relationship between Lender and
Borrower, and Borrower waives any right to assert, now or in the future, the
existence 

 

14

 

or
creation of any fiduciary relationship between Lender and Borrower in any
action or proceeding (whether by way of claim, counterclaim, cross claim or
otherwise) for damages.

 

(b)                                 This Agreement shall be deemed to be one of
financial accommodation and not assumable by any debtor, trustee or
debtor-in-possession in any bankruptcy proceeding without Lender’s express
written consent and may be suspended in the event a petition in bankruptcy is
filed by or against Borrower.

 

(c)                                  In the event Borrower’s principals, officers or
directors form a new entity, whether corporate, partnership, limited liability
company or otherwise, similar to that of Borrower during the term of this
Agreement, such entity shall be deemed to have expressly assumed the
Obligations due Lender by Borrower under this Agreement.  Upon the formation of any such entity, Lender
shall be deemed to have been granted an irrevocable power of attorney with
authority to file, on behalf of the newly formed entity, a new UCC-1 or UCC-3
Financing Statement with the appropriate secretary of state or UCC filing
office.  Lender shall be held harmless
and be relieved of any liability arising from filing any such statement or the
resulting perfection of a lien in any of the new entity’s assets.  In addition, Lender shall have the right to
notify the new entity’s account debtor of Lender’s lien rights, its right to
collect all Factor Sub Account Proceeds and Factor Sub Accounts, and to notify any
new Lender or lender who has sought to procure a competing lien of Lender’s
right is in such new entity’s assets.

 

(d)                                 Borrower expressly authorizes Lender to access the
systems of and/or communicate with any shipping or trucking company in order to
obtain or verify tracking, shipment or delivery status of any Goods regarding
an Approved Account.

 

(e)                                  INTENTIONALLY RESERVED

 

(f)                                    Borrower shall indemnify Lender from any loss
arising out of the assertion of any Avoidance Claim.  Borrower shall notify Lender within two
business days of it becoming aware of the assertion of an Avoidance Claim.

 

(g)                                 Borrower agrees to execute any and all forms (i.e.
Forms 8821 and/or 2848) that Lender may require in order to enable Lender to
obtain and receive tax information issued by the Department of the Treasury,
Internal Revenue Service, or receive refund checks.

 

(h)                                 Borrower will cooperate with Lender in obtaining a
control agreement in form and substance satisfactory to Lender with respect to
Collateral consisting of:  Deposit
Accounts; Investment Property; Letter-of-Credit Rights; and electronic Chattel
Paper.

 

(i)                                             Lender and Borrower agree and acknowledge that the
loan facility provided for by this Agreement is not conditioned upon the
existence or provision of any other loan facility, factoring arrangement or
other financial accommodations between Lender and Borrower or any of their
affiliates.

 

(j)                                     The
terms of this Agreement and the other Factoring Documents are confidential and
Borrower agrees not to disclose same to any party other than its accountants,
attorneys and others that are in a confidential relationship with Borrower and
who agree to treat this Agreement and the other Factoring Documents and the
contents of same as confidential, except as required by law (i.e. SEC filings).

 

(k)                                  The
Borrower shall make each payment required hereunder, and/or under any
instrument delivered hereunder, without setoff, deduction or counterclaim of
any kind, whether any right of setoff, deduction or counterclaim arises
pursuant to this Agreement, arises pursuant to applicable law or otherwise.

 

Section 20.                                   Governing Law; Jurisdiction; Venue, Waiver of
Jury Trial and Service of Process.

 

(A)   THIS
AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE,
AND BORROWER HEREBY AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF CALIFORNIA, AND WAIVES 

 

15

 

PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE CERTIFIED MAIL DIRECTED TO
BORROWER AT ITS ADDRESS AS IT APPEARS AT THE BEGINNING OF THIS AGREEMENT AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S. MAILS, CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, POSTAGE PREPAID. 
BORROWER WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.  NOTHING IN THIS SECTION SHALL
AFFECT LENDER’S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR AFFECT LENDER’S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

(B)  EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO. 
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTIONS SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

 

Section 21.  Acknowledgment of Waivers
and Loss of Defenses.

 

(a)                                  Borrower
acknowledges that certain provisions of this Agreement operate as waivers of
rights that Borrower would otherwise have under applicable law.  Other provisions permit Lender to take
actions that Lender would otherwise not have a right to take, to fail to take
actions that Lender would otherwise have an obligation to take, or to take
actions that may prejudice Borrower’s rights and obligations under this
Agreement and against the Borrower.  In
the absence of these provisions Borrower might have defenses against Borrower’s
obligations under this Agreement.  These
defenses might permit Borrower to avoid some or all of Borrower’s obligations
under this Agreement.

 

(b)                                  Borrower
intends by the waivers and other provisions of this Agreement, including the
acknowledgement set forth in this section, to be liable to the greatest extent
permitted by law for all of Borrower’s obligations to Lender.  Borrower intends to have this liability even
if the terms of the Lending Documents change or if Borrower does not have any
rights against Borrower.

 

(b)                                  Borrower
acknowledges that (i) Borrower understands the seriousness of the
provisions of this Agreement; (ii) Borrower has had a full opportunity to
consult with counsel of Borrower’s choice; and (iii) Borrower has
consulted with counsel of Borrower’s choice or has decided not to consult with
counsel.

 

Section 22.                                   Waiver
Of Jury Trial.  This Section concerns
the resolution of any controversies or claims between the Borrower and Lender,
whether arising in contract, tort or by statute, including but not limited to
controversies or claims that arise out of or relate to: (i) this Agreement
(including any renewals, extensions or modifications); or (ii) any of the
other Lending Documents (collectively a “Claim”).

 

16

 

(a)                                  Judicial
Reference.

 

	
  i.

  	
   

  	
  The parties prefer that any
  dispute between them be resolved in litigation subject to a Jury Trial Waiver
  as set forth in Section 20 herein, but the California Supreme Court has
  held that such pre-dispute jury trial waivers are unenforceable. This
  Section will be applicable until: (i) the California Supreme Court
  holds that a pre-dispute jury trial waiver provision similar to that
  contained in Section 20 herein is valid or enforceable; or (ii) the
  California Legislature passes legislation and the governor of the State of
  California signs into law a statute authorizing pre-dispute jury trial
  waivers and as a result such waivers become enforceable.

  
	
   

  	
   

  	
   

  
	
  ii.

  	
   

  	
  Other than the exercise of
  provisional remedies (any of which may be initiated pursuant to applicable
  law), any controversy, dispute or claim (each, a “Claim”) between the parties
  arising out of or relating to this Agreement will be resolved by a reference
  proceeding in California in accordance with the provisions of
  Section 638 et seq. of the California Code of Civil Procedure (“CCP”),
  or their successor sections, which shall constitute the exclusive remedy for
  the resolution of any Claim, including whether the Claim is subject to the
  reference proceeding. Venue for the reference proceeding will be in the
  Superior Court or Federal District Court in Los Angeles County, California
  (the “Court”).

  
	
   

  	
   

  	
   

  
	
  iii.

  	
   

  	
  The referee shall be a retired
  Judge or Justice selected by mutual written agreement of the parties. If the
  parties do not agree, the referee shall be selected by the Presiding Judge of
  the Court (or his or her representative). A request for appointment of a
  referee may be heard on an ex parte or
  expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. The referee shall be
  appointed to sit with all the powers provided by law. Pending appointment of
  the referee, the Court has power to issue temporary or provisional remedies.

  
	
   

  	
   

  	
   

  
	
  iv.

  	
   

  	
  The parties agree that time is of
  the essence in conducting the reference proceedings. Accordingly, the referee
  shall be requested, subject to change in the time periods specified herein
  for good cause shown, to (a) set the matter for a status and
  trial-setting conference within forty-five (45) days after the date of
  selection of the referee, (b) if practicable, try all issues of law or
  fact within one hundred twenty (120) days after the date of the conference
  and (c) report a statement of decision within twenty (20) days after the
  matter has been submitted for decision.

  
	
   

  	
   

  	
   

  
	
  v.

  	
   

  	
  The referee will have power to
  expand or limit the amount and duration of discovery. The referee may set or
  extend discovery deadlines or cutoffs for good cause, including a party’s
  failure to provide requested discovery for any reason whatsoever. Unless
  otherwise ordered based upon good cause shown, no party shall be entitled to
  “priority” in conducting discovery, depositions may be taken by either party
  upon ten (10) days written notice, and all other discovery shall be
  responded to within twenty (20) days after service. All disputes relating to
  discovery which cannot be resolved by the parties shall be submitted to the
  referee whose decision shall be final and binding.

  
	
   

  	
   

  	
   

  
	
  vi.

  	
   

  	
  Except as expressly set forth in
  this Agreement, the referee shall determine the manner in which the reference
  proceeding is conducted including the time and place of hearings, the order
  of presentation of evidence, and all other questions that arise with respect
  to the course of the reference proceeding. All proceedings and hearings
  conducted before the referee, except for trial, shall be conducted without a
  court reporter, except that when any party so requests, a court reporter will
  be used at any hearing conducted before the referee, and the referee will be
  provided a courtesy copy of the transcript. The party making such a request
  shall have the obligation to arrange for and pay the court reporter. Subject
  to the referee’s power to award costs to the prevailing party, the parties will
  equally share the cost of the referee and the court reporter at trial.

  

 

17

 

	
  vii.

  	
   

  	
  The referee shall be required to
  determine all issues in accordance with existing case law and the statutory
  laws of the State of California. The rules of evidence applicable to
  proceedings at law in the State of California will be applicable to the
  reference proceeding. The referee shall be empowered to enter equitable as
  well as legal relief, provide all temporary or provisional remedies, enter
  equitable orders that will be binding on the parties and rule on any
  motion which would be authorized in a trial, including without limitation
  motions for summary judgment or summary adjudication. The referee shall issue
  a decision pursuant to CCP Section 644 the referee’s decision shall be
  entered by the Court as a judgment or an order in the same manner as if the
  action had been tried by the Court. The final judgment or order or from any
  appealable decision or order entered by the referee shall be fully appealable
  as provided by law. The parties reserve the right to findings of fact,
  conclusions of laws, a written statement of decision, and the right to move
  for a new trial or a different judgment, which new trial, if granted, is also
  to be a reference proceeding under this provision.

  
	
   

  	
   

  	
   

  
	
  viii.

  	
   

  	
  If the enabling legislation which
  provides for appointment of a referee is repealed (and no successor statute
  is enacted), any dispute between the parties that would otherwise be
  determined by reference procedure will be resolved and determined by
  arbitration. The arbitration will be conducted by a retired judge or Justice,
  in accordance with the California Arbitration Act Section 1280 through
  Section 1294.2 of the CCP as amended from time to time. The limitations
  with respect to discovery set forth above shall apply to any such arbitration
  proceeding.

  
	
   

  	
   

  	
   

  
	
  ix.

  	
   

  	
  THE PARTIES RECOGNIZE AND AGREE
  THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY
  A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
  TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND
  VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION
  WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO
  THIS AGREEMENT.

  

 

In Witness
Whereof, the parties have set their hands and seals on the day and year first
hereinabove written.

 

 

	
   

  	
  FCC, LLC, a Florida limited liability company doing
  business as First Capital Western Region, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Robert S. Yasuda

  
	
   

  	
  Name: 

  	
  Robert S. Yasuda

  
	
   

  	
  Title: 

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEADE INSTRUMENTS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Steven G. Murdock

  
	
   

  	
   

  	
  Steven G. Murdock

  
	
   

  	
   

  	
  Chief Executive Officer

  
				

 

18

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )
  SS:

  
	
  COUNTY OF

  	
  )

  

 

On
                                  ,
2009, before me,                                         ,
Notary Public, personally appeared Steven L. Muellner, who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.

 

WITNESS
my hand and official seal.

 

 

	
  Signature

  	
   

  	
   (Signature of Notary)

  	
  (Seal
  of Notary)

  

 

19

 

EXHIBIT “A”

 

Definitions

 

“Account(s)” means (i) all “accounts” as defined in the
UCC, whether presently existing or hereafter arising, due to Borrower and (ii) all
presently existing or hereafter arising accounts receivable due to Borrower
(including medical and health-care-insurance receivables), book debts, notes,
drafts and acceptances and other forms of obligations or rights to payment of a
monetary obligation now or hereafter owing to Borrower, whether arising from
the sale or lease of goods or the rendition of services by Borrower (including
any obligation that might be characterized as an account, contract right,
general intangible or chattel paper under the UCC), all of Borrower’s rights
in, to and under all purchase orders now or hereafter received by Borrower for
goods and services, all proceeds from the sale of Inventory, all monies due or
to become due to Borrower under all contracts for the sale or lease of goods or
the rendition of services by Borrower (whether or not yet earned by performance)
(including the right to receive the proceeds of said purchase orders and
contracts), all collateral security and guarantees of any kind given by any
Obligor with respect to any of the foregoing, and all goods returned to or
reclaimed by Borrower that correspond to any of the foregoing and all proceeds
of the foregoing.

 

“Account Debtor” or “Customer” means any Person who is
obligated on an Account, Chattel Paper or General Intangible.

 

“Advance” is defined in Section 2.2 of this Agreement.

 

“Agreement” means this Agreement, including the Exhibits and any
Schedules hereto, and all amendments, modifications and supplements hereto and
thereto and restatements hereof and thereof.

 

“Application” means each application made
by Borrower in connection with this Agreement.

 

“Approved
Account(s)”
means a Factor Sub Account which is deemed acceptable to make Advances against
by Lender in the exercise of its reasonable sole credit or business judgment
and for which Factor has a payment obligation under the Factor Sub Factoring
Agreement.

 

“Avoidance
Claim”
means any claim that any payment received by Lender from or for the Factor Sub
Account of a Factor Sub Account Debtor is avoidable under the federal
Bankruptcy Code or any other debtor relief statute.

 

“Business Day” means any day that a bank
located in California, Oklahoma or Ohio is open for business.

 

“Chattel
Paper”
means a record or records that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, a security interest in specific goods and license
of software used in the goods, a lease of specific goods, or a lease of
specific goods and license of software used in the goods.

 

“Collateral” means and includes
all of Borrower’s right, title and interest in and to all of Borrower’s
property other than Factor Sub Accounts, whether real or personal, tangible or
intangible, now owned or existing or hereafter acquired or arising and wherever
located, including all of the following: (a) all Factor Sub Accounts
Proceeds, (b) Chattel Paper, (c) Commercial Tort Claims, (d) Deposit
Accounts, (e) Documents, (f) Equipment (g) General Intangibles
(including but not limited to all files, correspondence, computer programs,
tapes, disks and related data processing software which contain information
identifying or pertaining to any of the Collateral or any Customer or showing
the amounts thereof or payments thereon or otherwise necessary or helpful in
the realization thereon or the collection thereof), (h) Goods, (i) Inventory,
(j) Instruments, (k) Investment Property, (l) Letters of Credit
and Letter of Credit Rights, (m) Negotiable Collateral (n) the
Reserve, (o) all Supporting Obligations, (p) the proceeds of all
Accounts that are not Factor Sub Accounts including the amounts payable as the
purchase price therefore under the Factoring and Inventory Advances and
Security Agreement, (q) all other personal property assets of the Borrower
except Factor Sub Accounts and Accounts sold to FCC under the Factoring and
Inventory Loan and Security Agreement, and (r) all proceeds and products
of the foregoing.

 

A-1

 

“Commercial
Tort Claim” means (i) all “commercial tort claims” as defined in the UCC, and (ii) all
claims arising in tort with respect to which: 
(A) The claimant is an organization; or (B) The claimant is an
individual and the claim: (x) arose in the course of the claimant’s
business or profession; and (y) does not include damages arising out of
personal injury to or the death of an individual.

 

“Deposit
Account” means (i) all “deposit
accounts” as defined in the UCC, and (ii) any demand, time, savings,
passbook or like account maintained with a bank, savings and loan association,
credit union, trust company or like organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.

 

 “Dispute” means any claim, whether or
not provable, bona fide, or with or without support, made by an Factor Sub
Account Debtor as a basis for refusing to pay a Factor Sub Account, either in
whole or in part, including, but not limited to, any contract dispute, charge
back, credit, right to return Goods, or other matter which diminishes or may
diminish the dollar amount or timely collection of such Factor Sub Account.

 

“Documents”
means a document of title or a receipt of the type described in UCC 7-201(2).

 

“Default” means any of the events specified in Section 9.1 of
this Agreement.

 

“Equipment” means (a) all
“equipment” as defined in the UCC, and (b) all of Borrower’s present and
hereafter acquired machinery, equipment, furniture, fixtures, goods, and all
other tangible personal property (other than Inventory), including computer and
other electronic data processing equipment and other office equipment and
supplies, computer programs and related data processing software, embedded
software, spare parts, tools, motors, automobiles, trucks, tractors and other
motor vehicles, rolling stock, jigs, as well as all of such types of property
leased by Borrower and all of Borrower’s rights and interests with respect
thereto under such leases (including, without limitation, options to purchase),
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect
thereto; wherever any of the foregoing is located.

 

“Factor
Sub” means FCC Factor Subsidiary II, LLC, a Delaware limited liability
company.

 

“Factor
Sub Accounts” means (i) all “accounts” as defined in the UCC, whether
presently existing or hereafter arising, and (ii) all presently existing
or hereafter arising accounts receivable due to Borrower (including medical and
health-care-insurance receivables), book debts, notes, drafts and acceptances
and other forms of obligations or rights to payment of a monetary obligation
now or hereafter owing to Borrower, whether arising from the sale or lease of
goods or the rendition of services by Borrower (including any obligation that
might be characterized as an account, contract right, general intangible or
chattel paper under the UCC), all of Borrower’s rights in, to and under all
purchase orders now or hereafter received by Borrower for goods and services,
all proceeds from the sale of Inventory, all monies due or to become due to
Borrower under all contracts for the sale or lease of goods or the rendition of
services by Borrower (whether or not yet earned by performance) (including the
right to receive the proceeds of said purchase orders and contracts), all
collateral security and guarantees of any kind given by any obligor with
respect to any of the foregoing, and all goods returned to or reclaimed by
Borrower that correspond to any of the foregoing but only to the extent that
such accounts are purchased by Factor Sub under the terms of the Factor Sub
Factoring Agreement.

 

“Factor
Sub Accounts Proceeds” means the proceeds of Factor Sub Accounts,
including, without limitation, any amounts payable by Factor Sub as the
Purchase Price of the Factor Sub Accounts under the Factor Sub Factoring
Agreement.

 

“Factor
Sub Factoring Agreement” means that certain Factoring and Security
Agreement entered into by and between Factor Sub and Borrower dated as of the
date hereof.

 

“Factoring and Inventory Advances and Security Agreement” means
that certain Factoring and Inventory Advances and Security Agreement by and
between Borrower and FCC dated as of the date hereof.

 

A-2

 

“FCC”
means FCC, LLC, a Florida limited liability company doing business as First
Capital Western Region, LLC.

 

 “Financing Statement” means each UCC financing
statement naming Lender as secured party and Borrower as debtor, in connection
with this Agreement.

 

“GAAP” means generally accepted
accounting principles consistently applied and maintained throughout the period
indicated and consistent with the prior financial practice of the Person
referred to.

 

“General
Intangible” means (i) all “general intangibles” as defined in the UCC,
and (ii) all of Borrower’s present and future general intangibles and all
other presently owned or hereafter acquired intangible personal property of
Borrower (including payment intangibles and any and all choses or things in
action, goodwill, patents and patent applications, tradenames, servicemarks,
trademarks and trademark applications, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
licenses and rights under any licensing agreements, route lists, infringement
claims, software, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit Factor Sub Accounts, tax refunds and tax
refund claims) other than Goods, Factor Sub Accounts, Chattel Paper, Commercial
Tort Claims, Deposit Factor Sub Accounts, Documents, Equipment,  Instruments, Investment Property, Letters of
Credit or Letters of Credit Rights, but specifically including all of  Borrower’s books and records.

 

“Goods”
means (i) all “goods” as defined in the UCC, and (ii) all of Borrower’s
present and hereafter acquired goods, wherever located, including imbedded
software to the extent included in “goods”, manufactured homes, and standing
timber that is cut and removed for sale.

 

“Indemnifiable
Tax”
means any Tax other than a Tax that would not be imposed in respect of a
payment under this Agreement but for a present or former connection between the
jurisdiction of the government or taxation authority imposing such Tax and the
recipient of such payment or a person related to such recipient (including,
without limitation, a connection arising from such recipient or related person
being or having been a citizen or resident of such jurisdiction, or being or
having been organized, present or engaged in a trade or business in such
jurisdiction, or having or having had a permanent establishment or fixed place
of business in such jurisdiction, but excluding a connection arising solely
from such recipient or related person having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement).

 

 “Instrument” means (i) all “instruments”
as defined in the UCC, and (ii) all negotiable instruments or any other
writings that evidence a right to the payment of a monetary obligation, is not
itself a security agreement or lease, and is of a type that in ordinary course
of business is transferred by delivery with any necessary endorsement or
assignment.  The term does not include (i) Investment
Property, (ii) Letters of Credit, or (iii) writings that evidence a
right to payment arising out of the use of a credit or charge card or
information contained on or for us with the card.

 

“Inventory”
means (i) all “inventory” as defined in the UCC, and (ii) all of
Borrower’s inventory, together with all of Borrower’s present and future
inventory, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower’s present and future raw materials,
work in process, finished goods, shelving and racking upon which the inventory
is stored and packing and shipping materials, wherever located, and any
documents of title representing any of the above.

 

“Investment
Property” means (i) any “investment property” as defined in the UCC,
and (ii) a security, whether certificated or uncertificated, security
entitlement, securities account, commodity contract, or commodity account.

 

“Lending
Documents” means, collectively, this Agreement and any other agreements,
instruments, certificates or other documents entered into in connection with
this Agreement, including collateral documents, letter of credit agreements,
riders covering inventory or other loans, security agreements, pledges,
guaranties, mortgages, deeds of trust, assignments and subordination
agreements, and any other agreement executed by Borrower, any guarantor or any
affiliate of Borrower, any Obligor or any guarantor pursuant hereto or in
connection herewith.

 

A-3

 

“Letter
of Credit”
means a commercial or stand-by letter of credit issued by or on behalf of or
for the benefit of Borrower.

 

“Letter
of Credit Right” means (i) “letter of credit right” as defined in the
UCC, and (ii) a right to payment or performance under a Letter of Credit,
whether or not the beneficiary has demanded or is at the time entitled to
demand payment or performance.  The term
does not include the right of a beneficiary to demand payment or performance
under a Letter of Credit.

 

“Lien”
means, as applied to the property of any Person, any security deed, mortgage,
deed to secure debt, deed of trust, lien, pledge, assignment, charge, security
interest, title retention agreement, negative pledge, levy, execution, seizure,
attachment, garnishment, or other encumbrance of any kind in respect of such
property, whether or not choate, vested, or perfected.

 

“Maximum Revolving Credit Limit” means the sum
of an amount equal to Ten Million and No/100 Dollars ($10,000,000) less the
total outstanding principal amount of loans or other obligations outstanding
under that certain Factoring and Inventory Advances and Security Agreement.

 

“Negotiable
Collateral” means all of Borrower’s present and future letters of credit,
advises of credit, notes, drafts, instruments, and documents, including,
without limitation, bills of lading, leases, and chattel paper, and Borrower’s
books and records relating to any of the foregoing.

 

 “Net Invoice
Amount” means with respect to each Factor Sub Account, the invoice amount
of such Factor Sub Account, less returns (whenever made), all selling
discounts, other discounts, allowances, credits or deductions of any kind
allowed or granted to or taken by the Account Debtor at any time and all
amounts for freight.

 

“Obligations” means all present and future obligations hereunder owing
by Borrower to Lender whether or not for the payment of money, whether or not
arising pursuant to this Agreement, or evidenced by any note or other
instrument, whether direct or indirect, absolute or contingent, due or to
become due, joint or several, primary or secondary, liquidated or unliquidated,
secured or unsecured, original or renewed or extended, whether arising before,
during or after the commencement of any Bankruptcy Case in which Borrower is a
debtor, including but not limited to any obligations arising pursuant to
letters of credit or acceptance transactions or any other financial
accommodations or any guaranty due to Lender.

 

“Obligor”
means Borrower and any other Person primarily or secondarily, directly or
indirectly, liable on any of the Obligations, including, but not limited to,
any guarantor thereof (individually an “Obligor” and collectively, the “Obligors”).

 

 “Permitted Liens” means (a) liens
for unpaid taxes, assessments, or other governmental charges or levies that are
not yet delinquent, (b) liens set forth on Schedule 2 hereto, (c)  the
interests of lessors in goods which are leased to Borrower, including leases
which are deemed to be “capital leases” in accordance with GAAP, (d) 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
are for sums not yet delinquent, (e) Liens in favor of FCC or any of its
affiliates, and (f) encumbrances on trademarks arising pursuant to any
agreements whereby Borrower grants a license to a third party to use one or
more of Borrower’s trademarks.

 

“Person” means an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization or a
government or any agency or political subdivision thereof.

 

 “Purchase
Price” means the price that Factor Sub has agreed to pay Borrower under the
Factor Sub Factoring Agreement for each Factor Sub Account.

 

“Reserve Account” means a bookkeeping account on the books, maintained by
Lender, to which the Required Reserve Amount and such other amounts as
determined by Lender may be charged to ensure Borrower’s performance with the
provisions hereof.

 

A-4

 

“Reserve Percentage” means twenty percent (20.0%) of the Purchase Price of the
Factor Sub Accounts and as such percent may change in accordance herewith.

 

“Required
Reserve Amount”
means the Reserve Percentage multiplied by the unpaid balance of all Approved
Factor Sub Accounts.

 

“Schedule
of Factor Sub Accounts” means a form supplied by Lender from time to time wherein
Borrower lists those Factor Sub Accounts it requests Lender to make Advances
against under the terms of this Agreement.

 

“Security Interest” means the Liens of Lender on and in the Collateral
affected hereby or pursuant to the terms hereof.

 

“Supporting
Obligation” means (i) a “supporting obligation” as defined in the UCC,
and (ii) a Letter of Credit Right or secondary obligation that supports
the payment or performance of an Account, Chattel paper, a Document, a General
Intangible, an Instrument, or Investment Property.

 

“Tax” means any present or future
tax, levy, impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any government or
other taxing authority in respect of any payment under this Agreement other
than a stamp, registration, documentation or similar tax.

 

“Termination Fee” means the fee payable by
Borrower to Lender as provided in Section 10 hereof.

 

“UCC”
means the Uniform Commercial Code as in effect from time to time in the State
of California.

 

A-5

 

SCHEDULE 1

 

Form of Schedule of Factor Sub
Accounts

 

A-6

 

SCHEDULE 2

 

Permitted Sales or Liens

 

UCC
#10998869 filed with the Delaware Secretary of State by Bank of America, N.A.
(all assets)—TO BE TERMINATED

 

UCC
#30280704 filed with the Delaware Secretary of State by General Electric
Capital Corporation (leased equipment)

 

UCC
#30932981 filed with the Delaware Secretary of State by General Electric
Capital Corporation (leased equipment)

 

UCC
# 41350471 filed with the Delaware Secretary of State by Celtic Leasing
Corporation and Banc One Leasing Corp. (leased equipment)

 

UCC
#06-7088609600 filed with the California Secretary of State by Celtic Leasing
Corp. (leased equipment)

 

A-7

 

SCHEDULE 4.3 (b)

 

Collateral Locations

 

6001 Oak
Canyon

Irvine,
CA  92618

 

Boulevard San Antonio

De los Buenos de Mendoza

No. 20104, Parque Industrial Valle Sur 2

Tijuana, Baja California, Mexico CP. 22114

 

Ave La Paz No 10009

Parque Industrial Pacifico

Nave 15-AB-0500

Tijuana, Baja California, Mexico CP. 22670

 

27 Hubble

Irvine,
CA  92618

 

Consignees, Processors, Bailees and
Warehousemen

 

None

 

A-8

 

SCHEDULE 6.1 (m)

 

Real Property

 

None

 

A-9

 

SCHEDULE 6.2 (f)

 

Subsidiaries

 

Meade Coronado Holdings Corp.

Coronado Instruments, Inc.

MTSC Holdings, Inc.

Simmons Outdoor Corporation

MC Holdings, Inc.

Meade.com

Meade Instruments (Guangzhou) Co., Ltd.

Meade Instruments Foreign Sales Corporation Limited

Meade Instruments Mexico, S. de R.L. de C.V.

Meade Instruments Europe Corporation

 

A-10

 

SCHEDULE 7.4

 

Persons Authorized to Request
Advances

 

Steven G. Murdock

Paul E. Ross

John A. Elwood

 

A-11

 

SCHEDULE 8.1 (m)

 

Bank Accounts

 

Bank of America #xxxxxxxxx0477
(Controlled Disbursement)

Bank of America
#xxxxxxxxx5331 (Payroll)

Bank of America
#xxxxxxxxx5330 (General)

Bank of America
#xxxxxxxxx7067 (Lockbox)

 

A-12Exhibit 10.124

 

FACTORING
AND SECURITY AGREEMENT

FACTOR SUB ACCOUNTS

 

Date: February 9, 2009

 

Name of Client (“Client”) MEADE INSTRUMENTS CORP.

 

Client and FCC Factor Subsidiary II, LLC, a Delaware limited liability
company (“Factor Sub”), hereby agree to the terms and conditions set forth in
this Factoring Agreement.

 

Section 1.  Definitions.

 

1.1           Defined Terms.
Capitalized terms shall have the meanings ascribed to them on Schedule A.

 

1.2           Other Referential Provisions.

 

(a)           All terms in this Agreement, the
Exhibits and Schedules shall have the same defined meanings when used in any
other Factoring Documents, unless the context shall require otherwise.

 

(b)           Except as otherwise expressly
provided herein, all accounting terms not specifically defined or specified
herein shall have the meanings generally attributed to such terms under GAAP
including applicable statements and interpretations issued by the Financial
Accounting Standards Board and bulletins, opinions, interpretations and
statements issued by the American Institute of Certified Public Accountants or
its committees.

 

(c)           All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the
plural shall include the singular.

 

(d)           The words “hereof”, “herein”,
“hereto” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provisions of this Agreement.

 

(e)           Titles of Articles and Sections in
this Agreement are for convenience only, do not constitute part of this
Agreement and neither limit nor amplify the provisions of this Agreement, and
all references in this Agreement to Articles, Sections, Subsections, paragraphs,
clauses, sub clauses, Schedules or Exhibits shall refer to the corresponding
Article, Section, Subsection, paragraph, clause or sub clause of, or Schedule
or Exhibit attached to, this Agreement, unless specific reference is made
to the articles, sections or other subdivisions or divisions of, or to
schedules or exhibits to, another document or instrument.

 

(f)            Each definition of or reference to a
document in this Agreement shall include such document as amended, modified,
supplemented or restated from time to time.

 

(g)           Except where specifically
restricted, reference to any Person shall be construed to include such Person’s
successors and permitted assigns.

 

(h)           Any and all terms used in this
Agreement which are defined in the UCC shall be construed and defined in
accordance with the meaning and definition ascribed to such terms under the
UCC, unless otherwise defined herein.

 

(i)            The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
shall”.  Reference to any law,
constitution, statute, treaty, regulation, rule or ordinance, including
any section or other part thereof (each, for purposes of this paragraph (i), a
“law”), shall refer to that law as amended from time to time and shall include
any successor law.

 

 

1.3           Exhibits and Schedules.  All Exhibits and Schedules attached hereto
are incorporated herein by reference and made a part hereof.

 

Section 2.               Purchase & Sale
of Factor Sub Accounts.

 

2.1  Purchase of Factor Sub Accounts.  Client hereby sells to Factor Sub all of
Client’s right, title and interest in and to all of its Factor Sub
Accounts.  Factor Sub shall be the sole
and exclusive owner of such Factor Sub Accounts with full power to collect and
otherwise deal with such Factor Sub Accounts. 
All Factor Sub Accounts shall be submitted to Factor Sub on a Schedule
listing each Factor Sub Account separately. 
The Schedule of Factor Sub Accounts shall be in such form as Factor Sub
may prescribe from time to time and shall be signed by an officer or authorized
signer of the Client.  Client may submit
such Factor Sub Accounts electronically, by facsimile, by mail or other
delivery service of Client’s choosing that is approved by Factor Sub.  Any Factor Sub Accounts submitted
electronically shall be submitted in such electronic format as Factor Sub may
require.  At the time the Schedule of
Factor Sub Accounts is presented, Client shall also deliver to Factor Sub, if
requested by Factor Sub, one copy of an invoice for each Account together with
evidence of shipment, furnishing and/or delivery of the Inventory or rendition
of service(s).

 

2.2  Credit Approval.

 

(a) 
Client shall submit to Factor Sub the credit requirements of Client’s
Customers, a description of its selling terms and such other information as
Factor Sub may request.  Factor Sub may,
in its sole credit judgment, establish credit lines for sales by Client to its Customers
on its normal selling terms or such other terms as Factor Sub may approve
(“Credit Lines”).  Client may also submit
for credit approval specific orders from Customers and Factor Sub may, in its
sole credit judgment, approve such orders on a single order approval basis
(“Single Order Approval”).  Factor Sub
Accounts arising under the terms of Credit Lines or Single Order Approvals are
hereinafter referred to as Approved Accounts; Factor Sub Accounts not arising
under Credit Lines or Single Order Approvals are hereinafter referred to as Client
Risk Accounts.  All Credit Approvals must
be in writing to be effective. Credit Approval(s) shall be limited to the
specific terms and amounts indicated in either the Credit Line or Single Order
Approval.  If Goods are shipped or
services are rendered based on a verbal approval, it is Client’s responsibility
to ensure that such Credit Approval is received in writing.  Any Factor Sub Account for freight,
samples, or miscellaneous sales (including, the sale of Goods and/or in
quantities not regularly sold by Client) shall always be a Client Risk Account,
notwithstanding any written Credit Approval from Factor Sub.  For purposes of determining Factor Sub’s
Credit Approval hereunder, the account(s) balance due Factor Sub from any
given Customer shall be calculated as the aggregate amount owed by that
Customer less any credits to which such Customer may be entitled, and is not to
be construed to mean individual invoices owed by that Customer.

 

(b)  Credit Approval(s) may be withdrawn, either orally or in
writing, in Factor Sub’s discretion at any time before actual delivery of Goods
or rendering of services. Credit Approval(s) are automatically rescinded
and withdrawn if the terms of sale vary from the terms approved by Factor Sub,
or if the terms of sale are changed by Client without Factor Sub’s prior
written approval of the new terms, or if the Account is not assigned to Factor
Sub within ten days from the date of the invoice, or if the Goods are not
delivered on or before the expiration of the Single Order Approval or if there
is no expiration date if the Goods are not delivered within 30 days of the date
of the Single Order Approval.  If Factor
Sub Accounts exceed either a Credit Line or Single Order Approval, only the
amount in excess of the Credit Line or Single Order Approval shall be
considered Client Risk Accounts, provided, however, that if Client ships Goods
or provides services to a Customer who has outstanding Factor Sub Accounts owed
to Client, and such Customer’s Credit Line and/or outstanding Single Order
Approval(s) have been withdrawn by Factor Sub, and the Factor Sub Accounts
created by such shipment exceed ten percent (10%) of the total amount of
Client’s Factor Sub Accounts outstanding, any Credit Approvals applying to
those Factor Sub Accounts shall be deemed cancelled and all outstanding Factor
Sub Accounts from that Customer are Client Risk Accounts for all purposes.

 

(c)  Factor Sub shall have no liability of any kind for declining
or refusing to give, or for withdrawing, revoking, or modifying, any Credit
Approval pursuant to the terms of this Agreement, or for

 

 

exercising or
failing to exercise any rights or remedies Factor Sub may have under this
Agreement or otherwise.  In the event
Factor Sub declines to give Credit Approval on any order received by Client
from a Customer and in advising Client of such decline Factor Sub furnishes
Client with information as to the credit standing of the Customer, such
information shall be deemed to have been requested of Factor Sub by Client and
Factor Sub’s advice containing such information is recognized as a privileged
communication.  Client agrees that such
information shall not be given to Client’s Customer or to Client’s sales
representative(s).  If necessary, Client
shall merely advise its Customer(s) that credit has been declined on the
account and that any questions should be directed to Factor Sub.

 

(d)  Factor Sub will assume the Credit Risk on Approved Accounts,
i.e., if a Customer, after receiving and accepting the delivery of Goods or services
(subject to all warranties herein) for which Factor Sub has given written
Credit Approval, fails to pay an Account when due solely for any reason other
than a Bona Fide Defense, Factor Sub shall bear any loss thereon up to the
amount of the Credit Approval, subject to the terms and provisions stated
herein or in the Credit Approval.  Factor
Sub will pay to Client on the Collection Date, the Purchase Price of any
Approved Account that Factor Sub is required to purchase hereunder.

 

(e)  Client shall bear the Credit Risk on all Client Risk
Accounts; Factor Sub shall have full recourse to Client for all Client Risk
Accounts.  Upon demand by Factor Sub,
Client shall pay to Factor Sub the full amount of a Client Risk Account,
together with all expenses incurred by Factor Sub up to the date of such
payment, including reasonable attorney’s fees in attempting to collect or
enforce such payment or payment of such Account(s).

 

(f)  If monies are owing from a Customer for both Approved
Accounts and Client Risk Accounts, Client agrees that any payments or credits
applying to any Account owing by such Customer will be applied:  first, to any Approved Accounts
outstanding on Factor Sub’s books and second, to any Client Risk Account
outstanding on Factor Sub’s books.  This
order of payment applies regardless of the respective dates the sales occurred
and regardless of any notations on payment items.

 

2.3  Purchase
Price.

 

(a) 
On the Collection Date applicable to a Factor Sub Account, Factor Sub shall pay
to Client the Purchase Price for such Factor Sub Account, less (i) moneys
remitted, paid, or otherwise advanced by Factor Sub to or on behalf of Client
(including any amounts which Client may reasonably be obligated to pay in the future), (ii) any other
charges provided for by this Agreement or otherwise due Factor Sub by Client,
and (iii) any deductions taken by the Customer in connection with such
Factor Sub Account.  Any and all Purchase
Price paid by Factor Sub hereunder shall be paid in accordance with any
collateral assignment executed by Client and then in effect.

 

(b)   No
discount, credit, allowance or deduction with respect to any Factor Sub Account
in excess of $10,000 shall be granted or approved by Client to any Customer
without the prior written consent of Factor Sub unless such discount, credit,
allowance or deduction is shown on the face of an invoice at the time such
invoice is submitted to Factor Sub. 
Client agrees to give Factor Sub notice of all discounts, credits,
allowances or deductions in excess of $10,000.

 

(c)   Client shall pay to
Factor Sub or Factor Sub may charge Client’s account with Factor Sub, the
amount of any payment that Factor Sub receives with respect to a Client Risk
Account if Factor Sub is subsequently required to return such payment, whether
as a result of any proceeding in bankruptcy or otherwise.  Factor Sub is authorized to withhold, without
giving prior notice to Client, such payments and credits otherwise due to
Client under the terms of this Agreement for reasonably anticipated claims or
to adequately satisfy reasonably anticipated obligation(s) Client may owe
Factor Sub.

 

2.4  Commission.

 

(a)           For Factor Sub’s
services hereunder, Client shall pay and Factor Sub shall be entitled to
receive a Factoring Commission equal to three-quarters of one percent (0.75%)
of the gross invoice amount of each Factor Sub Account (“Commission”).  The Commission shall be due and payable to
Factor Sub on the date of creation of each Factor Sub Account and shall be
chargeable to Client’s account with Factor

 

 

Sub.  Factor Sub shall be entitled to receive a
surcharge equal to two percent (2%) of the gross invoice amount of all Factor
Sub Accounts arising out of sales to any Customer that is a
debtor-in-possession.

 

(b)           Factor Sub’s
Commission is based upon Client’s maximum selling terms of ninety (90)
days.  Client will not grant additional
dating to any Customer without Factor Sub’s prior written approval.  If Factor Sub approves extended terms or
additional dating, the rate of Commission shall be increased by one-quarter of
one percent (0.25%) of the gross invoice amount of each Factor Sub Account for
each 30 days or portion thereof of extended or additional dating.

 

(c)           The minimum
aggregate Factoring Commissions payable under this Agreement for each Contract
Year hereof shall be One Hundred Fifty Thousand and No/100 Dollars ($150,000),
which shall be payable at the rate of Twelve Thousand Five Hundred and No/100
Dollars ($12,500) per month or part thereof. 
To the extent of any deficiency (after giving effect to Commissions
payable under the foregoing subsections), the difference between the minimum
and the amount already charged shall be chargeable to Client’s account with
Factor Sub, or at Factor Sub’s option, payable by Client on Factor Sub’s demand.  Client shall pay the difference between the
minimum Commissions due hereunder for each Contract Year less the amount of
Commissions actually paid to date for the Contract Year prior to the
termination of this Agreement.

 

2.5           Notice Of
Purchase.  All invoices
submitted to Customers by Client shall plainly state on their face that the
amounts payable thereunder are payable at such lockbox address as Factor Sub
may designate to Client in writing from time to time.

 

2.6           Repurchase Obligation.  Client agrees to repurchase and accept
reconveyance from Factor Sub of any Approved Account in the event that (a) there
occurs a breach of any representation or warranty relating to such Account or
there shall exist a Bona Fide Defense with respect to such Account, (b) Factor
Sub provides Client written notice thereof requesting repurchase of such
Account under this Section 2.6 and (c) Client fails to cure such
breach or Bona Fide Defense, to the reasonable satisfaction of Factor Sub,
within fifteen (15) business days of such notice. Client agrees to repurchase
and accept reconveyance from Factor Sub of any Account that is not an Approved
Account in the event that there occurs a breach of any representation or
warranty relating to such Account or a Dispute with respect to such
Account.  The repurchase price of an
Approved Account shall be paid by Client to Factor Sub on such 15th business
day in an amount equal to the Purchase Price previously paid, if any, by Factor
Sub therefor or by cancellation of Factor Sub’s purchase obligation if payment
has not previously been made by Factor Sub to Client. The repurchase price of
Factor Sub Account that is not an Approved Account shall be paid by Client to
Factor Sub upon demand by Factor Sub in an amount equal to the Purchase Price
previously paid, if any, by Factor Sub therefor or by cancellation of Factor
Sub’s purchase obligation if payment has not previously been made by Factor Sub
to Client.  Interest shall accrue on the
repurchase price from and including the date that Factor Sub originally paid
the Purchase Price for the applicable Account to but excluding the date that
such repurchase price therefor is paid in full at a rate equal the Interest
Rate. All such interest shall be computed for the actual number of days elapsed
on the basis of year consisting of 360 days.

 

Section 3.  Collections.

 

3.1
General. (a)   IT IS THE INTENTION OF THE PARTIES HERETO THAT AS TO
ALL FACTOR SUB ACCOUNTS, THE TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE
A TRUE PURCHASE AND SALE OF ACCOUNT(S) UNDER § 9-318 OF THE UCC AS IN
EFFECT IN THE STATE OF CALIFORNIA AND AS SUCH, THE CLIENT SHALL HAVE NO LEGAL
OR EQUITABLE INTEREST IN SUCH PROPERTY SOLD.

 

3.2 Collections.

 

(a)  Factor Sub shall have the right at any time with or without
notice to Client, to notify any or all Customers of the sale and assignment of
the Factor Sub Accounts to Factor Sub and to direct such Customers to make
payment of all amounts due or to become due to Client directly to Factor
Sub.  Client agrees not to change any of
such instructions or to give its Customers different instructions so long as
this Agreement shall remain in effect. 
To the extent there are no Obligations of Client owed to Factor Sub
hereunder and so long as Client is not in Default, Factor Sub shall be deemed
to have received any such

 

 

proceeds of
Factor Sub Accounts in excess of the amount of such proceeds to which Factor
Sub is entitled as the owner of such Factor Sub Accounts as a pure pass-through
for and on account of Client.

 

(b)   Factor Sub, as the
sole and absolute owner of the Factor Sub Accounts, shall have the sole and
exclusive power and authority to collect each such Account, through legal
action or otherwise, and Factor Sub may, in its sole discretion, settle,
compromise, or assign (in whole or in part) any of such Factor Sub Accounts, or
otherwise exercise, to the maximum extent permitted by applicable law, any
other right now existing or hereafter arising with respect to any of such
Factor Sub Accounts.

 

(c)   Should
Client receive payment of all or any portion of any Factor Sub Account, Client
shall immediately notify Factor Sub of the receipt of such payment, hold such
payment in trust for Factor Sub separate and apart from Client’s own property
and funds, and shall deliver such payment to Factor Sub without delay in the
identical form in which received.  Should
Client receive any check or other payment instrument with respect to any Factor
Sub Account and fail to surrender and deliver to Factor Sub such check or
payment instrument within five (5) days, Factor Sub shall be entitled to
charge Client a Misdirected Payment Fee to compensate Factor Sub for the
additional administrative expenses that the parties acknowledge are likely to
be incurred as a result of such breach.

 

(d) In the event any Goods, the sale of which gave rise to a
Factor Sub Account, are returned to or repossessed by Client, such Goods
shall be held by Client in trust for Factor Sub, separate and apart from
Client’s own property and subject to Factor Sub’s sole direction and control.

 

(f) 
Client agrees to notify Factor Sub promptly in writing of any credit loss, or
anticipated credit loss, for Approved Accounts, such notice in any event to be
received by Factor Sub no longer than 120 days after the maturity date of the
invoice (based on its longest optional terms). 
Client’s failure to provide such notice to Factor Sub within the 120 day
period shall result in Client assuming the entire Credit Risk on such Factor
Sub Account, and Factor Sub shall be deemed free of any such Credit Risk.

 

Section 4.  Power of
Attorney.

 

4.1 Power
of Attorney.  Client hereby grants to
Factor Sub an irrevocable power of attorney authorizing and permitting Factor
Sub, at its option, without notice to Client to do any or all of the
following:  (a) endorse the name of
Client on any checks or other evidences of payment whatsoever that may come
into the possession of Factor Sub regarding Factor Sub Accounts;  (b) receive, open and dispose of any
mail addressed to Client and put Factor Sub’s address on any statements mailed
to Customers; (c) pay, settle, compromise, prosecute or defend any action,
claim, conditional waiver and release, or proceeding relating to Factor Sub
Accounts; (d) upon the occurrence of a Default, notify in the name of the
Client, the U.S. Post Office to change the address for delivery of mail
addressed to Client to such address as Factor Sub may designate, however,
Factor Sub shall turn over to Client all such mail not relating to Factor Sub
Accounts; (e) file any Financing Statement deemed necessary or appropriate
by Factor Sub to protect Factor Sub’s interest in and to the Factor Sub
Accounts, or under any provision of this Agreement; (f) effect debits to
any deposit account or other account that Client or Client’s principals who have
executed a guaranty agreement maintain at any bank for any sums due to or from
the Client under this Agreement; (g) upon a Default, to prepare and mail
all invoices relating to Factor Sub Accounts; and (h) to take all actions
necessary and proper in order to carry out this Agreement.  The authority granted to Factor Sub herein is
irrevocable until this Agreement is terminated and all Obligations are fully
satisfied.

 

Section 5.
Client’s Representations, Covenants and Warranties.

 

Section 5.1 Client’s Representations, Covenants and Warranties.  Client represents, warrants and covenants to
Factor Sub that:

 

(a)           Client is a
corporation or limited liability company, duly organized, validly existing and
in good standing under the laws of the state of Delaware and is qualified and
authorized to do business and is in good standing in all states in which such
qualification and good standing are necessary or desirable;

 

(b)           The execution,
delivery and performance by Client of this Agreement does not and will not constitute
a violation of any applicable law, violation of Client’s articles of
incorporation or organization or bylaws or any material breach of any other
document, agreement or instrument to which

 

 

Client is a
party or by which Client is bound.  The
Agreement is a legal, valid and binding obligation of Client enforceable
against it in accordance with its terms;

 

(c)           Client is the sole
owner and holder of all Factor Sub Accounts and there is no security interest,
lien, judgment or other encumbrance in or affecting such Factor Sub
Accounts.  At the time of assignment to
Factor, the Account is a valid, bona fide account, representing an undisputed
indebtedness incurred by the named Customer for goods actually sold and delivered
or for services completely rendered;

 

(d)           Other than those
discounts, allowances and deductions set forth on the face of the invoice at
the time it was assigned to Factor Sub, there are and shall be no set-offs,
allowances, discounts, deductions, counterclaims, or disputes with respect to
any Account.  Client shall inform Factor
Sub, in writing, immediately upon learning that there exists any Dispute.  Client shall accept no returns and shall
grant no allowance or credit to any Customer without prior written notice to
Factor Sub.  If required by Factor Sub,
Client shall submit to Factor Sub credit memos itemized on a separate Schedule
for all returns and allowances made during the previous week.  At Factor Sub’s option, Factor Sub may
require that Client pay Factor Sub for the amount of such credit memos, or in
Factor Sub’s sole and exclusive discretion, Factor Sub may agree to accept the
Schedule of Factor Sub Accounts and apply same to Client’s account;

 

(e)           Client’s address, as set forth
below its signature line hereto, is Client’s mailing address, its chief
executive office, principal place of business and the office where all of the
books and records concerning the Factor Sub Accounts are maintained which shall
not be changed without giving thirty (30) days prior written notice to Factor
Sub;

 

(f)            Client shall
maintain its books and records in accordance with GAAP and shall reflect on its
books the absolute sale of the Factor Sub Accounts to Factor Sub.  Client shall furnish Factor Sub, upon
request, such information and statements, as Factor Sub shall require from time
to time regarding Client’s business affairs, financial condition and results of
its operations.  Without limiting the
generality of the foregoing, Client shall provide Factor Sub, (i) on or
prior to the 30th day of each month, unaudited financial
statements with respect to the prior month, (ii) within forty-five (45)
days after the end of each of Client’s quarters, unaudited financial statements
(on a fiscal year-to-date basis) prepared by a CPA acceptable to Factor Sub, (iii) within
ninety (90) days after the end of each of Client’s fiscal years, audited
financial statements prepared by a CPA acceptable to Factor Sub, (iv) a
certificate from the president or chief financial officer of Client stating
whether any Default has occurred and stating the nature of the Default, and (v) such
other information as Factor Sub may request. 
Client will furnish to Factor Sub upon request a current listing of all
open and unpaid accounts payable. All financial statements and reports furnished
to Factor Sub hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP;

 

(g)           Client has paid and
will pay all taxes and governmental charges imposed with respect to sale of Goods
and rendition of services and shall furnish to Factor Sub upon request
satisfactory proof of payment and compliance with all federal, state and local
tax requirements;

 

(h)           Client will promptly
notify Factor Sub of (i) the filing of any lawsuit against Client
involving amounts greater than $100,000.00, and (ii) any attachment or any
other legal process levied against Client;

 

(i)            The application
made and information delivered by or on behalf of Client in connection with
this Agreement, and the statements made therein are true and correct at the
time that this Agreement is executed. 
There is no fact which Client has not disclosed to Factor Sub in writing
which could materially adversely affect the properties, business or financial
condition of Client, or any of the Factor Sub Accounts or which is necessary to
disclose in order to keep the foregoing representations and warranties from
being misleading;

 

(j)            In no event shall
the funds paid to Client hereunder be used directly or indirectly for personal,
family, household or agricultural purposes;

 

(k)           Client does business
under no trade or assumed names except as indicated below.  These names are a trade name and/or
tradestyle by which Client will or may identify and sell certain of its
products and under which Client will or may conduct a portion of its business,
and are not an independent

 

 

corporation or other legal entity.  Factor is hereby authorized to receive,
endorse and deposit any and all checks sent to it in payment of such Accounts
including such checks as are payable to any of the trade styles or
tradenames.  Accounts invoiced in the
name of any tradename or tradestyle are subject to all of the terms and
conditions of this Agreement with the same force and effect as if they were
Client’s corporate name:

 

Meade

Meade.com
 Coronado

 

(l)            Any invoice or
written communication that is issued by Client to Factor Sub by facsimile
transmission is a duplicate of the original;

 

(m)          Any electronic
communication of data, whether by e-mail, tape, disk, or otherwise that Client
remits or causes to be remitted to Factor Sub shall be authentic and genuine;
and

 

(n)           Client does not own, control or
exercise dominion over, in any way whatsoever, the business of any Account or
Customer.

 

(o)           Client will not merge or consolidate
with any other Person or sell, transfer, lease, abandon, or otherwise dispose
of a substantial portion of Client’s assets or any interest therein except
that, so long as no Default has occurred and is continuing, Client may sell
Inventory in the ordinary course of Client’s business, provided, however, that
the sale of Meade Germany is specifically permitted.

 

(p)           Client will not obtain or attempt to
obtain from any Person other than Factor Sub or FCC, any loans, advances, or
other financial accommodations or indebtedness of any kind, nor will Factor Sub
enter into any direct or indirect guaranty of any obligation of another
Person.  Client will not permit any of
Client’s assets to be subject to any Lien other than a Lien in favor of FCC or
its affiliates.

 

Section 6.  Administration.

 

6.1
Expenses.  Client shall pay all
costs incurred by Factor Sub pursuant to this Agreement, including search and
filing fees, wire and ACH transfer fees, audit and field examination fees,
legal fees (including the allocated cost of internal counsel) for preparation
of this Agreement and any other Factoring Documents and the perfection,
preservation and enforcement of any of Factor Sub’s rights hereunder.

 

6.2
Credit Inquiries.  Client
authorizes Factor Sub to disclose such information as Factor Sub deems
appropriate to persons making credit inquiries about Client.

 

6.3 Field Examinations.  During the term of this Agreement and so long
as there exists or has existed no Default, Factor may conduct up to four (4) field
examinations per contract year; provided, however, that upon the occurrence of
a Default and so long as it continues, Factor may conduct additional field
examinations.  Client agrees to pay to
Factor an audit fee of $900  per auditor,
per day (including partial days), plus all of Factor’s out-of-pocket travel and
living expenses incurred while performing each field examination.

 

Section 7.
Accounting Information.

 

7.1  Accounting Statements.  Factor Sub shall provide Client with
information on the Factor Sub Accounts and a monthly reconciliation of the
factoring relationship relating to billing, collection, and account maintenance
such as aging, posting, error resolution and e-mailing or mailing of
statements.  All of the foregoing shall
be in a format and in such detail, as Factor Sub, in its sole discretion, deems
appropriate.  Factor Sub’s books and
records shall be admissible in evidence without objection as prima facie
evidence of the status of the Factor Sub Accounts and Client’s account with
Factor Sub.  Each statement, report, or
accounting rendered or issued by Factor Sub to Client shall be deemed
conclusively accurate and binding on Client unless within thirty (30) days
after the date of issuance Client notifies Factor Sub to the contrary pursuant
to Section 10 hereof, setting forth with specificity the reasons why
Client believes such statement, report, or accounting is inaccurate, as well as
what Client believes to be correct amount(s) therefore.  If the Client gives notice of its
disagreement with Factor Sub’s statement, all matters in such statement that
are

 

 

not objected to in Client’s
notice, shall be deemed conclusively accurate and binding on Client.  Client’s failure to receive any monthly
statement shall not relieve it of the responsibility to request such statement
and Client’s failure to do so shall nonetheless bind Client to whatever Factor
Sub’s records would have reported.

 

7.2  Inspections.  Factor Sub shall have the right at any
time, at Client’s expense, to visit and inspect Client’s books and records, and
to make and take away copies of Client’s books and records.

 

Section 8.  Defaults and Remedies.

 

8.1  Default.   A Default shall be deemed to have
occurred hereunder upon the happening of one or more of the following: (a) Client
shall fail to pay as and when due any amount owed to Factor Sub; (b) any
Obligor shall breach any covenant, warranty or representation set forth herein
or in any Factoring Document or same shall be untrue when made; (c) any Obligor becomes insolvent in that its
debts are greater than the fair value of its assets or is unable to pay its debts as they mature, or admits in writing
that it is insolvent or unable to pay its debts, makes an assignment for the
benefit of creditors, makes a conveyance fraudulent as to creditors under any
state or federal law, or a proceeding is instituted by or against any Obligor
alleging that such Obligor is insolvent or unable to pay debts as they mature,
or a petition under any provision of Title 11 of the United States Code, as amended,
or any state insolvency proceeding is filed by or against any Obligor; (d) any
involuntary lien, garnishment, attachment or the like shall be issued against
or shall attach to the Factor Sub Accounts or any portion thereof and the same
is not released within ten (10) days; (e) any Obligor suffers the
entry against it for a final judgment for the payment of money in excess of
$100,000.00, unless the same is discharged within thirty (30) days after the
date of entry thereof or an appeal or appropriate proceeding for review thereof
is taken within such periods and a stay of execution pending such appeal is
obtained; (f) any report, certificate, schedule, financial statement,
profit and loss statement or other statement furnished by Client, or by any
Obligor or other person on behalf of
Client, to Factor Sub is not true and correct in any material respect; (g) Client
shall have a federal or state tax lien filed against any of its properties, or
shall fail to pay any federal or state tax when due, or shall fail to file any
federal or state tax form as and when due; (h) a material adverse change
shall have occurred in Client’s financial conditions, business or operations; (i) any
suspension of the operation of Client’s present business; (j) dissolution,
merger, or consolidation of any Obligor that is a corporation, partnership or
limited liability company, provided, however, that the sale of Meade Germany is
specifically permitted; (k) transfer of a substantial part (determined by
market value) of the property of any Obligor; (l) sale, transfer or
exchange, either directly or indirectly, of a controlling stock or equity
ownership interest of any Obligor; (m) termination, unenforceability or
withdrawal of any guaranty for the Obligations, or failure of any Obligor to
perform any of its obligations under such a guaranty or assertion by any
Obligor that it has no liability or obligation under such a guaranty, (n) a
default or event of default shall occur under the terms of any agreement
between Client and FCC, LLC, or between Client and Factor Sub, or (o) Client
shall breach any covenant or fail to perform any covenant in any agreement
between Client and FCC, LLC, or between Client and Factor Sub.

 

8.2 Remedies.  (a)  Upon a Default, Factor Sub
may, without demand or notice to Client, exercise all rights and remedies
available to it under this Agreement, under the UCC or otherwise, including
terminating this Agreement and declaring all Obligations immediately due and
payable, provided, however that in the event of a Default described under
clause (c) of Section 8.1, such termination and acceleration shall
automatically occur without any notice, demand or presentment of any kind.

 

(b)           Without notice to or demand upon
Client or any other Person, Factor Sub may make such payments and do such acts
as Factor Sub considers necessary or reasonable to protect its interest in the
Factor Sub Accounts.  Client authorizes
Factor Sub to enter each premises where any books and records are located, take
and maintain possession of the books and records, and to pay, purchase, contest
or compromise any lien which in Factor Sub’s opinion appears to be prior or
superior to its interest and to pay all expenses incurred in connection
therewith.

 

 

(c)           Factor Sub shall be entitled to any
form of equitable relief that may be appropriate without having to establish
that any remedy at law is inadequate or other grounds.  Factor Sub shall be entitled to freeze, debit
and/or effect a set-off against any fund or account Client may maintain with
any bank.  In the event Factor Sub deems
it necessary to seek equitable relief, including, but not limited to,
injunctive or receivership remedies, as a result of a Default, Client waives
any requirement that Factor Sub post or otherwise obtain or procure any bond.  Alternatively, in the event Factor Sub, in
its sole and exclusive discretion, desires to procure and post a bond, Factor
Sub may procure and file with the court a bond in an amount up to and not
greater than $100,000.00 notwithstanding any common or statutory law
requirement to the contrary.  Upon Factor
Sub’s posting of such bond it shall be entitled to all benefits as if such bond
was posted in compliance with state law. 
Client waives any right it may be entitled to, including an award of
attorney’s fees or costs, in the event any equitable relief sought by and
awarded to Factor Sub is thereafter, for whatever reason(s), vacated, dissolved
or reversed.

 

8.3  Cumulative Rights; Waivers.  The occurrence of any Default shall entitle
Factor Sub to all of the default rights and remedies (without limiting the
other rights and remedies exercisable by Factor Sub either prior or subsequent
to a Default) as available to a Secured Party under the UCC in effect in any
applicable jurisdiction.  All rights,
remedies and powers granted to Factor Sub in this Agreement, or in any other
instrument or agreement given by Client to Factor Sub or otherwise available to
Factor Sub in equity or at law, are cumulative and may be exercised singularly
or concurrently with such other rights as Factor Sub may have.  These rights may be exercised from time to
time as to all or any part of the Factor Sub Accounts hereunder as Factor Sub
in its discretion may determine.  Factor
Sub and Client expressly intend and agree that each purchase and sale of a
Factor Sub Account pursuant to this Agreement shall be a true purchase and sale
of each such Factor Sub Account.  To the extent that, contrary to such
express intent and agreement, any purchase or sale of Factor Sub Accounts or any
other transaction pursuant to this Agreement is construed to be or
characterized as a loan or financing, then all indebtedness and other
obligations of Client owing to Factor Sub under this Agreement shall be secured
by, and for such purpose Client does hereby grant to Client a security interest
in, all of the Factor Sub Accounts.  Factor shall have all rights and
remedies as a secured creditor under applicable law, in addition to its rights
and remedies hereunder Factor Sub may not be held to have waived its rights and
remedies unless the waiver is in writing and signed by Factor Sub.  A waiver by Factor Sub of a right, remedy or
default under this Agreement on one occasion is not a waiver of any right,
remedy or default on any subsequent occasion. 
No exercise by Factor Sub of one right or remedy shall be deemed an
election, and no waiver by Factor Sub of any default on Client’s part shall be
deemed a continuing waiver.  No delay by
Factor Sub shall constitute a waiver, election or acquiescence by it.

 

Section 9. Term.

 

9.1
Term.   This Agreement may be
terminated upon forty-five (45) days prior written notice from Factor Sub to
Client.  Client shall have the right to
terminate this Agreement at any time, however, upon payment of the appropriate
Prepayment Penalty as outlined below:

 

	
  Prepayment Penalty

  	
   

  	
  Time Period During

  Which Termination

  Occurs

  	
   

  
	
  $

  	
  300,000

  	
   

  	
  During the
  first year

  	
   

  
	
  $

  	
  200,000

  	
   

  	
  During the
  second year

  	
   

  
	
  $

  	
  100,000

  	
   

  	
  During the
  third year

  	
   

  

 

 

If
termination of the Agreement by the Client is a result of the sale of all or
substantially all of Client’s stock or assets, the Prepayment Penalty will be
as follows:

 

	
  Prepayment Penalty

  	
   

  	
  If Termination

  Occurs Due To

  Stock Or Asset Sale

  	
   

  
	
  $

  	
  300,000

  	
   

  	
  Within 180 days of the Agreement Date

  	
   

  
	
  $

  	
  150,000

  	
   

  	
  More than 181 days after the Agreement Date
  but prior to 365 days after the Agreement Date

  	
   

  
	
  $

  	
  100,000

  	
   

  	
  During the second Contract Year

  	
   

  
	
  $

  	
  50,000

  	
   

  	
  During the third Contract Year

  	
   

  

 

Prior
to any termination of this Agreement becoming effective, Client shall pay any
minimum annual Commission that remains unpaid for the Contract Year in which
this Agreement is terminated, in addition to the Prepayment Penalty noted
above.  Notwithstanding anything herein
to the contrary, Factor Sub may terminate this Agreement i) at any time without
notice after the occurrence of a Default, or ii) assuming no Default by Client,
Factor Sub may terminate this Agreement at any time by giving not less than
forty-five days notice.  Notwithstanding
payment in full of all Obligations by Client, any such notice of termination is
conditioned on Client’s delivery, to Factor Sub, of a general release in a form
reasonably satisfactory to Factor Sub. 
Client understands that this provision constitutes a waiver of its
rights under § 9-513 of the UCC.  Factor
Sub shall not be required to record any terminations or satisfactions of any of
Factor Sub’s liens until Client has executed and delivered to Factor Sub said
general release and Client shall have no authority to do so without Factor
Sub’s express written consent.  Any
termination of this Agreement shall not affect Factor Sub’s ownership of the
Factor Sub Accounts, and this Agreement shall continue to be effective,
until all transactions entered into and Obligations incurred hereunder have
been completed and satisfied in full. 
The expense
reimbursement, repayment and indemnification provisions of this
Agreement shall survive the termination of this Agreement.  All Obligations shall be immediately due and
payable in full upon termination of this Agreement for any reason.

 

Section 10.  Notices.  Any notice or communication with respect to
this Agreement shall be given in writing, sent by (i) personal delivery,
or (ii) overnight delivery service with proof of delivery, or (iii) United
States mail, first-class with postage prepaid, or registered or certified mail,
or (iv) prepaid telegram, telex or telecopy, addressed to each party
hereto at its address and to the attention of the person listed as set forth
below the signatures of the parties to this Agreement.  Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of overnight delivery service or telecopy, on the next business day at the
receiving location or in the case of mail, upon receipt.

 

Section 11. Attorney’s Fees.  Client agrees to reimburse Factor Sub upon
demand for all reasonable attorney’s fees, court costs and other expenses
incurred by Factor Sub in the preparation, negotiation and enforcement of this
Agreement and protecting or enforcing its interest in the Factor Sub Accounts,
or in the representation of Factor Sub in connection with any bankruptcy case
or insolvency proceeding involving Client, or any Factor Sub Accounts,
including any defense of any Avoidance Claims (except to the extent related to
Approved Accounts where no Dispute exists). 
Client hereby agrees to pay such fees, costs and expenses and Factor Sub
shall also have the right to charge Client’s account with Factor Sub
therefore.  Notwithstanding the existence
of any law, statute or rule, in any jurisdiction which may provide Client with
a right to attorney’s fees or costs, Client hereby waives any and all rights to
hereafter seek attorney’s fees or costs hereunder and Client agrees that Factor
Sub exclusively shall be entitled to indemnification and recovery of any and
all attorney’s fees or costs in respect to any litigation based hereon, arising
out of, or related hereto, whether under, or in connection with, this and/or
any 

 

 

agreement executed in conjunction herewith, or any course of conduct,
course of dealing, statements (whether verbal or written) or actions of either
party.

 

Section 12.  Indemnity.  Client hereby indemnifies and agrees to hold
harmless and defend Factor Sub from and against any and all claims, judgments,
liabilities, fees and expenses (including attorney’s fees) which may be imposed
upon, threatened or asserted against Factor Sub at any time and from time to
time in any way connected with this Agreement. 
The foregoing indemnification shall apply whether or not such
indemnified claims are in any way or to any extent owed, in whole or in part,
under any claim or theory of strict liability, or are caused, in whole or in
part, by any negligent act or omission of Factor Sub.

 

Section 13.  Severability.  Each and every provision, condition, covenant
and representation contained in this Agreement is, and shall be construed to
be, a separate and independent covenant and agreement.  If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of the Agreement
shall not be affected thereby.

 

Section 14.  Parties in
Interest.  All grants, covenants and
agreements contained in this Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that Client may not delegate or assign any of its duties or
obligations under this Agreement without the prior written consent of Factor
Sub.  Notwithstanding anything
herein to the contrary, the Factor Sub may, without consent of
the Client, grant a security interest in, sell or assign, grant or sell
participations in or otherwise transfer all or any portion of its rights and
obligations hereunder to one or more Persons and upon notice of such
assignment, sale or grant of participation by Factor Sub, to treat such
assignee, transferee or participant as 
“Factor Sub” for all purposes hereunder

 

Section 15.  Governing
Law;  Submission to Process and Venue.  This Agreement shall be deemed a contract
made under the laws of the State of California and shall be construed and
enforced in accordance with and governed by the internal laws of the State of
California, without reference to the rules thereof relating to conflicts
of law.  Client hereby irrevocably
submits itself to the exclusive jurisdiction of the state and federal courts
located in any county in California in which Factor has a business location,
and agrees and consents that service of process may be made upon it in any
legal proceeding relating to this Agreement, the purchase of Factor Sub
Accounts or any other relationship between Factor Sub and Client by any means
allowed under state or federal law.   
Client hereby waives and agrees not to assert, by way of motion, as a
defense or otherwise, that any such proceeding, is brought in any inconvenient
forum or that the venue thereof is improper.

 

Section 16.  Complete
Agreement.  This Agreement, the
written documents executed pursuant to this Agreement, if any, and the
acknowledgment delivered in connection herewith set forth the entire
understanding and agreement of the parties hereto with respect to the
transactions contemplated herein and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties.  No modification or amendment of or supplement
to this Agreement shall be valid or effective unless the same is in writing and
signed by the party against whom it is sought to be enforced.

 

Section 17. Miscellaneous.

 

(a)                                  Client acknowledges
that there is no, and it will not seek or attempt to establish any, fiduciary
relationship between Factor Sub and Client, and Client waives any right to
assert, now or in the future, the existence or creation of any fiduciary
relationship between Factor Sub and Client in any action or proceeding (whether
by way of claim, counterclaim, crossclaim or otherwise) for damages.

 

(b)                                 This
Agreement shall be deemed to be one of financial accommodation and not assumable
by any debtor, trustee or debtor-in-possession in any bankruptcy proceeding
without Factor Sub’s express written consent and may be suspended in the event
a petition in bankruptcy is filed by or against Client.

 

(c)                                  In
the event Client’s principals, officers or directors form a new entity, whether
corporate, partnership, limited liability company or otherwise, similar to that
of Client during the term of this Agreement, such entity shall be deemed to
have expressly assumed the Obligations due Factor Sub by Client under this
Agreement.  Upon the formation of any
such entity, Factor Sub shall be deemed to have been granted an irrevocable
power of attorney with authority to file, on behalf of the newly formed 

 

 

successor business, a new UCC Financing Statement with
the appropriate secretary of state or UCC filing office.  Factor Sub shall be held-harmless and be
relieved of any liability resulting from the filing of a Financing Statement or
the resulting perfection of a lien in any of the successor entity’s
assets.  In addition, Factor Sub shall
have the right to notify the successor entity’s Customers of Factor Sub’s lien
rights, its right to collect all Factor Sub Accounts, and to notify any new
factor or lender who has sought to procure a competing lien, of Factor Sub’s
rights in such successor entity’s assets.

 

(d)                                 Client
expressly authorizes Factor Sub to access the systems of and/or communicate
with any shipping or trucking company in order to obtain or verify tracking,
shipment or delivery status of any Goods regarding a Factor Sub Account.

 

(e)                                  INTENTIONALLY RESERVED

 

(f)                                    Client shall indemnify Factor
Sub from any loss arising out of the assertion of any Avoidance Claim.  Client shall notify Factor Sub within two
business days of it becoming aware of the assertion of an Avoidance Claim.

 

(g)                                 Client agrees to execute any and
all forms (i.e. Forms 8821 and/or 2848) that Factor Sub may require in order to
enable Factor Sub to obtain and receive tax information issued by the
Department of the Treasury, Internal Revenue Service, or receive refund checks.

 

(h)                                 The Client shall make each
payment required hereunder, and/or under any instrument delivered hereunder,
without setoff, deduction or counterclaim of any kind, whether any right of
setoff, deduction or counterclaim arises pursuant to this Agreement, arises
pursuant to applicable law or otherwise.

 

(i)                                     The terms of this Agreement and the other
Factoring Documents are confidential and Client agrees not to disclose same to
any party other than its accountants, attorneys and others that are in a
confidential relationship with Client and who agree to treat this Agreement and
the other Factoring Documents and the contents of same as confidential, except
as required by law (i.e. SEC filings).

 

Section 18.                                      Governing Law; Jurisdiction; Venue, Waiver of
Jury Trial and Service of Process.

 

(A)   THIS
AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE,
AND CLIENT HEREBY AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF CALIFORNIA, AND WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON CLIENT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
CERTIFIED MAIL DIRECTED TO CLIENT AT ITS ADDRESS AS IT APPEARS AT THE BEGINNING
OF THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S. MAILS, CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID.  CLIENT WAIVES ANY OBJECTION BASED ON FORUM
NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.  NOTHING IN
THIS SECTION SHALL AFFECT FACTOR’S RIGHT TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT FACTOR’S RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST CLIENT OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.

 

(B)  EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN 

 

 

CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
HERETO OR THERETO.  IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTIONS SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

Section 19.  Acknowledgment of Waivers and Loss of Defenses.

 

(a)                                  Client acknowledges that certain
provisions of this Agreement operate as waivers of rights that Client would
otherwise have under applicable law. 
Other provisions permit Factor to take actions that Factor would
otherwise not have a right to take, to fail to take actions that Factor would
otherwise have an obligation to take, or to take actions that may prejudice
Client’s rights and obligations under this Agreement and against the
Client.  In the absence of these
provisions Client might have defenses against Client’s obligations under this
Agreement.  These defenses might permit
Client to avoid some or all of Client’s obligations under this Agreement.

 

(b)                                  Client intends by the waivers and
other provisions of this Agreement, including the acknowledgement set forth in
this section, to be liable to the greatest extent permitted by law for all of
Client’s obligations to Factor.  Client intends
to have this liability even if the terms of the Factoring Documents change or
if Client does not have any rights against Client.

 

(c)                                  Client acknowledges that (i) Client
understands the seriousness of the provisions of this Agreement; (ii) Client
has had a full opportunity to consult with counsel of Client’s choice; and (iii) Client
has consulted with counsel of Client’s choice or has decided not to consult
with counsel.

 

Section 20.                                   Waiver Of Jury Trial. 
This Section concerns
the resolution of any controversies or claims between the Client and Factor,
whether arising in contract, tort or by statute, including but not limited to
controversies or claims that arise out of or relate to: (i) this Agreement
(including any renewals, extensions or modifications); or (ii) any of the
other Factoring Documents (collectively a “Claim”).

 

(a)                                  Judicial Reference.

 

	
   

  	
  i.

  	
  The parties prefer that
  any dispute between them be resolved in litigation subject to a Jury Trial
  Waiver as set forth in Section 18 herein, but the California Supreme
  Court has held that such pre-dispute jury trial waivers are unenforceable.
  This Section will be applicable until: (i) the California Supreme
  Court holds that a pre-dispute jury trial waiver provision similar to that
  contained in Section 18 herein is valid or enforceable; or (ii) the
  California Legislature passes legislation and the governor of the State of
  California signs into law a statute authorizing pre-dispute jury trial
  waivers and as a result such waivers become enforceable.

  
	
   

  	
   

  	
   

  
	
   

  	
  ii.

  	
  Other than the exercise of
  provisional remedies (any of which may be initiated pursuant to applicable
  law), any controversy, dispute or claim (each, a “Claim”) between the parties
  arising out of or relating to this Agreement will be resolved by a reference
  proceeding in California in accordance with the provisions of
  Section 638 et seq. of the California Code of Civil Procedure (“CCP”),
  or their successor sections, which shall constitute the exclusive remedy for
  the resolution of any Claim, including whether the Claim is subject to the
  reference proceeding. Venue for the reference proceeding will be in the
  Superior Court or Federal District Court in Los Angeles County, California
  (the “Court”).

  

 

	
   

  	
   

  	
   

  
	
   

  	
  iii.

  	
  The referee shall be a
  retired Judge or Justice selected by mutual written agreement of the parties.
  If the parties do not agree, the referee shall be selected by the Presiding
  Judge of the Court (or his or her representative). A request for appointment
  of a referee may be heard on an ex parte or
  expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. The referee shall be
  appointed to sit with all the powers provided by law. Pending appointment of
  the referee, the Court has power to issue temporary or provisional remedies.

  
	
   

  	
   

  	
   

  
	
   

  	
  iv.

  	
  The parties agree that
  time is of the essence in conducting the reference proceedings. Accordingly,
  the referee shall be requested, subject to change in the time periods
  specified herein for good cause shown, to (a) set the matter for a
  status and trial-setting conference within forty-five (45) days after the
  date of selection of the referee, (b) if practicable, try all issues of
  law or fact within one hundred twenty (120) days after the date of the
  conference and (c) report a statement of decision within twenty (20)
  days after the matter has been submitted for decision.

  
	
   

  	
   

  	
   

  
	
   

  	
  v.

  	
  The referee will have
  power to expand or limit the amount and duration of discovery. The referee
  may set or extend discovery deadlines or cutoffs for good cause, including a
  party’s failure to provide requested discovery for any reason whatsoever.
  Unless otherwise ordered based upon good cause shown, no party shall be
  entitled to “priority” in conducting discovery, depositions may be taken by
  either party upon ten (10) days written notice, and all other discovery
  shall be responded to within twenty (20) days after service. All disputes
  relating to discovery which cannot be resolved by the parties shall be
  submitted to the referee whose decision shall be final and binding.

  
	
   

  	
   

  	
   

  
	
   

  	
  vi.

  	
  Except as expressly set
  forth in this Agreement, the referee shall determine the manner in which the
  reference proceeding is conducted including the time and place of hearings,
  the order of presentation of evidence, and all other questions that arise
  with respect to the course of the reference proceeding. All proceedings and
  hearings conducted before the referee, except for trial, shall be conducted
  without a court reporter, except that when any party so requests, a court
  reporter will be used at any hearing conducted before the referee, and the
  referee will be provided a courtesy copy of the transcript. The party making
  such a request shall have the obligation to arrange for and pay the court
  reporter. Subject to the referee’s power to award costs to the prevailing
  party, the parties will equally share the cost of the referee and the court
  reporter at trial.

  
	
   

  	
   

  	
   

  
	
   

  	
  vii.

  	
  The referee shall be
  required to determine all issues in accordance with existing case law and the
  statutory laws of the State of California. The rules of evidence
  applicable to proceedings at law in the State of California will be
  applicable to the reference proceeding. The referee shall be empowered to
  enter equitable as well as legal relief, provide all temporary or provisional
  remedies, enter equitable orders that will be binding on the parties and
  rule on any motion which would be authorized in a trial, including
  without limitation motions for summary judgment or summary adjudication. The
  referee shall issue a decision pursuant to CCP Section 644 the referee’s
  decision shall be entered by the Court as a judgment or an order in the same
  manner as if the action had been tried by the Court. The final judgment or
  order or from any appealable decision or order entered by the referee shall
  be fully appealable as provided by law. The parties reserve the right to
  findings of fact, conclusions of laws, a written statement of decision, and
  the right to move for a new trial or a different judgment, which new trial,
  if granted, is also to be a reference proceeding under this provision.

  

 

	
   

  	
   

  	
   

  
	
   

  	
  viii.

  	
   If the enabling legislation which provides
  for appointment of a referee is repealed (and no successor statute is
  enacted), any dispute between the parties that would otherwise be determined
  by reference procedure will be resolved and determined by arbitration. The
  arbitration will be conducted by a retired judge or Justice, in accordance
  with the California Arbitration Act Section 1280 through
  Section 1294.2 of the CCP as amended from time to time. The limitations
  with respect to discovery set forth above shall apply to any such arbitration
  proceeding.

  
	
   

  	
   

  	
   

  
	
   

  	
  ix.

  	
  THE PARTIES RECOGNIZE AND
  AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE
  DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE
  OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY
  KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS
  REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT
  OF OR IS RELATED TO THIS AGREEMENT.

  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

In Witness Whereof, the parties have set their hands and seals on the
day and year first hereinabove written.

 

 

	
   

  	
  FCC Factor Subsidiary II, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/Robert S. Yasuda

  
	
   

  	
  Name:

  	
  Robert S. Yasuda

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MEADE INSTRUMENTS CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/Steven G. Murdock

  
	
   

  	
            Steven G.
  Murdock, President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Client address through February 28, 2009:

  
	
   

  	
  6001 Oak Canyon

  
	
   

  	
  Irvine, CA 92618

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Client address after February 28,
  2009:

  
	
   

  	
  27 Hubble

  
	
   

  	
  Irvine, CA 
  92618

  
	
   

  	
   

  
	
   

  	
  Attention: 

  	
  John A. Elwood

  
					

 

 

STATE OF CALIFORNIA                            )

)
SS:

COUNTY
OF                              )

 

On
                                  ,
2009, before me,                                         ,
Notary Public, personally appeared Steven L. Muellner who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.

 

WITNESS
my hand and official seal.

 

	
  Signature

  	
   

  	
  (Signature
  of Notary)

  	
  (Seal
  of Notary)

  

 

 

SCHEDULE
“A”

 

Definitions

 

“Account(s)” means (i) all “accounts” as
defined in the UCC due to Client, whether presently existing or hereafter
arising due to Client, and (ii) all presently existing or hereafter
arising accounts receivable due to Client (including medical and
health-care-insurance receivables), book debts, notes, drafts and acceptances
and other forms of obligations or rights to payment of a monetary obligation
now or hereafter owing to Client, whether arising from the sale or lease of goods
or the rendition of services by Client or otherwise (including any obligation
that might be characterized as an account, contract right, general intangible
or chattel paper under the UCC), all of Client’s rights in, to and under all
purchase orders now or hereafter received by Client for goods and services, all
proceeds from the sale of Inventory, all monies due or to become due to Client
under all contracts for the sale or lease of goods or the rendition of services
by Client or otherwise (whether or not yet earned by performance) (including
the right to receive the proceeds of said purchase orders and contracts), all
collateral security and guarantees of any kind given by any Obligor with
respect to any of the foregoing, and all goods returned to or reclaimed by
Client that correspond to any of the foregoing and all proceeds of the
foregoing.

 

“Agreement” means this Agreement, including the Exhibits and any
Schedules hereto, and all amendments, modifications and supplements hereto and
thereto and restatements hereof and thereof.

 

“Approved Account” means a Factor Sub Account representing a
sale to a Customer within the terms of a Credit Line established for such
Customer on Client’s normal selling terms or within the Single Order Approval
issued by Factor Sub provided that delivery is completed while such Credit Line
or Single Order Approval remains in effect and such Factor Sub Account has not
been charged back to the Client.

 

 “Avoidance Claim” means
any claim that any payment received by Factor Sub from or for the account of an
Account Debtor is avoidable under the federal Bankruptcy Code or any other
debtor relief statute.

 

“Bona Fide Defense” means, with respect to any Factor Sub
Account and the applicable Customer, (a) any bona fide legal defense which
is valid and has been asserted by such Customer in good faith to the payment,
in whole or in part, of such Factor Sub Account by such Customer resulting from
a breach by Client of its contract with, its representations and warranties
(express or implied) at the time made to, or its other obligations (if any)
owing to, such Customer in connection with such Factor Sub Account, including
with respect to price, delivery, quantity, quality or any other material terms
of the sale or service transaction, as applicable, (b) any counterclaim or
set-off against Client unrelated to the specific Factor Sub Account, (c) the
breach of any representation or warranty at the time made by Client to Factor
Sub with respect to such Factor Sub Account, whether intentionally or unintentionally,
or (d) any allowance, credit, acceptance of a return or other dilution or
modification with respect to such Factor Sub Account made or granted after
Credit Approval thereof by Factor Sub that is not authorized under the
Agreement.  “Bona Fide Defense” shall
exclude (i) a Customer’s financial inability to pay or its discharge in
bankruptcy or under other debtor protection law, (ii) illegality or
defense as a result of a change in applicable law and (iii) excused
payment as a consequence of enemy attack, civil commotion, strikes, lockouts,
the act or restraint of public authorities, acts of God or force majeure.  A Factor Sub Account that is subject to a
dispute and nonpayment by the applicable Customer shall be deemed to be a
subject to a Bona Fide Defense unless Factor Sub reasonably determines
otherwise in good faith based on the information then available to it (a “Good
Faith Determination”).  Any determination
made by Factor Sub as to any such dispute and nonpayment may change in light of
information subsequently available to it. 
Client shall promptly provide Factor Sub with such further information
as Factor shall request concerning such dispute and non-payment.

 

“Client” has the meaning ascribed thereto in
the introductory paragraphs hereof.

 

 

“Client Risk Account” means those Factor Sub Accounts for which
Factor Sub has not given Credit Approval, for which Credit Approval has been
withdrawn or revoked or with respect to which Factor Sub is not responsible
under Section 2 hereof.

 

“Collection Date” means (a) for payments received by Factor
in payment of Factored Accounts, the date a check, draft or other item
representing payment on an invoice is posted to Factor ‘s account plus four (4) business
days; or (b) for Approved Accounts paid by Factor solely for any reason
other than a Bona Fide Defense, the Friday of the calendar week following the
calendar week in which the 120 day period for such Approved Account ends.

 

 “Commission” has the meaning ascribed
thereto in Section 2.4 (a) hereof.

 

“Contract Year” means the twelve month period ending on the date
that is twelve months after the effective date of this Agreement and the twelve
month period ending on each annual anniversary thereof.

 

“Credit Approval(s) and Credit Approved” means, with regard
to an Approved Account, that Factor Sub has accepted the Credit Risk.

 

“Credit Lines” has the meaning ascribed
thereto in Section 2.2 (a).

 

“Credit Risk” means the Customer’s failure to pay an Account
when due solely because of its financial inability to pay.

 

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

 

 “Default”
means any of the events specified in Section 8 of this Agreement.

 

“Dispute or Disputed Account” means any claim, whether or not
provable, bona fide, or with or without support, made by a Customer as a basis
for refusing to pay an Account, either in whole or in part, including any
contract dispute, charge back, credit, right to return Goods, or other matter
which diminishes or may diminish the dollar amount or timely collection of such
Account.

 

“Factor Sub” has the meaning ascribed thereto
in the introductory paragraph hereof.

 

“Factor
Sub Accounts” means those Accounts arising from Customers that Factor Sub
identifies to  Client in writing from
time to time as acceptable Customers.

 

“Factoring
Documents” means, collectively, this Agreement and any other agreements,
instruments, certificates or other documents entered into in connection with
this Agreement, including collateral documents, letter of credit agreements,
riders covering inventory or other loans, security agreements, pledges,
guaranties, mortgages, deeds of trust, assignments and subordination
agreements, and any other agreement executed by Client, any guarantor or any
affiliate of Client or any guarantor pursuant hereto or in connection herewith.

 

“FCC” means FCC, LLC, a Florida limited liability company doing
business as First Capital Western Region, LLC.

 

“Financing Statement” means each UCC financing statement naming
the Factor Sub as purchaser/secured party and the Client as Client/debtor, in
connection with this Agreement.

 

“GAAP” means generally accepted accounting principles
consistently applied and maintained throughout the period indicated and
consistent with the prior financial practices of the Person referred to.

 

“Interest
Rate” means (a)   Client will
pay Factor Sub or, at Factor Sub’s option, Factor Sub may charge Client’s
account with, interest on the average daily net principal amount of Obligations
outstanding hereunder, calculated monthly and payable on the first day of each
calendar month, at a rate (computed on the basis of the actual number of days
elapsed over a year of 360 days) (the “Interest Rate”) equal to the sum of (i) LIBOR
(as defined below), plus five and one-half percent (5.5%) (the “Interest
Margin”), but in no event shall the Interest Rate be less than 7.75%.  The Interest Rate may not be the lowest or
best rate at 

 

 

which
Factor Sub calculates interest or extends credit.  The Interest Rate for each calendar month
shall be adjusted (if necessary) on the first day of such calendar month and
shall be equal to the Interest Rate in effect as of the close of business on
the last Business Day of the immediately preceding calendar month.

 

As
used herein, the following terms shall have the following meanings:

 

 “LIBOR” means, at any
time, an interest rate per annum equal to the interest rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) as published in the “Money Rates”
section of The Wall Street Journal (or another national publication
selected by the Factor Sub) as the one month London Interbank Offered Rate for
United States dollar deposits or such other language (or, if such page shall
cease to be publicly available or, if the information/description contained on
such page, in Factor Sub’s sole judgment, shall cease to accurately reflect
such London Interbank Offered Rate, then such rate as reported by any publicly
available recognized source of similar market data selected by Factor Sub that,
in Factor Sub’s reasonable judgment, accurately reflects such London Interbank
Offered Rate).

 

“Inventory” means (i) all “inventory” as defined in
the UCC, and (ii) all of Client’s inventory, together with all of Client’s
present and future inventory, including goods held for sale or lease or to be
furnished under a contract of service and all of Client’s present and future
raw materials, work in process, finished goods, shelving and racking upon which
the inventory is stored and packing and shipping materials, wherever located,
and any documents of title representing any of the above.

 

“Ledger
Debt” means any debt, liability or obligation now or hereafter owing by
Client to others, including any present or future client of Factor Sub, which
Factor Sub may have obtained or may obtain by purchase, assignment,
negotiation, discount, participation or otherwise.

 

“Misdirected
Payment Fee” means fifteen percent (15%) of the amount of any payment on
account of an Account which has been received by Client and not delivered in
kind to Factor Sub within five (5) days following the date of receipt by
Client.

 

“Net Invoice Amount” means the invoice amount of the Account,
less returns (whenever made), all selling discounts (at Factor Sub’s option,
calculated on shortest terms), credits or deductions of any kind allowed or
granted to or taken by the Customer at any time.

 

“Obligations”
means all present and future obligations owing by Client to Factor Sub,
including interest thereon, whether or not for the payment of money, whether or
not evidenced by any note or other instrument, whether direct or indirect,
absolute or contingent, due or to become due, joint or several, primary or
secondary, liquidated or unliquidated, secured or unsecured, original or renewed
or extended, whether presently contemplated or not, regardless of how the same
arise, or by what instrument, agreement or book account they may be evidenced,
or whether evidenced by any instrument, agreement or book account, whether
arising before, during or after the commencement of any federal Bankruptcy
Case in which Client is a debtor, including without limitation, Commissions,
Ledger Debt, fees and expenses and any amounts due to Factor under any guaranty
issued by Client.

 

“Obligor”
means Client and any other Person primarily or secondarily, directly or
indirectly, liable on any of the Obligations, including, but not limited to,
any guarantor thereof (individually an “Obligor” and collectively, the “Obligors”),

 

“Person” means an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization or a
government or any agency or political subdivision thereof.

 

 “Purchase Price” means the Net
Invoice Amount less Factor Sub’s Commission.

 

“Schedule of Factor Sub Accounts” means a form supplied by
Factor Sub from time to time wherein Client lists all Factor Sub Accounts.

 

“Single Order Approval” has the meaning
ascribed thereto in Section 2.2 (a) hereof.

 

 

“Termination Fee” means the fee payable to Factor Sub pursuant
to Section 9.1 hereof.

 

“UCC” means the Uniform Commercial
Code as in effect from time to time in the State of California.

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